Notice to Members from the Board of Directors – Savings Limits September 2020

Over the past number of years, Tipperary Credit Union has seen a dramatic increase in new savings. We see this as a vote of confidence from our members that we are their #1 financial provider and we thank all members who trust us with their savings.

Unfortunately, there are knock-on implications for all credit unions when accepting new savings. When the increase in new savings is higher than the demand for new loans, these funds must be invested at zero or even negative rates. There is also a regulatory requirement set by the Central Bank that all credit unions must “reserve” a minimum of 10% of new savings. In simple terms, this means that a credit union must make a surplus at the end of the year of at least 10% of new savings; so if there is €10million of new savings in a year, €1m surplus must be set aside as a regulatory reserve. This greatly reduces the ability to pay a rebate, dividend, or carry forward funds into the future.

The issue of savings growth is a significant risk for the entire credit union sector as we are largely victims of our own success. Throw into the mix the economic impact of COVID-19, falling investment income, rising costs, and restrictive regulatory and legislative requirements; then the issue of share growth must be addressed as a priority.

For the reasons set out above, the Board of Directors of Tipperary Credit Union made the decision to introduce a temporary savings limit of €30,000 per member across all accounts. This came into effect on 1st February 2020.

On review of this temporary savings limit, and exasperated by the COVID-19 pandemic, it was agreed by the Board of Directors that further measures are required to stem the large inflow of savings into our Credit Union. Therefore, effective 1st September 2020, members will be asked to limit savings to a maximum of €2,500 per month while also staying within the €30,000 overall savings limit (across all accounts). Members are free to lodge over €2,500 in a month so long as they ensure they make sufficient withdrawals in that same month to remain within the €2,500 limit. Some examples are set out below:

Example 1 = Member’s balance on 1st September 2020 is €4,000 and on the 30th September 2020 is €6,000. Member has remained within the €2,500 limit and no action required.

Example 2 = Member’s balance on 1st September 2020 is €4,000 and on the 30th September 2020 is €8,000. Member has not remained within the €2,500 limit and will be asked to withdraw funds to comply with the new savings limit. Member will be given one month’s grace to comply with savings limit.

The Board of Directors will be constantly monitoring the level of savings in our credit union and reserve the right to increase, decrease, or remove entirely the temporary savings limit in the future. Our staff will be monitoring daily to ensure all members stay within their savings limit.

These savings limits will ensure that Tipperary Credit Union continues to be a strong, secure and top-performing credit union. It does not impact on our ability to lend and we ask that you consider Tipperary Credit Union for any lending needs now and into the future.

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We thank you for your understanding on this matter and apologise for any inconvenience this may cause.