Everything You Need To Know
First Choice Credit Union has recently carried out a strategic review of its members savings position in the context of the current environment in which it operates. In light of this strategic review, the Board of Directors have taken the decision to reduce the present Savings Limit as follows:
- The maximum savings per member in aggregate is reducing from €30,000 to €20,000.
- Members aged 65 or over are not in scope for the change during Covid-19 Level 5 restrictions.
- For members aged 0-17 inclusive, the maximum savings amount will be €10,000 per member.
- For new members joining on or after 1st March 2021, the maximum savings amount will be €10,000 per member.
- Where a member has a current account, that is separate. Current accounts will have a maximum balance of €20,000 per account.
Please note: The above will take effect from 12th May 2021 or 60 days from receipt of notification letter, whichever is the later.
Frequently Asked Questions
Are my savings secure with First Choice Credit Union?
Your savings in First Choice Credit Union are very secure and are backed by strong assets, reserves and performing loans. In addition, your savings continue to be guaranteed by the Deposit Guarantee Scheme which guarantees all savings in financial institutions for amounts up to €100,000.
Why are a savings now being capped at €20,000?
In recent months the Credit Union has seen a significant increase in savings from a relatively small portion of our membership (5% of members hold savings with balances of more than €20,000 per member). A significant portion of these savings must be kept in short term investments on which the Credit Union receives little or no return. Some banks are currently charging the Credit Union for short term investments.
If savings continue to grow, more of our profits must be channelled into reserves, which limits the Board’s ability to propose dividends & additional services in the future.
The negative interest rate climate also means that First Choice Credit Union is effectively being charged by banks to hold the portion of our member funds necessary to meet our liquidity requirements.
The rising costs and low interest rate environment limits the Boards ability to propose dividends or invest in new products and services for members. By introducing a savings limit the Board are attempting to maximise the surplus available for distribution to members or to invest in new products /services and support the sustainable growth of the Credit Union for its members.
What is the saving limit?
The savings limit applies to the total amount a member can have in savings in First Choice Credit Union. Please note the following:
– The maximum savings per member in aggregate is reducing from €30,000 to €20,000.
– For members aged 0-17 inclusive, the maximum savings amount will be €10,000 per member.
– For new members joining on or after 1st March 2021, the maximum savings amount will be €10,000 per member. The ‘new member’ limit will be reviewed annually.
– Members aged 65 or over are not in scope for the change during the COVID Level 5 restriction.
– Where a member has a current account, that is separate. Current accounts will have a maximum balance of €20,000 per account.
What about members with savings currently above €20,000?
Members with savings above €20,000 will be kindly asked to withdraw their excess funds where possible. Members in this category cannot make lodgements to their accounts and will be advised accordingly that we will not be accepting any further lodgements to their account(s) if their total savings remain above €20,000. There is no restriction on members withdrawing funds from their account.
What if my savings are pledged against a Loan?
If members have savings pledged against a loan, the savings limit will still apply. They will not be allowed to increase your savings balance above €20,000.
Is there a limit of Current Account balances?
Yes. Separately, where a member has a sole or joint First Choice Credit Union Current Account, the member(s) may maintain a maximum balance of €20,000 on that account separately from the savings account limit mentioned above.
Note: €20k current account limit is per Account and not per member. So, a current account has a maximum limit of €20,000 regardless of whether joint or single.
How long will the limit remain?
Given the current and projected future challenging climate of increased regulatory levies and historically low returns on investments, the savings limit will be in place for the foreseeable future. However, the Board of First Choice Credit Union will keep the savings limit under constant review, if a decision is taken to change the current arrangement members will be notified directly of this. A significant increase in the lending book would also be helpful.
Will this affect members dividend and Interest rebate?
The dividend and interest rebate are decided upon on a year by year basis at the Annual General Meeting. The amount of surplus will determine what amount is available for dividend/rebate. By introducing a savings limit, we are attempting to maximise the surplus available.
Does this mean the Credit Union cannot give out loans?
First Choice Credit Union is in a strong position to give out loans, subject to appropriate assessments being completed. Our ability to lend is in no way affected by the savings limit. We continue to provide valuable loan services to the local community.
Does this mean the Credit Union is in difficulty?
No, this has no bearing on the day to day operations of the Credit Union.
First Choice Credit Union is adequately capitalised – our overall total reserves are 17% of our total assets. Our statutory reserve is currently in excess of 11% of our total assets (i.e. higher than of the Central Bank Requirement of 10%).
Each time our savings increase, we must allocate more money from our surplus funds to our regulatory reserve, thereby reducing the funds we have available to pay out by way of dividend or loan interest rebate. It also reduces the amount we can afford to invest in new services and new technology options that can benefit all our members.
To reduce the impact of this savings growth, the decision was taken to limit savings for the long-term benefit of our members.