Everything You Need To Know
First Choice Credit Union recently carried out a strategic review of its members savings position in the context of the current environment in which it operates, and has reluctantly taken the decision to introduce a savings limit of € 30,000 per member with effect from 1st February 2020. A limit of €60,000 will apply to joint accounts i.e. € 30,000 per each individual member.
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 you introducing a savings limit?
Total savings in First Choice Credit Union grew by over 4% last year and now stand at €176 million. While the savings increase shows that members have great confidence in the Credit Union, it also means we have a growing amount of surplus funds which are not lent out and must be invested. Under Central Bank regulations, we must also maintain our non-distributable statutory capital, at a minimum of 10% of total assets – so for every additional €100,000 of savings lodged, we must allocate €10,000 from our surplus to our capital reserves.
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 limit applies to the total amount a member can have in savings in First Choice Credit Union. The limit is based on the member, not the account. So, each member is limited to a maximum of €30,000 savings, whether they are in a single account, joint account or a combination of both. Members with less than €30,000 can continue to save up to the new limit of €30,000. If a member currently has over €30,000 in savings, they will be unable to lodge additional monies as they have already reached the maximum.
What about members with savings currently above €30,000?
Members with savings above €30,000 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 €30,000. There is no restriction on members withdrawing funds from their account. Over 96% of our members hold less than €30,000 in savings and of those savings the average balance is circa €3,500.
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 €30,000.
How many members will this affect?
The savings limit will directly affect members with savings in excess of €30,000, currently 4% of members. Members in this category cannot make lodgements to their account(s) until such time as the balance in their savings is below €30,000. There is no restriction on members withdrawing funds from their account.
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 with total reserves of €36.6 million (17.32%) and assets of just over €211 million.
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.