St. Francis 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 July 2020.
Frequently Asked Questions
Why is St Francis Credit Union introducing a savings limit?
Total savings in St. Francis Credit Union grew by over 9% last year and now stand at €184 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. The Central Bank of Ireland requires that all credit unions maintain a regulatory reserve of a minimum of 10% of total assets. Increased savings has a knock on effect on the credit union’s ability to maintain this regulatory reserve. This means that for every €10,000 in savings lodged to the credit union, the credit union has to put €1,000 aside from the credit unions surplus/profits into regulatory reserve. This has the effect of depleting the amount available to pay a dividend at year end and to invest into new services.
Members savings which are not borrowed by other members are invested in the financial markets to make a return. However, at present, financial institutions are so well funded some are now charging the credit union to hold your savings. This has meant that income from investments has dropped significantly in recent years. In some cases financial institutions are charging the credit union to hold these funds.
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 savings limit?
The limit applies to the total amount a member can have in savings in St. Francis Credit Union. The limit is based on the member. 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.
Please note that for accounts opened after 31st December 2019 the maximum savings amount allowable is €25,000 for an adult account and €10,000 for a Junior Account.
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 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.
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. Over 96% of our members hold less than €30,000 in savings and of those savings the average balance is €5,100.
How long will the savings limit remain for?
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 St. Francis Credit Union will keep the savings limit under constant review, if a decision is taken to change the current arrangement members will be notified of this. A significant increase in the lending book would also be helpful.
Are my savings secure with St Francis Credit Union?
Your savings in St. Francis 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.
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?
St. Francis 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.
St. Francis Credit Union is adequately capitalised with total reserves of €42.1 million (18.43%) and assets of just over €228.7 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.
I’m affected by the savings cap of €30,000, what will I do now?
You will be contacted by a credit union representative who will advise you of your options. You will be requested to withdraw funds to bring your savings balance below the €30,000 cap, this can be done by cash, cheque or EFT. Please bring ID (valid photo ID and current proof of your address dated in the last 6 months) to undertake this transaction. We cannot give out financial advice to members on investment or other savings options. We recommend that you talk to your financial advisor.
What is the maximum lodgement per month?
The maximum amount of funds that can be lodged to an individual members account per month is €8,000. This is calculated on a per calendar month basis and is system monitored. Any funds electronically transferred to an account that exceeds the maximum allowable will be returned to the account from where it was transferred.