Member Notice – New Savings Cap €25,000 and New Monthly Lodgement Cap €7000
August 2022
Important Notice
New Savings Cap €25,000 and New Monthly Lodgement Cap €7000
As you are aware Letterkenny Credit Union (LKCU) has had a savings cap of €30,000 in place since July 2018. As a result of the continued significant growth in membership and increase in the value of savings, the Board of Directors of Letterkenny Credit Union has taken the extremely difficult decision to lower the savings cap per tenant to €25,000 [with affect from 31st August 2022] and request that members with a balance in excess of €25,000, withdraw this amount by 30 September 2022. The cap will take into account all balances held by you in the credit union, including joint accounts.
Example: Member A has €30,000 in a sole account and €15,000 in a joint account,
This means that Member A has a total balance of €37,500 i.e. €30,000 (100% of the sole account balances) plus €7,500 (50% of the joint account balance).
Therefore, unfortunately Member A will have to reduce their overall holding by €12,500 with Letterkenny Credit Union, to ensure that the €25,000 limit is adhered to.
The monthly lodgement cap applies to all lodgements made by a member in Letterkenny Credit Union.
This is not an action that the board embrace but under the current regulatory regime, it is the only meaningful way the board can continue to manage the balance sheet and continue to meet the needs of most of our members.
Why is this action being taken? The action is required due to the knock-on implication of accelerated share growth on the credit union’s ability to maintain regulatory reserves set out by the Central Bank of Ireland, which is a minimum of 10% of our total assets. The credit union currently must transfer an increasing amount of its surplus to regulatory reserves hindering any distributions to members and future investment in services for all members. In addition, the credit union must invest an ever-increasing amount of members savings in a challenging low-rate investment market and in some cases incurring negative interest returns.
Does this mean the credit union is in difficulty? No, this has no bearing on the day-to-day operations of the credit union and the ability to lend to members is not impacted. LKCU is adequately capitalised at €13.3M and has assets of €116m. Since the beginning of the financial year 2020, savings have increased by €22m. Total Member savings now exceeds €100m.
To reduce the impact of this savings growth, the decision was reluctantly taken to limit savings to the benefit of all our members
How many members will this affect? This will affect approx. 800 member accounts in total which is less than 4% of our total membership. The Board feel it’s fair that all members now adhere to the €25,000 savings limit.
Are my savings safe here? Your savings remain safe and secure at LKCU. We are a financially strong and stable credit union. In addition, your savings continue to be guaranteed by the Government Deposit Guarantee Scheme.
How long will the cap last for? The Board of LKCU will keep the savings restriction under constant review, if they make any decision to change the current cap, members will be informed.
What does this mean to you? This decision affects 4% of our membership and has been made in the interest of all our members. We apologise for the inconvenience this may cause, as we ask members with over €25,000 in their account (s) to reduce their balance(s) below €25,000. This limit is calculated to include all balances in your sole name (savings, deposit, ATM, and MYCU current) and to include 50% of any joint account balances. When calculating how much to withdraw, please consider any frequent electronic payments that may cause your account to go over €25,000.
If you have frequent regular payments coming into your account with Letterkenny Credit Union, you need to either (a) arrange that your funds are credited to another account or (b) withdraw a lump sum to allow your payments to continue being received by Letterkenny Credit Union. We advise that you seek professional advice on how best to invest any surplus money.
If payments are received which would increase a members share balance over €25,000, Letterkenny Credit Union will have no option but to return these payments.
The Board of Directors are reviewing this saving cap on a monthly basis, and we are seeking your support to ensure the continued financial strength of Letterkenny Credit Union.
To withdraw funds please sign up for online banking and withdraw funds online. You may also visit us with your photo Identification (current Driver’s licence or Passport) and withdraw by cheque or electronic funds transfer if you bring the IBAN and BIC of another financial institution.
Yours sincerely,
Gordon Randles – Chief Executive Officer