EC Approves Prolongation of Irish Credit Union Resolution Scheme
EC approved prolongation of the Irish scheme for the orderly winding up of credit unions until May 31, 2021. EC found the scheme to be in line with the EU State Aid rules. The scheme is intended to safeguard financial stability when a credit union becomes unable to meet regulatory requirements. The scheme allows Ireland to provide aid for transferring the assets and liabilities of a failing credit union to an acquirer through a competitive process. In Ireland, credit unions are small financial institutions that are not covered by the Bank Recovery and Resolution Directive (BRRD).
The scheme allows Ireland to provide aid for transferring the assets and liabilities of a failing credit union to an acquirer through a competitive process. This will help to achieve the maximum value for the assets and liabilities, ensuring that the aid is limited to the minimum necessary for an orderly winding up and that no buyer gains an undue economic advantage through the acquisition of under-priced assets and liabilities. Ireland chose to make a special sector-funded resolution scheme available to the credit unions, which has been used only three times since its setup. The scheme was initially approved in December 2011 and has been prolonged fifteen times since then, with the last prolongation being in June 2019.
Post the financial crisis, EC had adopted a comprehensive framework to support financial sector during the crisis and this framework spells out common conditions at the EU level for access to public support and the requirements for such aid to be compatible with the internal market in light of state aid principles. It comprises Banking Communication, the Recapitalization Communication, the Impaired Assets Communication, and the Restructuring Communication. These special rules were introduced under Article 107(3)(b) of the Treaty on the functioning of the EU that allows EC to approve state support to remedy a serious disturbance in the economy of a member state.
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Keywords: Europe, EU, Ireland, Banking, Credit Unions, Resolution, Orderly Resolution, Crisis Management Framework, EC
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