EC Approves Prolongation of Irish Credit Union Resolution Scheme
EC approved the prolongation of Irish credit union resolution scheme for orderly winding-up of credit unions to be in line with the EU state aid rules, particularly with the 2013 Banking Communication. The objective of the scheme is to safeguard financial stability when a credit union becomes unable to meet regulatory requirements. It allows Ireland to provide aid for transferring the assets and liabilities of a failing credit union to an acquirer through a competitive process. The scheme is being prolonged until May 31, 2020.
The move will help achieve maximum value for 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. Credit Unions are small financial institutions that are not covered by the Bank Recovery and Resolution Directive (BRRD). Ireland has chosen to make a special sector-funded resolution scheme available to the credit unions and the scheme has been used only three times since its setup. EC initially approved the scheme in December, 2011. It has been prolonged fourteen times since then, the last time in November 2018.
Post the financial crisis, EC had adopted a comprehensive framework to support the 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, Financial Stability, Credit Unions, Resolutions, Orderly Resolution, EC
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