24 June 2021
New Monthly Savings Limit
Over the past number of years, Newmarket Credit Union, like many other financial institutions, has seen a vast increase in savings. While, on one hand, it shows our members confidence in Newmarket Credit Union, it has the counter-effect of increasing our capital level requirements.
This savings pattern has been exacerbated by the COVID 19 pandemic, which has seen a further increase in savings, less demand for, and early repayment of, loans. Investment income is at an all time low, whilst we are also navigating a negative interest rate environment.
Whilst Newmarket Credit Union is secure, stable and well-capitalised, it was necessary to review the savings patterns experienced by the credit union. Following this review, the Board of Directors has reluctantly decided to introduce a maximum amount you can save each month in the credit union. The maximum monthly savings limit is now €3,000. This decision was taken in the best interest of all members of the credit union and is in addition to the overall savings cap of €50,000 in place since January 2020.
The rationale behind introducing the cap is as follows:
- Our total savings are growing by in excess of 5% per annum and now stand at €43.8 million.
- Against this, our total loans stand at €8.29 million, which means we have a rapidly growing amount of surplus funds.
- Under Central Bank regulations, we must maintain our statutory capital at a percentage of our total assets. In practical terms, this means that for every additional €100,000 of savings, we have to allocate €10,000 from our surplus/profits to our Capital Reserve.
- Some banks are now charging negative interest rates for monies held on demand deposit with them, which we are required to do for liquidity purposes.
All of the above can have the effect of depleting the amount available to pay a dividend at year end. It also reduces the amount we can afford to invest in new services and new technology options that can benefit all of our members.
To reduce the impact of this, your Board is trying to limit the growth in savings in order to benefit the greater number of our members.
Having undertaken a review of members savings habits, we are confident that the introduction of the new €3,000 monthly limit will have little or no impact on the majority of members but will allow the credit union to manage savings growth effectively.
The Board regrets the imposition of this requirement and it will keep these arrangements under constant review. Should it be possible to raise the limit on monthly share deposits, the credit union will notify members immediately.
We would greatly appreciate if members would co-operate in reducing their shares below the maximum €50,000 limit, to enable Newmarket Credit Union to operate more efficiently in meeting the increased demand on resources towards reserves.
The situation is continually reviewed and is most likely to require further action of another reduced limit on shares.
Please, be assured these decisions are taken by the Board of Directors after long and careful consideration. It is in line with most other credit unions nationwide, where some have much stricter limits in place.
Thank you for your understanding in this matter.