The Central Bank has admitted to making calculation errors on mandatory payments it collects from credit unions for the Deposit Guarantee Scheme.
The bank, which has fined lenders hundreds of millions for overcharging on tracker mortgages, said it had miscalculated the payments due in two years, 2019 and 2021. It said the errors had resulted in some institutions being overcharged with others being undercharged for the period.
The total amount at stake was €253,000, or 0.1pc of the amount collected. Most of the institutions affected were credit unions, the bank said.
The Central Bank said no consumers were affected by the mistake, however credit unions pay their fees out of members’ funds.
“We apologise for this and we understand and regret any inconvenience that may arise, for credit unions in particular, as a result,” the Central Bank said in a statement.
“It is clear from our initial assessment, however, that the maximum undercharges/overcharges involved are not in any way significant in terms of the financial position of any individual credit union.”
Officials are still assessing what went wrong, but the bank has notified the affected institutions of the errors.
The bank is expecting to complete its investigation next month, when it will outline a process for correcting and settling accounts with the affected institutions.
The Central Bank said credit unions that were overcharged will be repaid first and the undercharged institutions would be dealt with subsequently.
All deposit-taking credit institutions, such as banks, credit unions and building societies, pay an annual contribution to the DGS, which protects customers’ savings up to €100,000.
The amount each pays is calculated according to a risk-based formula. The Central Bank has an objective of accumulating a fund worth 0.8pc of all covered deposits by 2024 next year.
The bank said the balance in the fund was unaffected by the errors it had disclosed.
The DGS was beefed up during the financial crisis to provide reassurance to consumers who were concerned they might lose savings due to banks failing. The previous coverage limit was just €20,000.
The scheme has paid out tens of millions in compensation to credit union depositors left exposed by financial problems in several credit unions, most at the Drumcondra and District Credit Union in 2020.
“This acknowledgement from the Central Bank follows on from representations made by the ILCU on behalf of our member credit unions to the Central Bank in early December, where we pointed out the anomalies in the calculation of the DGS contribution levies issued to credit unions,” said David Malone, CEO of the Irish League of Credit Unions.
“We welcome the swift action taken by the Bank and we look forward to our continued engagement to ensure this issue is concluded to the satisfaction of our credit unions.”
