Credit unions could have an extra €5.5bn to lend to homebuyers and businesses
And Out To Sets Plan The Central New House Business Currently A Document Limits Decouple To Bank Prescribe Separate Lending The And Limits Imposed Lending For
Credit unions could have an additional €5.5bn to lend to homebuyers and businesses under proposed new Central Bank rules.
The Central Bank has published the findings of a public consultation on changes that could see credit unions allowed to lend more of their assets.
The document sets out a plan to decouple the limits currently imposed and to prescribe new separate limits for house lending and business lending.
It also means all credit unions, regardless of asset size, would operate under the same rules.
For house lending, a credit union would be able to lend up to 30% of total assets to mortgage applicants and up to 10% to businesses.
The document suggests that this would mean that the ability for credit unions to lend for both mortgages and businesses would jump from €2.9bn to €8.6bn.
For most credit unions, the combined lending limit for mortgages and small businesses is set at 7.5% of total assets. This limit can be increased to 10%, and potentially up to 15%, for larger credit unions that submit a business case to the Central Bank and receive approval for higher mortgage and SME (small and medium-sized enterprises) lending.
Irish League of Credit Unions CEO David Malone told the the sector welcomed the proposals, which have been under discussion for 18 months.
He said more credit unions could enter the mortgage space, where they currently have around €730m in loans.
“Credit unions offer competitive funds and we’re much more stable because we’re not reliant on European Central Bank rates. We also have an omnichannel presence — we’re digital and physical. Members say that’s a huge benefit when they’re looking for a mortgage.”
The consultation document also calls for the removal of the requirement for credit unions to receive a comprehensive business plan and detailed financial projections for business loans of €25,000 or more, community loans, or loans to other credit unions.
Mr Malone said that of particular interest is the sector’s agri-lending programme, which currently has around €100m in 250 rural locations. Finance Minister Jack Chambers said he agrees that the changes are necessary.
“The proposed amendments to the framework would provide a guardrail for those credit unions who want to increase their level of house and business lending, allowing these credit unions the opportunity to provide credit for their members in a sustainable manner,” he said.
Mr Chambers is understood to be supportive of an increased role for credit unions and in multiple parliamentary responses has pointed to a peer review of Ireland by the International Credit Union Regulators’ Network (ICURN).
It said that, without some “liberalisation”, recent changes to the laws around credit unions may not work.
In one such response, Mr Chambers said the Central Bank should “reflect on the views of the credit union stakeholders and the ICURN report”.