The Irish League of Credit Unions has called on the Minister with Responsibility for Credit Unions, Sean Fleming, to make the necessary regulatory changes to enable credit unions to significantly increase their footprint in the mortgage market.
In a statement, the Irish League of Credit Unions said credit unions would like to be in a position where they could fill the gap left by the departures of Ulster Bank and KBC from the Irish market and start lending more mortgages.
But it added that credit unions are still bound by the “restrictive lending limits” for mortgages prescribed by the Central Bank.
Mortgage and SME lending is limited to a combined maximum of 7.5% of total assets for most credit unions.
The Irish League of Credit Unions says this means that a credit union with assets of €70m and taking an average mortgage of €350,000 can only offer 15 mortgages under the current limits, exclusive of any SME lending.
If they have SME lending then the number of mortgages they can offer reduces accordingly within the strict 7.5% lending limit.
ILCU Deputy CEO David Malone said that the Programme for Government committed to “enable the Credit Union movement to grow as a key provider of community banking in the country”.
“In order for credit unions to become community banks, and to really engage in the mortgage market, the ILCU is asking Minister Fleming to address the imbalance caused by the restrictive regulatory lending regime in his soon to be published review of the policy framework within which Credit Unions operate,” Mr Malone said.
“The publication of this policy framework review presents a once in a decade opportunity for the Minister to empower credit unions to realise their full potential in filling the gap left by Ulster Bank and KBC and in doing so, offering a community based alternative to the remaining banks to the Irish public,” he said.
“The ILCU is ready and willing to constructively engage with Minister Fleming and his officials in achieving this aim,” he added.
In a statement, the Central Bank said credit unions have significant lending capacity following changes that were introduced in 2020 that allowed them to undertake increased longer term lending, including home mortgage and business lending.
In addition to the ability to provide mortgages to the value of 7.5% of total assets, credit unions with at least €50 million in total assets can avail of a higher percentage of assets – 10% – if they fulfil certain conditions.
Larger credit unions can apply for a 15% limit, if they have at least €100 million in total assets, the regulator pointed out.
It said five credit unions had already notified the Central Bank of their intention to use the 10% limit and four have been approved to use the 15%. Two further applications are in progress.
“The sector has just under €20 billion in total assets which affords capacity to advance at least €1.5 billion in house and/or business loans,” the Central Bank statement said.
“Credit unions have currently lent almost €300 million in house loans to members, with around €1.1 billion of unused capacity of the €1.5 billion. In addition, further lending capacity is available for larger credit unions to apply for, if they have sufficient reserves and are so minded,” it added.
The regulator concluded by saying that it would continue to engage with sector representatives and the Oireachtas on the ‘appropriateness and effectiveness’ of the credit union regulatory framework.