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Plans to lift credit-union lending capacity

The Central Bank has published proposals that it says are aimed at providing greater scope for credit unions to increase lending to businesses and householders.

The proposals are contained in a review of the regulatory framework for credit-union lending.

The Central Bank kas also launched a public consultation on proposed changes to the framework, which were signalled last month by deputy governor Sharon Donnery.

The review analyses the impact of lending regulations introduced in January 2020, looking at supervisory experience, lending data, feedback from stakeholders, broader developments within the credit-union and wider banking sectors.

‘Targeted changes’

The regulator said that an analysis of lending data showed that credit unions already had “considerable capacity” to provide more mortgage and business lending within the existing limits.

Its review has, however, proposed what the Central Bank describes as “targeted changes” to the regulations, which would increase the sector’s total lending capacity to €8.6 billion from the current €2.9 billion.

Under the plans, there would be separate concentration limits for mortgage and business lending.

The lending capacity available to all credit unions would change to 30% of total assets for mortgage lending, and 10% of total assets for business lending.

The proposals would also remove a 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.

The proposed changes are outlined in the public consultation, which will close for submissions on 11 February 2025.

‘Important milestone’

Speaking today (11 December), Donnery described the publication as “an important milestone” for credit unions and their members and provided further opportunities for the sector to develop and collaborate.

“Our expectation is that the proposed changes to the lending framework, if implemented, would enable those credit unions that wish to undertake increased house and business lending activity in order to diversify loan books, improve loan-to-asset ratios, and better deliver for their members.

“We expect that credit unions will continue to lend prudently as they further build skills, capacity and expertise in this type of lending,” she concluded.