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Review of rules on credit-union lending

The Central Bank’s deputy governor has said that the regulator is looking at changing the rules governing credit unions to allow the sector to lend more.

Sharon Donnery was speaking at a conference on internal-audit services held by the Irish League of Credit Unions yesterday (19 November).

Revised lending regulations were introduced in 2019, to allow greater flexibility for credit unions to diversify their loan books and engage in more long-term lending – including mortgages.

Capacity

Donnery told the conference that she had heard some criticism from the sector about the regulations’ lending limits, but she believed that they were needed to enable credit unions to build the necessary capacity and capabilities for this type of lending.

“I am happy to say that our supervisory experience tells us that many credit unions in the sector have built this capacity, and they have prudently engaged in business and mortgage lending,” she stated.

As a result, the Central Bank has carried out a review of the lending limits that it will publish in early December.

This will be followed by a public consultation on what Donnery described as “proposed targeted – but significant – changes to the lending framework”.

These will include changes to concentration limits and to certain underwriting requirements.

Outsourcing

The conference heard that mortgages now made up 11% of credit unions’ loan books.

While Donnery encouraged credit unions to expand their loan books, she told them to do so “safely and sustainably”.

She also told the conference that, as the sector became increasingly reliant on outsourcing to digitise its services, it must focus on strengthening “operational resilience and disruption preparedness”.

Donnery added that the Central Bank would look “in due course” at how its revised Consumer Protection Code, to be published next year, would apply to credit unions.