The Central Bank has announced new lending rules for credit unions aimed at increasing the amount of long-term lending that will take effect from January.
The change in regulations will allow loans outstanding for periods of more than five and 10 years to make up a larger proportion of credit unions’ loan books,
Maturity limits will be replaced by new concentration limits for home mortgage and business loans, which from next year will not be allowed to make up more than 7.5% of a credit union’s total assets combined.
However, the limit will be higher for larger credit unions with assets of at least €50m (10%) and €100m (15%), subject to Central Bank approval.
‘The changes being announced today follow a comprehensive review of the lending framework for credit unions,’ Central Bank registrar for credit unions Patrick Casey said.
‘This forms part of our commitment to ensuring a responsive regulatory framework. It is important that the lending framework remains appropriate for credit unions taking account of their risk management, capabilities, expertise and financial resilience.
‘We are introducing these changes so that credit unions will have greater flexibility to engage in longer term lending, including home mortgage and business lending, to support increased diversification in credit union lending.’
He added: ‘The amending regulations represent significant and fundamental structural framework changes, providing sufficient capacity and flexibility to enable safe and sound business model transformation on a sustainable basis serving members’ long term interests.’
The announcement comes a fortnight after the Savvi chain of credit unions was fined by the Central Bank for breaching long-term limits over a period of four years.
