Change aims to boost credit-union lending
The Central Bank has confirmed that it is introducing “targeted but significant” changes to the regulatory lending framework for credit unions.
The regulator says that the changes, first proposed last year, will provide greater scope for credit unions to increase lending to businesses and households.
The changes follow a review of credit-union lending and a public consultation process and include:
- Separate concentration limits for house and business lending, and
- House lending will have a limit of 30% of total assets, and business lending will have a limit of 15% of total assets.
The Central Bank says that the new lending limits, which will apply from 30 September, will increase the total lending capacity of the sector for house and business lending from €2.9 billion to €9.9 billion.
‘Certainty’
The regulator adds that the changes will ‘future-proof’ the lending limits and provide certainty to credit unions in their business planning.
Other changes to the lending regulations include providing limited scope for non-principle-residence home lending and the removal of certain underwriting and board reporting requirements.
Mary-Elizabeth McMunn (deputy governor, financial regulation) said: “While considerable capacity remained for further lending within the previous lending limits, the updated framework aims to allow credit unions the ability to sustainably develop into the future – within the appropriate guardrails the limits provide and in the long-term interests of their members.”
‘Take the opportunities’
“It is our expectation that credit unions planning to avail of the changes will do so in a phased, prudent, and sustainable manner,” she stated, adding that the regulator also expected credit unions to continue to develop the skills, expertise, and risk management necessary for this type of lending.
McMunn warned, however, that enabling regulations alone were not enough.
“To address current and future challenges, credit unions must now take the opportunities provided to them in the regulatory framework so that they can continue to play their important role in delivering for their members, communities and the financial sector,” she concluded.