The Central Bank of Ireland has announced significant changes to its lending framework for credit unions that it says will more than treble the sector’s mortgage and small business lending capacity to €9.9 billion.
The Irish League of Credit Unions (Ilcu), which represents more than 90 per cent of the sector here, has described the reforms as “a major step forward” for the sector, offering it significant opportunities to increase its services for members.
Although they have been eased in recent years, the current financial crisis-era rules limit mortgage and small business lending to 7.5 per cent of the credit unions’ total assets or 15 per cent for larger credit unions that present a business case to the regulator and receive its permission.
On Thursday, the Central Bank said that credit union mortgage lending will now be limited to 30 per cent of total assets and business lending will be limited to 15 per cent, offering the sector “considerably higher capacity” to lend to members.
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The new limits, which will apply from September 30th, will increase the sector’s total lending capacity from €2.9 billion to €9.9 billion, an increase of more than 340 per cent.
Credit unions will also not have to submit business plans for certain lending while mandatory monthly performance reporting will also be abolished for specific loan categories.
The reforms come on foot of a review of the sector, the results of which were published last December.
“Following a significant review, which included engagement with stakeholders and a public consultation process, today we are confirming important targeted changes to the lending framework for credit unions, which will significantly increase the potential of the sector to provide house and business loans to their members,” said Mary-Elizabeth Munn, deputy governor of the Central Bank in a statement.
“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.”
Ireland’s credit union sector has long called for the lending rules to be updated, against a backdrop of rising demand for its mortgage offering.
According to Ilcu, the value of the sector’s loan book surpassed €6 billion for the first time since the 2008 financial crisis in the three months to the end of March.
Ms Munn said the changes come alongside other recent changes to the legislative and regulatory framework for credit unions. Laws introduced in 2023 allow credit unions to refer members to peers for services for the first time and to club together to provide loans.
“Taken together, these reforms will enable credit unions to diversify their loan books, enhance their financial viability, and deliver even more value to the people and communities they serve,” said Helen Carbery, chief executive of the Credit Union Development Association in a statement.
Ilcu chief executive David Malone said the changes were a significant step forward for the sector.
“These changes will allow credit unions to contribute more meaningfully to addressing Ireland’s housing challenges, and the enhanced business lending opportunities will support local economic development,” he said.
