Credit unions should be regulated based on their size, have a greater flexibility to issue loans, and be allowed provide lending to help alleviate the housing and homelessness crisis, according to a report from an Oireachtas committee.
The finance committee has published its report on the review of the credit union sector, and has issued a number of recommendations on the regulations surrounding credit unions and proposals for the sector’s long-term sustainability.
Committee chair John McGuinness (Fianna Fáil) said “the time is ripe to assess the wellbeing of the credit union sector and to review whether the measures put in place in the aftermath of the economic crisis remain appropriate”.
“Whilst acknowledging and supporting the prerequisite objective of maintaining financial stability and safeguarding members’ funds, the Committee is also of the opinion that minor changes and incentives can boost and contribute to the growth of the sector,” he said.
The report found some €800m in funding would have been available for social housing investment in last year, if the regulations allowed credit unions to lend to housing authorities.
“All committee members acknowledged that the credit unions’ community-led approach and emphasis on social inclusion is an innovative one which has contributed much to Irish society,” said Mr McGuinness.
“The committee recommends that the credit union movement be empowered to contribute to alleviating the current housing crisis in the State. Serious consideration should be given to enabling credit unions to utilise their substantial assets to lend to approved housing bodies and help alleviate the housing and homelessness crisis.”
The report outlines proposals on the tiered regulation, as originally put forward by a commission on credit unions.
It proposes tailoring regulations for credit unions dependent on their size, suggesting a three-tier approach that segregates credit unions with assets of less than €10m, with assets ranging between €10m and €100m, and the third, largest tier, that would incorporate credit unions with assets in excess of €100m.
“The objective of introducing a tiered regulatory structure is to deliver a framework that will allow small and simpler credit unions to continue to operate with proportionate regulations as well as setting out the requirements to allow larger, more complex credit unions to avail of more permissive business models than they currently can avail of,” the report states.
It warns that credit unions need to be allowed to lend more to be viable in the future.
“The committee is of the opinion that the current average loans-to-assets ratio of 26% is an issue of serious concern in terms of the future viability of the credit union movement,” it states.
“The figure should be at a minimum in the 40-50% ratio range and on that basis the committee recommends that the issue be addressed by all stakeholders as a matter of urgency.”
The report also warned that “the aging demographic profile that is synonymous with credit unions which poses a threat to the future growth of the movement”.
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