New rules ‘limit credit access’

New rules from the Central Bank will severely restrict access to savings and credit, credit union groups have claimed.

They believe the new regulations are a retrograde step and may cause reputational damage to the movement.

“Most importantly, those that will suffer most are ordinary members — current and future,” they warned.

Published yesterday, the Central Bank’s Consultation Paper 88 outlines the regulations covering areas such as reserves, liquidity, lending, investments, savings, and borrowings.

The Central Bank said it was proposed that the regulations, building on existing prudential and governance requirements, come into force at the end of December.

Anne-Marie McKiernan, registrar of credit unions, said the regulations would foster a safer, stronger credit union sector, with greater protection of members’ funds.

The Irish League of Credit Unions, the Credit Union Development Association, and Credit Union Managers Association said the draconian rules would restrict credit unions from offering members real choice. They are particularly critical of the proposal to impose a cap of €100,000 on savings that an individual member can hold in the credit union.

“It is not appropriate to impose a savings limit on credit unions when no such limit applies to banks which have had to be recapitalised by taxpayers. This limit would mean that credit unions are viewed in a poor light by users of financial services and could potentially damage confidence in credit unions,” they stated.

Rules on loan maturity limits — no more than 10% of a credit union’s total loan book — would limit loans for home repairs or renovations.

They also described the requirement to maintain a regulatory reserve ratio of not less than 10% of total assets as a crude and blunt instrument that did not take account of the risks credit unions faced.

Credit union groups are also concerned that they would have little option but to place excess funds on deposit with banks.

The groups, along with individual credit unions, made submissions setting out their concerns about the proposed regulations. “These submissions have not been taken into account by the Central Bank and the final regulations contain minimum change to those originally proposed,” the groups said. They have written to Finance Minister Michael Noonan, asking him to postpone signing the commencement order.


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