Credit union sector ‘stable’ reveals Central Bank

The credit union sector has stabilised and lending has increased, according to the Central Bank, although it added there was still pressure on the credit union business model.

In its report, ‘Financial Conditions of Credit Unions: 2012-2017’, the second such report following one issued last February, the Central Bank said there had been growth in new lending and a decrease in the level of reported arrears.

Total assets increased by €3.1bn between 2012 and 2017 and currently stand at €16.8bn, while members’ savings rose by €2.3bn in the same period.

The loan-to-asset ratio dropped from 37% in 2012 to 27% in 2015 and has remained at that level.

Average loan arrears also fell from 19.6% in 2012 to 7.4% in 2017 and the report said there was strong liquidity in the sector.

There was also a reduction in income over the same period, however, “driven in particular by the decrease in loan interest income related to the decline in credit union lending since 2012”. There had also been a fall in investment income.

Patrick Casey, registrar of Credit Unions, wrote in the report that credit unions “need to exploit their uniqueness” and secure the right mix of services and products.

Reacting to the report, the Irish League of Credit Unions (ILCU) said its affiliate members were “in a positive financial position”, with lending having increased over the past two years.

It also welcomed the stabilising of the loan-to-asset ratio across the sector and it noted “significant progress on arrears, with loan arrears down 73% since 2011”.

It said growing the loan book would continue to be a priority and that the ILCU has been working with credit unions to develop “prudent, long-term lending strategies, such as a centralised, residential mortgage solution”.

The ILCU said it had developed a comprehensive proposal outlining how surplus credit union funds could be used for social housing and had been lobbying the government on the issue, as well as seeking support from the Central Bank to broaden the investment classes credit unions can participate in.

Kevin Johnson of the Credit Union Development Association said: “We would like to see the urgent introduction of tiered regulations as set out by the Commission on Credit Unions to enable them to lend out some of the €6bn available to lend.

“A modernisation of the current regulations will allow some credit unions to continue offering basic savings and loans only, while allowing other credit unions to develop and offer a greater range of services.”

centralbank.ie