Credit unions want Government to remove lending 'handcuffs'

Credit unions want Government to remove lending 'handcuffs'

Minister of State Sean Fleming said credit unions are 'not doing enough of lending'. Picture: Daragh Mc Sweeney/Provision

Credit unions have urged the Government to release them from the “handcuffs” of lending limits so they can increase their participation in the mortgage market.

The Irish League of Credit Unions (ILCU) has said that credit unions are prevented from expanding into the mortgage market, in line with the programme for government, because of restrictive lending limits.

The Central Bank of Ireland currently limits mortgage and SME lending to a combined maximum of 7.5% of a credit union’s total assets.

A credit union with assets of €70m, taking an average mortgage of €350,000, can only offer 15 mortgages under the current limits, exclusive of any SME lending. 

If they participate in SME lending, then the number of mortgages they can offer reduces accordingly within the 7.5% lending limit.

By the end of 2021, only two credit unions received approval from the Central Bank for a 15% lending limit, as their assets totalled at least €100m.

The ILCU has responded to comments made by minister of State Sean Fleming, who said that “credit unions should fill the gap left by the departures of Ulster Bank and KBC from the Irish market and start lending more mortgages”.

Mr Fleming said credit unions are “not doing enough of lending”.

The programme for government committed to enabling the credit union movement to grow as a "key provider of community banking in the country".

"In order for credit unions to become community banks, and to really engage in the mortgage market, the ILCU is asking Minister Fleming to address the imbalance caused by the restrictive regulatory lending regime in his soon-to-be-published review of the policy framework within which credit unions operate,” said ILCU deputy chief executive David Malone.

The publication of this policy framework review presents a once-in-a-decade opportunity for the minister to empower credit unions to realise their full potential in filling the gap left by Ulster Bank and KBC and in doing so, offering a community-based alternative to the remaining banks to the Irish public. 

"The ILCU is ready and willing to constructively engage with Minister Fleming and his officials in achieving this aim.” 

In the Dáil last week, Finance Minister Paschal Donohoe confirmed that work on the Review of the Policy Framework for the credit union sector is “well advanced”, and that proposals emanating from the review will be issued for consultation “shortly”.

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