Home Credit union Credit unions call for task force to help sector lend

Credit unions call for task force to help sector lend

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Credit union representatives will urge Minister of State Seán Fleming at a meeting on Thursday to support the establishment of a policy task force to develop a sector that has been hobbled for years by excess customers and regulatory restrictions on certain types of loans.

The Central Bank eased lending restrictions in early 2020 to allow credit unions to engage in longer-term lending, including home mortgages and business loans.

However, current lending limits mean the industry can effectively only offer a maximum of 3% of all mortgages underwritten in the state and less than 10% of small business loans, according to David Malone, acting chief executive. of the Irish League. credit unions, one of the representative bodies present at the meeting.

Minister Fleming, who is responsible for financial services policy, told Seanad last week that he planned to present legislative proposals to Cabinet ‘soon’ to meet the program’s commitment to the government to review the framework broader legal framework around the sector.

However, he clarified that they would not include any specific proposals to change regulations or regulatory limits.

Engage fully

“Credit unions cannot reach their potential and become a key provider of community banking services, as the government has committed to in the program for the government, with such restrictive lending limits,” Mr Malone said. . “We are considering the establishment of a Credit Union Policy Task Force, with which we are fully engaged, as the appropriate body to carry out this review, ensuring that policy is not developed in the void.”

He said the working group should include the representative bodies of credit unions, the Central Bank and the Ministry of Finance.

The three remaining Irish banks accounted for 69% of mortgage drawdowns in the market last year, with the remainder mainly held by KBC Bank Ireland and Ulster Bank, which are pulling out of the state.

The SME lending market is also highly concentrated, with the top three banks, including Ulster Bank, holding 90% of the market share.

Savings in the credit union sector rose 2.8% in the 12 months to September to 16.8 billion euros, according to a Central Bank report released in December.

While credit unions participated in a wider recovery in demand for credit in Ireland as part of a gradual reopening of the economy over the 12 months, the average player in the sector was just 27, €10 in loan for €100 in assets in September, near historic lows.

The ratio is down from 49% in 2007 and ranks among the lowest among credit union movements globally. The optimal loan to asset ratio is generally considered to be around 50%.