Central Bank of Ireland proposals to increase credit union lending limits – public consultation announced
11 December 2024
Press Release
The Central Bank of Ireland has today (11 December) published a review of the regulatory framework for credit union (PDF 631.87KB) lending, and launched a public consultation on proposed changes to the framework.
The proposed changes will ensure the regulatory framework remains appropriate for the sector and will provide greater scope for those credit unions who wish to undertake further house and business lending.
The review was a planned commitment given by the Central Bank to analyse the impact of lending regulations introduced in January 2020. This evidence based review considered supervisory experience, lending data, feedback from stakeholders, broader developments within the credit union sector, and in the wider banking ecosystem.
Analysis of lending data shows that, at a sectoral level, considerable capacity remains available for credit unions to provide house and business lending within existing limits.
However, having completed the review, and in order to enable the sector to sustainably develop in the long term interest of its members’, the Central Bank considers that a number of targeted changes to the regulations should be proposed at this time. The changes focus on concentration limits for house and business lending, and certain conditions attached to underwriting. The proposed changes are outlined in the public consultation, which will close for submissions on 11 February 2025.
Speaking on the publication, Deputy Governor Sharon Donnery said: “The lending framework for credit unions has provided, and will continue to provide, important guardrails for the sector and for the protection of members’ funds. However, we are committed to ensuring the regulatory framework is responsive and appropriate in a financial system that is changing at pace. The proposed changes build upon the existing lending framework and follow our own comprehensive evidence-based review. Today’s publications are an important milestone for credit unions and their members, and provide further opportunity for the sector to develop and collaborate in a meaningful and sustainable manner. Our expectation is that the proposed changes to the lending framework, if implemented, would enable those credit unions that wish to undertake increased house and business lending activity in order to diversify loan books, improve loan to asset ratios and better deliver for their members. We expect that credit unions will continue to lend prudently as they further build skills, capacity and expertise in this type of lending.”
ENDS
Notes to the Editor
- decouple the limits to prescribe new separate concentration limits for house lending and business lending;
- remove tiering so that all credit unions regardless of asset size may avail of the same concentration limits;
- adjust the lending capacity available to all credit unions for house and business lending, within the new concentration limits, as follows:
- house lending - 30% of total assets
- business lending - 10% of total assets
- remove the requirement for credit unions to receive a comprehensive business plan and detailed financial projections for business loans of €25,000 or more, community loans or loans to other credit unions.
These changes would result in significant overall capacity for house and business lending (€8.6bn capacity compared to the €2.9bn available under the current concentration limits).