The imposition of lending restrictions is the responsibility of the Registrar of Credit Unions - RCU - who is the independent regulator for credit unions at the Central Bank. Within her independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members. I have been informed that it has been necessary to put lending restrictions in place in credit unions where there are regulatory concerns about the operation of these individual credit unions and the resultant risk to members' savings.
The criteria assessed to determine the imposition of lending restrictions includes, but is not limited to the following:
- Prudential returns which are unaudited returns, submitted to the RCU;
- Financial ratios which cover level of arrears and provision coverage; and
- The governance framework within the credit union.
Decisions on regulatory restrictions which are imposed in the form of directions under the Act are made by the Registrar. Other regulatory restrictions may be imposed as part of on-going supervisory engagement. These may be dealt with by the Registrar, but they may also be dealt with by a member of the management team, depending on the issue.
Credit union lending restrictions currently in place are reviewed on a regular basis to determine whether they are still set at appropriate levels. Lending restrictions are typically given effect by regulatory directions. As from 1 August 2013 regulatory directions are appealable to the Irish Financial Services Appeals Tribunal - IFSAT.
Overall in the current environment, in relation to lending, all credit unions are required to ensure that they apply enhanced scrutiny to all new loan applications and that all applications are fully assessed to determine the borrower’s ability to repay. Credit unions are also required to ensure that they put in place clear limits on the total funds available for granting loans, bearing in mind the need to ensure that a credit union maintains adequate levels of liquidity to support its operations.
