Credit Unions have an important role to play in providing credit in local communities around the country.
Section 35(2) of the Credit Union Act, 1997 permits a credit union to have up to 30% of its loan book outstanding for more than 5 years and up to 10% of its loan book outstanding for more than 10 years.
Based on the most recent information provided by credit unions to the Central Bank in the December 2013 quarterly prudential returns, average lending over 5 years as a percentage of gross loans was some 11%, while average lending over 10 years as a percentage of gross loans was about 2%. These figures indicate that, in general, credit unions are currently well within the limits as set down in the 1997 Act.
On foot of recommendations from the Commission on Credit Unions, section 11 of the Credit Union and Co-operation with Overseas Regulators Act 2012 substantially amends section 35 of the 1997 Act. These amendments provide for new Central Bank regulations to deal with a range of lending issues including:
- the classes of lending that a credit union may engage in, for example business lending;
- the duration of loans;
- large exposures; and
- concentration limits.
Section 11 will be commenced in tandem with the new Central Bank regulations, which are to be introduced as part of the tiered regulatory approach recommended by the Commission. This tiered approach will address a range of areas including lending, investments, savings, borrowings, additional services, reserves and liquidity.
The Central Bank has issued a consultation paper on the tiered regulatory approach in order to provide an opportunity for stakeholders to set out their views across a range of issues, including how credit unions might engage in business lending in the future. The Central Bank is currently considering the submissions received and is planning further consultation and a regulatory impact assessment.
