Dáil Éireann Debate, Thursday - 19 January 2017
84. Deputy Michael McGrath asked the Minister for Finance the number of credit unions currently operating under lending restrictions; the number of credit unions with restrictions on lending to persons and aggregate monthly lending in bands of €10,000, in tabular form; and if he will make a statement on the matter. [2355/17]
View answer87. Deputy Michael McGrath asked the Minister for Finance the current restrictions that apply to long-term lending such as mortgages by credit unions; and if there are any plans to ease these restrictions. [2358/17]
View answerI propose to take Questions Nos. 84 and 87 together.
I have been informed that in February 2015 the Central Bank commenced a lending restriction review initiative, whereby credit unions subject to a lending restriction that are satisfied they have made the necessary improvements and have embedded these improvements in robust risk sensitive lending practices, could apply for a review of their lending restriction. The closing date for receipt of applications to review lending restrictions under this initiative was 30 September 2015. The individual credit union lending restrictions in place are reviewed on a regular basis to determine whether they are still set at appropriate levels.
I have been informed by the Central Bank that circa 24% of credit unions (73 in total) are currently operating under lending restrictions compared with 52% at the start of the review process. These include 8 credit unions with a monthly maximum lending restriction and 65 with a maximum individual loan size restriction. In the majority of the relevant cases, the maximum individual loan size is in excess of €10,000 as detailed in the following table.
|
Lending Restriction on Individual Loans |
Number of Credit Unions |
|
10,000 |
6 |
|
>10,000 and 20,000 |
34 |
|
>20,000 and 30,000 |
19 |
|
>30,000 and 40,000 |
3 |
|
>40,000 and 50,000 |
2 |
|
>50,000 and 60,000 |
- |
|
>60,000 and 70,000 |
- |
|
>70,000 and 80,000 |
- |
|
>80,000 and 90,000 |
- |
|
>90,000 and 100,000 |
1 |
|
Total |
65 |
The Credit Union Act, 1997 (the 1997 Act) and the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (2016 Regulations) (which set out services exempt from additional services requirements) set out the services that a credit union may provide to its members.
Credit unions are not prohibited from providing mortgages to members. However, mortgages are subject to the maturity limits contained in the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (the Regulations) which set out the percentage of a credit union's loan book that can be outstanding for periods exceeding both 5 years and 10 years, as well as limits on the maximum outstanding liability to an individual member. Under the Regulations, issued at the beginning of January 2016, credit unions continue to be allowed to lend up to 30% of their loan book over five years and up to 10% of their loan book over 10 years, subject to a maximum maturity of 25 years. In addition, credit unions are able to apply to the Central Bank for an extension to their longer term lending limits (up to 40% of their loan book over 5 years and up to 15% of their loan book over 10 years). Approval is subject to conditions set by the Central Bank.
As a first step to making the existing longer term lending limits more usable the Central Bank agreed to undertake work on potential changes to the conditions attaching to approvals for existing longer term lending limits as part of the sector stakeholder dialogue process. Some initial proposals on how the conditions could be amended were put forward by the Central Bank for discussion within the sector stakeholder dialogue and the Central Bank now intends to publish revised conditions.
The September 2016 Prudential Return indicates that for the sector overall total gross loans over 10 years amount to 2.46% of total loans in the credit union sector compared to the limit of 10%. 73% of credit unions currently engaged in lending over 10 years have less than 3% of their total gross loans outstanding for over 10 years, and just 11% have more than 5% of their total gross loans outstanding for over 10 years.
Lending restrictions in credit unions are a matter for the Registrar of Credit Unions at the Central Bank, who, as the independent regulator for credit unions, acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members.
