Credit unions in Ireland are regulated and supervised under a specific piece of legislation - the Credit Union Act, 1997 and regulations issued by the Central Bank, which set out the framework for the registration, regulation and operation of credit unions including detailed governance requirements and prudential requirements on items including reserves, liquidity, member savings and lending.
The Central Bank has developed and published the Credit Union Handbook to assist credit unions by bringing together in one place the legal and regulatory requirements, and guidance that apply to credit unions, arising from their authorisation as credit unions. The Central Bank has included specific chapters within the Credit Union Handbook which deal with Lending and Savings, Chapters 13 and 19 respectively. The Credit Union Handbook is available at the following link: https://www.centralbank.ie/regulation/industry-market-sectors/credit-unions/credit-union-handbook
In relation to lending, on 24 October 2018 the Central Bank published Consultation Paper (CP125) on potential changes to the lending framework for credit unions. The proposals contained in CP125 include the removal of the existing lending maturity limits which cap the percentage of credit union lending which may be outstanding for periods of greater than 5 and 10 years, and the introduction of concentration limits, on a tiered basis, for home mortgage and commercial loans expressed as a percentage of total assets.
The consultation period closed on 9 January 2019. Following its review of feedback received, in accordance with statutory requirements, the Central Bank will be undertaking consultations with myself, the Credit Union Advisory Committee and credit union representative bodies on proposed draft regulations. Following this the Central Bank expects to publish a feedback statement and final regulations in the latter half of 2019.
In terms of savings, the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (the 2016 Regulations) set an individual savings limit of €100,000 that applies on a per member basis. The 2016 Regulations also provided that credit unions could apply to the Central Bank to retain individual members’ savings in excess of €100,000, which were held at commencement of the Regulations and that credit unions with total assets in excess of €100 million can apply to the Central Bank for approval to increase individual member savings in excess of €100,000.
The introduction of the savings limit by the Central Bank followed a public consultation, CP88 - Consultation on Regulations for Credit Unions on commencement of the remaining sections of the 2012 Act. In the feedback statement to CP88, the Central Bank outlined that having considered the feedback received the Central Bank was of the view that an individual members savings limit of €100,000 is appropriate given the stage of development of the sector and the Central Bank’s mandate to ensure the protection of members’ funds by credit unions and safeguarding the stability of the sector.
The Deputy might also be interested to note that I will be bringing forward the Credit Union Interest on Loans Bill 2019 shortly. This bill will amend the current one per cent per month interest rate ceiling for credit unions, permitting credit unions to charge up to two per cent per month. This amendment will provide credit unions with greater flexibility to risk price loan products and in so doing may create an opportunity for credit unions to provide new product offerings.