The imposition of lending restrictions is the responsibility of the Registrar of Credit Unions, who is the independent regulator for credit unions. Within his 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. As Minister for Finance, my role is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions. It would not be appropriate for me, as Minister for Finance, to examine or adjudicate on whether the placing of lending restrictions is necessary on a case by case basis. I believe that such action would represent interference in the work of the independent regulator.
While loan interest is a valuable source of income for credit unions, it is important that lending takes places in accordance with regulatory requirements in order to protect the savings of members in credit unions and to ensure that credit unions focus on risks when making lending decisions. Restrictions are imposed on a case-by-case basis and are reviewed regularly. The type of lending restrictions can include maximum individual loan size, overall maximum monthly lending limits and restrictions on business lending.
The Registrar has advised that about 50% of credit unions are subject to lending restrictions at present. Almost all credit unions with a lending restriction have a maximum individual loan size restriction. Of the credit unions with lending restrictions over 65% can lend €20,000 or more to an individual member. Less than 3% of credit unions are restricted to loans of less than €10,000 to an individual member, and less than 1% of credit unions are restricted to lending less than €5,000 per member. Commercial lending restrictions apply to approximately a third of credit unions.
The imposition of lending restrictions is part of the normal regulation and supervision of the sector and is not part of credit union restructuring. The Commission on Credit Unions was established to review and make recommendations on the future of the credit union movement, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect depositors savings and financial stability. The Interim Report of the Commission was published in October 2011 and was welcomed by all the stakeholders. The Final Report is to be provided to me by the end of March 2012.
