I propose to take Questions Nos. 70 and 71 together.
I have been informed by the Registrar of Credit Unions 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 number of lending restrictions is a reflection of the Registrar of Credit Union’s concerns about lending practices in the sector.
There are currently about 58% of all credit unions subject to lending restrictions. Almost all credit unions with a lending restriction in place have a maximum individual loan size restriction. Of the credit unions with lending restrictions, over 71% can lend €20,000 or more to an individual member, which is a sizeable amount and should cover most circumstances.
Fewer than 2.5% of credit unions are restricted to issuing loans of less than €10,000 to an individual member, and fewer than 1% of credit unions are restricted to issuing loans of less than €5,000 per member. These are the cases where the Registrar of Credit Unions has the more significant concerns in terms of risk to members’ savings. However, the individual credit union lending restrictions currently in place are reviewed on a regular basis to determine whether they are still set at appropriate levels.
The Report of the Commission on Credit Unions sets out the loan to assets ratio of the credit union sector for each year from December 2006 to December 2011. The loan to asset ratio has reduced from 40.81% in December 2011 to 36.33% in December 2012, based on Central Bank Prudential Returns. The Report also states that Irish credit unions appear to be significantly under-lent. This is due in part to the overall reduction in demand for personal loans.
The Credit Union and Co-operation with Overseas Regulators Act 2012 will see the introduction of a flexible regulatory and supervisory framework for credit unions in the form of a tiered regulatory approach. This approach will assist credit unions in determining the business model they wish to adopt and will allow some credit unions to offer a greater range of services while complying with additional regulatory requirements. The Central Bank is to set out more detailed regulations on lending in the context of this tiered approach. However, the need for prudent lending with analysis of all loan applications to ensure a credit union member’s credit worthiness will remain a vital element in safeguarding credit union members’ savings.