Credit unions have an important role to play in providing credit in local communities around the country and I am supportive of safe and responsible lending by credit unions.
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.
Acting as the independent regulator, the Registrar of Credit Unions at the Central Bank has applied lending restrictions to some credit unions. I have been informed that these restrictions are viewed as short term in the majority of cases and are imposed as a means of allowing a credit union to address identified concerns as quickly as possible. Where lending restrictions are imposed they tend to take the form of a restriction on individual loan size or on commercial lending activity and in some cases, a limit on the total lending permitted each month. At this time fewer than 10% of all credit unions have a restriction in place which limits the total amount of lending within the month, while close to 40% of all credit unions have a restriction on commercial lending activity. Currently, the average loan rate in the sector is just over €6,000 and only about a dozen individual credit unions have lending restrictions that limit the amount loaned to less than €10,000. This ensures that the vast majority of credit unions can continue to make loans significantly greater than the average loan for the sector. The Registrar of Credit Unions has assured me that restrictions are reviewed on a regular basis.
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. Section 11 will be commenced in tandem with new Central Bank regulations on lending, which are to be introduced as part of the tiered regulatory approach recommended by the Commission. The Central Bank has recently held the first of its consultation processes on the tiered regulatory approach and is considering the views submitted by credit unions and others.