Lending rules will change for credit unions in Ireland next year, which will see maturity limits replaced with new concentration caps.
The Central Bank of Ireland has published its amendments to the country’s credit union framework, after a successful consultation period on the proposed changes. These new rules will give credit unions the ability to undertake increased longer-term lending, including home mortgage and business lending.
It also offers additional capacity to extended to larger and stronger credit unions which meet certain requirements.
These changes will take effect from January 2020.
More specifically, the new measures will see the removal of existing lending maturity limits which cap the percentage of credit union lending which may be outstanding for periods of greater than five and ten years.
These are to be substituted for concentration limits which are differentiated by tiers and will apply to home mortgage and business loans. They will be expressed as a percentage of total assets.
There are three tiers under the new rules. The first is a combined concentration limit for house and business loans of 7.5% of total assets for all credit unions. Secondly, there is a 10% limit which is conditional on a credit union with an asset size of €50m. The final tier is a 15% limit for unions with €100m in assets.
Registrar for credit unions, Patrick Casey, said, “The proposals are grounded in the Central Bank’s statutory mandate, which is to ensure the protection by each credit union of the funds of its members and maintenance of the financial stability and well-being of credit unions generally. Where credit unions wish to undertake increased house and commercial lending, it is important that they understand the risks involved.
The amending regulations represent significant and fundamental structural framework changes, providing sufficient capacity and flexibility to enable safe and sound business model transformation on a sustainable basis serving members’ long-term interests.”
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