Central Bank of Ireland is reviewing credit union regulations

Credit unions across Ireland could soon be allowed to invest their members’ funds in social housing projects. The Central Bank of Ireland announced a review of regulations, saying it...

Credit unions across Ireland could soon be allowed to invest their members’ funds in social housing projects.

The Central Bank of Ireland announced a review of regulations, saying it was considering whether to facilitate further classes of investment by credit unions, in areas such as social housing.

Speaking at the annual general meeting of the Credit Union Development Association (CUDA), Elaine Byrne, deputy registrar of credit unions, highlighted the important role that credit unions play at community and society level.

She also acknowledged their role in the Irish financial sector, and the challenges they face.

Under existing regulations, credit unions can invest in a range of specified investment classes, which includes government securities, deposits and bank bonds and collective investment schemes made up of these instruments. Investments in these classes of investments are subject to specified maturity and concentration limits.

“We will review the regulations to consider whether it is appropriate and prudent to facilitate investment by credit unions in other investments – such as social housing –by broadening the permitted investment classes in the regulations,” said Ms Byrne

Related: What role should co-ops play in the financial sector after Brexit?

She said credit unions continue to face pressures from the low level of total loans to assets, currently at 27%, and the low-interest environment.

Another ongoing challenge is the need for credit unions to deliver the services and products their members want, in the way they want, she said.

Central Bank of Ireland figures show that credit union embers’ savings have continued to grow – up from €12.5bn at end-September 2015 to €13.3bn at end-September 2016.

But, warned Ms Byrne, this can pose an extra burden on credit unions in terms of their ability to provide a return to members on these funds.

Anne Marie McKiernan, registrar of credit unions at the Central Bank of Ireland, told the conference the sector needed to make improvements.

“For the sector’s future sustainability, we see four main requirements,” she said. “Further restructuring; a greater drive for new, active borrowers; a marked increase in core lending, and business model development in a multi-step, well-managed way.”

Ms McKiernan added that the bank could be considering further regulatory changes.

“Where credit unions can make a credible, well-constructed and prudent business case and we consider that current regulations may be  restricting, we have stated that we will use our  powers where appropriate to amend or introduce new regulations,” she said.

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