90 credit unions met this week to hear plans for the establishment of a central liquidity management mechanism (CLMM) for the sector.
On Thursday, the Central Bank confirmed that credit unions can increase the level of mortgage lending they do as a percentage of their total assets to 30 per cent from the end of September. The limit for business lending will increase to 15 per cent of total assets.
Based on the sector’s total assets of €22.05bn, the credit union sector will now have capacity to advance €6.6bn in mortgage lending and €3.3bn in business lending.
The CLMM would act as a centralised treasury function for all credit unions and is seen as a critical step in enabling credit unions to increase their volumes of mortgage and SME lending.
The five credit unions that have taken the lead on the issue -- Member First Credit Union, Health Services Staff Credit Union, Comhar Linn INTO Credit Union, First Tech Credit Union and St Raphael's Garda Credit Union -- and the Irish League of Credit Unions (ILCU) and the Credit Union Development Association (CUDA) convened the meeting in Kildare.
The establishment of a CLMM is also regarded as a critical first step in the establishment of a corporate credit union, effectively a credit union for credit unions. Currently, credit unions are solely funded through member shares.
In addition to establishing new funding structures for use by individual credit unions, it will provide other services such as asset and liability management for participating credit unions.
The concept of a corporate credit union is provided for in the Credit Union Amendment Act 2023. The Central Bank is expected to set the regulatory requirements for a corporate credit union in future.
Over recent months, the five named credit unions have engaged with key stakeholders, including the Central Bank of Ireland, the Department of Finance and some of the main audit firms, to share a vision on how the sector could evolve and how it can learn from international experience.
A KPMG study commissioned by the five credit unions found the need for an enhanced asset and liability framework, together with the development of new sources of funding to help evolve credit unions.
The study also recommended that the establishment of a centre of excellence to manage these activities be set up under the license of a corporate credit union.
Such actions would be consistent with best practice for credit unions in markets such as Canada, the US, Australia and New Zealand.
The current Programme for Government commits to the development of a five-year strategic plan for the sector.
The meeting at Johnstown House Hotel this week saw credit unions from across the country meet to hear of the progress being made and to indicate their support for the project.
“This is an important strategic development for the Sector, and we are delighted to see such a strong response from credit unions all over Ireland," a spokesperson for the credit unions said.
"Our objective is to make sure that the credit union movement has the necessary infrastructure to enable it to develop like it has in other jurisdictions.
"As a vital first step, a stand-alone Credit Union Service Organisation will be established over the coming months, to provide these specialist services.”
Paschal Donohoe, the minister for finance, welcomed the increase in lending capacity for credit unions sanctioned by the Central Bank.
Robert Troy, the junior minister with responsibility for credit unions, said the change in regulations would mean credit unions "will be able to compete more effectively in the mortgage and business lending market."
"The amendment of these regulations reflects the competence and capability of credit unions to grow their respective loan books in a prudent manner, and to future-proof their offering to support home owners and businesses," Troy continued.
This is a big step forward for the credit union movement in Ireland and I look forward to seeing the sector continue to support the needs of their members.”
