The Central Bank of Ireland has unveiled proposals that could see credit union mortgage and business lending nearly triple in the coming years. The proposed changes, which are now open for public consultation, focus on revising concentration limits for both mortgage and business lending, allowing credit unions to significantly increase their lending capacity.
Under the new framework, the Central Bank suggests decoupling the existing concentration limits for mortgage and business lending, establishing separate caps for each. Additionally, the new rules would eliminate tiering, meaning that all credit unions, regardless of their asset size, would have the same concentration limits.
The proposal includes setting a new limit of 30% of total assets for home lending and 10% for business lending. This adjustment is expected to dramatically boost the overall lending capacity of credit unions, with total lending for house and business loans projected to increase from €2.9 billion to €8.6 billion.
Kevin Johnson, CEO of the Credit Union Development Association (CUDA), expressed strong support for the changes, noting that they would lead to a tripling of the current mortgage loan book to over €2 billion. “We are pleased that this modernisation of the lending framework is in line with our request submitted to the Central Bank in February 2024,” Johnson said. He also highlighted the Credit Union (Amendment) Act 2023, which gives credit unions more flexibility, including the ability to engage in loan syndication to share lending risks among multiple credit unions.
The proposed changes would also simplify the business loan application process. Credit unions would no longer be required to receive comprehensive business plans and detailed financial projections for loans of €25,000 or more, as well as for community loans or loans to other credit unions.
The Central Bank believes these adjustments are necessary to ensure the regulatory framework continues to support the sector’s growth while maintaining appropriate safeguards. Deputy Governor Sharon Donnery emphasized that the changes aim to keep the regulatory environment responsive as the financial system evolves. “The proposed changes build upon the existing lending framework, ensuring the protection of members’ funds,” Donnery said.
David Malone, CEO of the Irish League of Credit Unions, also welcomed the proposed reforms. “We championed these changes over the last 18 months, and we are delighted to see them come to fruition,” he said. “These proposals are a vital step forward in empowering credit unions to support homebuyers and businesses.”
The proposals are open for consultation until February 11, 2025, and credit unions are encouraged to provide feedback on the changes before they are finalized.
