DUBLIN, Ireland–The second-largest credit union in Ireland has been hit with a sizeable fine for breaching its long-term lending limits and for paying one of its board directors.
Savvi, formerly known as St. Patrick’s Credit Union, has been fined €185,500 by the Central Bank, which regulates credit unions in Ireland.
The €377-million credit union, which has 21,000 members, notified the regulator in July 2017 that it had breached regulations and its credit policy, which stipulate that no more than 15% of its loans can have a term of more than 10 years outstanding, according to the Irish Times.
“The Central Bank’s investigation found that between July 2017 and December 2017, Savvi issued nine further long-term loans, so that by December 2017, its rate of long-term lending was 16.9%,” the regulator said in a statement.
According to the Irish Times, Savvi ceased issuing all long-term loans from January 2018 and by the middle of 2019 its ratio of loans with at least 10 years to maturity had been reduced to 14.7%.
Excessive Reimbursement for Director
Separately, the Central Bank found that Savvi had reimbursed travel expenses totaling €28,341 over a period of four years in excess of the applicable Civil Service rates. This constituted a payment of remuneration to a director, which is explicitly prohibited under credit union legislation, the Central Bank told the Irish Times.
“We welcome that credit unions seek to grow and develop their businesses, however regulations and safeguards still apply and, must be adhered to at all times,” said Seána Cunningham, head of enforcement and anti-money laundering at the Central Bank, told the Irish Times. “Lending limits act as a safeguard to mitigate the specific risks associated with different types of lending. As such, Savvi’s breach of the long-term lending limit is a serious matter for the Central Bank.”
Plans for Easing Regs
According to the publication, the regulator has consulted on a potential easing of lending restrictions at credit unions and expects to publish final proposals in the coming weeks, which will take effect at the beginning of 2020.
The consultation paper, issued last year, proposes removing lending maturity limits and replacing them with “concentration limits” for house and commercial lending, the two main forms of long-term lending, the Irish Times reported.
Under the blueprint, all credit unions would be allowed to lend for housing and commercial loans to a limit of 7.5% of the total assets of the CU. An increased concentration limit of 15% would be available, subject to the Central Bank’s approval, for unions that can demonstrate that they have financial firepower, the report added.