DUBLIN, Ireland–This country’s credit unions have started to recover from the collapse in lending that was caused by the pandemic, but are still struggling to find members looking to borrow, according to a new analysis.
Ireland’s Central Bank, which regulates credit unions on the Emerald Isle, said loan demand remains weak at a time too much money remains in CU savings accounts.
The excess deposits have forced credit unions to place the funds in mainstream banks, where negative interest rates are being applied, which only increases costs, the Independent reported.
“Covid-19’s onset left credit unions facing pressure to ‘remain open’ due to a collapse in lending,” the Independent added.
According to the Central Bank, applications for loans fell by up to 80% as the coronavirus pandemic made members reluctant to borrow.
Overall lending at Ireland’s 214 credit unions fell during 2020, but up to September this year it has recovered by €160 million to stand at €5.25 billion, the Central Bank said in its “2021 Financial Conditions of Credit Unions” report.
Caps on Member Savings
Many credit unions have managed to slow down the pace of growth of deposits, in part by placing caps on savings levels.
In addition to the costs from negative savings rates, for every €100 credit unions get in deposits, €10 has to go into their capital reserves, noted the Independent.
Total savings in Ireland’s credit unions is now €16.79 billion.
The country’s registrar of credit unions, Patrick Casey, told the Independent “the pace of growth (of savings) during 2021 has slowed compared to 2020 – which may reflect steps taken by many credit unions to manage savings inflows and also some reversal of Covid-19 effects.”
He added the latest data on credit unions reflects a return to more normal economic activity for them.
Assets Hit New High
The Central Bank said total credit union assets reached a record high of €19.98 billion in September, up €4bn in the last five years.
Bu the average loan-to-share ratio among Ireland’s credit unions is staggering low by American CU standards and is now close to half of what it was just a decade ago and now stands at 27.1%.
Casey said rules allowing credit unions to do more mortgage and business lending have helped, but Irish CUs remain heavily dependent on unsecured personal lending.
Similar to the U.S., the number of credit unions continues to shrink, with the 214 CUs operating today down 78 from five years ago, mostly as the result of mergers that have been encouraged by the government.
Other Data Points
Other data points released in the Central Bank report:
- Some 73 credit unions have assets of less than €40 million, also down more than half in the last five years.
- The number of credit unions with assets of at least €100 million has increased from 48 credit unions five years ago to 66 credit unions now and represent 67% of total sector assets.
- The average net income of credit unions was €570,000 through Sept. 30.