DUBLIN, Ireland–Proposed legislation in this country designed to boost credit union growth contains “no silver bullet,” according to one government official, who said the movement is weighed down by excess deposits and muted lending, and that it is mainly up to the sector to help itself.
Ireland’s CUs have been suffering from tremendously low loan-to-share ratios, especially by U.S. standards.
Minister of State Sean Fleming, who has responsibility for financial services in Ireland, said he is backing a bill that is designed to help credit unions co-lend and collaborate more. It is part of a broader effort by the government to review the wider legislative framework around Ireland’s credit unions, according to the Irish Times.
“There is no legislative silver bullet for the credit union movement. All we can do is pass legislation to enable them to lend,” Fleming said. “The only silver bullet is to lend more and that’s up to members of the movement themselves.”
LTS Ratio Declines
The Times reported the average credit union in the Republic of Ireland had just €27 out on loan for every €100 of assets as of September, close to historically low levels, according to figures published late last year by the Central Bank.
The ratio is down from 49% in 2007, and ranks among the lowest across credit union movements worldwide. The optimal loan-to-assets ratio is widely viewed to be about 50%, the Times stated.
“Some credit unions have ratios of as high as 64%, but others are as low as 14%,” Fleming told the Times.
The minister told the Times he is hopeful credit unions “rise to the challenge” in the coming months to attract current account business from individuals who have traditionally banked with Ulster Bank and KBC Bank Ireland, as the two overseas lenders exit the market.
Lending Restrictions Eased
The Central Bank, which regulates Ireland’s credit unions, eased lending restrictions in early 2020 to allow credit unions to engage in more longer-term lending, including home mortgages and business lending, the report added.
Current Central Bank lending limits mean that credit unions can effectively only offer a maximum of 3% of all mortgage loans being written in the country and less than 10% of SME loans.
The planned new legislation aims to make some amendments that would relax certain field of membership restrictions and allow co-lending on certain loans.