DUBLIN, Ireland–The country’s credit unions are pressing the government to relax laws so as to allow them to co-lend on projects and channel deposits into the government’s savings program.
The effort comes as Ireland’s credit unions continue to deal with an influx of deposits that has led some CUs to institute savings caps for members and with low loan-to-share ratios.
Ireland’s CUs have submitted a request with the Department of Finance asking that a legal restriction against credit unions introducing business to each other be removed, Kevin Johnson, CEO of the Credit Union Development Association, told the Irish Times.
The document, also signed by the Irish League of Credit Unions, Credit Union Managers Association, and the National Supervisors Forum, proposes that credit unions be able to lend in groups on larger transactions, the Times added.
“Credit unions may introduce business to banks but are legally restricted from introducing new business to other credit unions, which is both anti-consumer and illogical,” Johnson told the publication. “Credit unions should also be able to co-lend to allow them to pool expertise and capital to fund larger transactions, such as community projects, and thereby share the inherent risk and administration costs. If credit unions can benefit from large, pooled loans, it will enable them to put members savings to productive and provident use while also increase their income.
“Credit unions, particularly smaller ones, often face the scenario where an attractive loan proposal is made to them but because of the lending limits on that individual credit union they are forced to decline,” Johnson added.
Additional Requests
According to the Times, the submission also calls for credit unions, struggling with excess deposits, to be able to put members into State Savings products, similar to post offices.
“This would reduce regulatory reserves credit unions need to hold,” the report added.
As CUToday.info reported earlier, Ireland’s Central Bank, which regulates credit unions, eased lending restrictions early last year to allow credit unions to engage in more longer-term lending, including home mortgages and business lending. The government also committed in 2020 to review the wider legislative framework around credit unions.
While credit unions have seen some increased borrowing by members over the past 12 months, the average credit union in the sector had just €27.10 out on loan for every €100 of assets as of September, a loan-to-share ratio down from 49% in 2007.