Thursday 29 September 2016

Credit union rules relaxed to allow investment in social housing

Finance Minister Michael Noonan has ordered a review into the limits on the sector

Published 03/01/2016 | 02:30

Minister for Finance Michael Noonan TD speaking to media at Government Buildings following Rent Certainty Proposals and Increased Housing Supports.
Pic Steve Humphreys
10th November 2015.
Minister for Finance Michael Noonan TD speaking to media at Government Buildings following Rent Certainty Proposals and Increased Housing Supports. Pic Steve Humphreys 10th November 2015.

The Central Bank is scrapping a rule that prevents credit unions from investing in public projects, such as social housing.

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The country's credit unions have long campaigned to be allowed to invest in social housing. The Irish League of Credit Unions said in November that it had up to €8.5bn of members' deposits available to help solve Ireland's social housing crisis and that it could not understand why the Government was prohibiting this.

Department of Finance assistant secretary-general Ann Nolan confirmed to the country's biggest credit unions that the prohibition is being scrapped last month.

"Following discussions with the Central Bank, I have been informed that regulations have been updated in relation to classes of investments for credit unions to specifically include investments in projects of a public nature, including investments in social housing," Ms Nolan wrote on December 16.

Many other rules governing credit unions are also being reviewed, following the surprise move by Finance Minister Michael Noonan in December to order a statutory committee to probe the limits imposed on the sector, such as limitations on the nature and term of lending.

Many of these rules were originally introduced by the Central Bank, based on a 2012 report by the Commission on Credit Unions, another statutory group.

The Central Bank has been accused of implementing the Commission's recommendations in a manner inconsistent with their spirit and intent. Some credit unions deem them onerous.

The new review, to be conducted by the Credit Union Advisory Committee, will begin this month and is expected to report by the end of June.

The Sunday Independent has seen its terms of reference and among the things the committee must take into account is "the need for credit unions to develop their business model and grow income in a prudent manner".

The contentious €100,000 savings cap for credit unions has already been relaxed. Credit unions with more than €100m in assets may apply to the regulator to accept more than €100,000 from individual savers.

The Credit Union Development Association, which represents some of the country's largest credit unions, wants the regulator to go further. Writing in the Sunday Independent today, CUDA chief executive Kevin Johnson called for the introduction of tiered regulation, whereby larger credit unions would be given more freedom than smaller credit unions.

"Tiered regulation, done properly, will allow some credit unions to continue to offer basic savings and loans, while allowing other credit unions to develop and offer a greater range of services, as long as they have what is necessary to manage the additional risks," he writes.

"Credit unions need to be allowed to compete with banks... Fundamentally, credit unions offering a full range of services will drive great competition - something that is sorely lacking in Ireland at the moment."

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