The Central Bank has it will engage with the credit union sector about changing regulations that could allow for the funding of social housing.
While the Central Bank said it was open to engagement with the sector on the social housing issue, the regulator said that overall “standards of regulatory compliance are well below the those required to safeguard members funds”.
Anne Marie McKiernan, Registrar of credit unions at the Central Bank, told the Oireachtas committee on finance that the onus was on the credit unions to ensure that they were investing the money of their members in a “prudent” way.
Ms McKiernan added that it was “worrying” that the conversation surrounding easing of lending restrictions had focussed around the issue of mortgage provision.
She said that the regulator did not want "to lift limits and see what happens".
She said that credit union management had not presented the Central Bank with adequate proposals that met the regulatory compliance standards of the regulator.
The Central Bank has said the biggest challenge facing the credit union sector is to figure out how to grow lending in a responsible manner.
Des Carville, head of shareholding and financial advisory division at the Department of Finance, said that a review by the Credit Union Advisory Committee had thrown up “ persuasive arguments” about raising lending limits for credit unions.
“There is a persuasive argument that the lending limits constrain upfront investment and this will form part of the implementation group discussions,” Mr Carville told the oireachtas committee on finance, public expenditure and reform.
However, he added that it was the job of the Central Bank to make changes to any to existing restrictions on lending.
The Department said that 18pc of credit unions now had assets in excess of €100m and may need to be treated differently to smaller credit unions.
Officials from the Department of Finance were quizzed as to why credit unions were not being allowed enter into the mortgage lending market.
Labour’s Sean Sherlock accused the Department and the Central Bank of not taking credit union sector seriously because they were voluntary organisations.
“We have the utmost respect for the credit union sector. We are very supportive of the sector,” Mr Carville replied.
Committee chairman John McGuinness said that credit unions have been held back from entering in the housing market.
Labour's Sean Sherlock said that the scale of the problems in the credit unions had been “grossly, grossly overestimated.”
Mr Carville said that there was €250m in the Credit Institutions Resolution Fund and that €30m had been used to assist credit unions that had ran into difficulties.
The credit unions had been asked to pay €7m per year into the fund, which has now built over the course of five years
Mr McGuinness accused the Department of “illegally” taking money from the credit unions given that that legislation for the resolution fund had only required credit unions to contribute for four years.
Mr McGuinness concluded the session saying “the merry-go-round is coming to and end. We’re all getting sick of it.”