Saturday 21 April 2018

Credit unions frustrated over Government's failure to allow them help fund social housing

They hinted that the Government was snubbing their offer of funding (Stock picture)
They hinted that the Government was snubbing their offer of funding (Stock picture)

Charlie Weston Personal Finance Editor

Credit unions have expressed frustration over the failure by the Government and regulators to make changes to allow them to help fund social housing.

The mutually-owned lenders could put up €1bn initially and up to €5bn over time to help fund the building of homes.

They hinted that the Government was snubbing their offer of funding.

But they told the Oireachtas Finance, Public Expenditure and Reform Committee the Department of Finance and the Central Bank have yet to implement changes that would allow credit unions to fund social housing.

This is despite the chronic housing shortage.

Chief executive of the Irish League of Credit Unions Ed Farrell told the committee credit unions were frustrated at the lack of progress.

And president of the league Brian McCrory questioned why it was taking so long for changes to be made to allow credit unions to fund social housing.

The last Government looked to the credit unions in 2014 to help fund its housing strategy, Mr McCrory said.

But there needs to be changes implemented by the Central Bank and the Department of Finance to facilitate this.

He said the Department of Housing was interested in the funding idea.

“Given that they elicited it; they should be.  They in turn are talking to the Department of Finance, who we are led to believe are talking to the Central Bank.

“I have no doubt such conversations are taking place, what I do doubt is whether any action will ever arise as a consequence,” he told the committee.

Credit unions are prepared to pool some of their surplus funds into a central vehicle to help fund housing, the committee was told.

The politicians were told credit unions were being shackled by rules that are stopping them competing with banks, TDs and senators were told.

Legislative restrictions and Central Bank rules meant that credit unions are restricted to competing for less than 10pc of the lending market.

Chief executive of the Credit Union Development Organisation (CUDA) Kevin Johnson called on politicians on the Oireachtas Committee to use their influence to have the rules eased.

CUDA represents some of the largest credit unions in the State including St Anthony’s and Claddagh in Galway, Dundalk in Louth, and Tullamore, Co Offaly.

All credit unions are restricted in the amount they can lend out for more than 10 years, and have to observe strict rules on reserves.

The rules have been tightened up in the last two years.

Mr Johnson said: “The effect of new regulatory rules, without proportionality, relegates credit unions to compete in less than 10pc of the Irish credit market.”

He said this was despite the lenders having the capital, competency and community from which they can and should compete on a fair playing pitch with other lenders.

“The effect of these new rules, is like asking us to win an All-Ireland, whilst marginalising our team to staying inside our own square, at the same time allowing our competitors free reign over the remaining 90pc-odd of the pitch.

“The outcome of such actions will be obvious and plain for all to see.”

Mr Johnson blamed the rules for creating a situation where the mutually-owned organisations are doing less business than they were 10 years ago.

Credit unions want to lend some of their surplus funds to fund social housing, but they need the rules imposed on them changed to allow this.

And some larger credit unions are eager to get into mortgage lending, but the rules limit how much they can loan out.

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