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Credit union lending limits ‘not the barrier’ to more offering mortgages, says Central Bank

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'This is not a regulatory challenge, but a commercial one,' said Patrick Casey, registrar of credit unions at the Central Bank

'This is not a regulatory challenge, but a commercial one,' said Patrick Casey, registrar of credit unions at the Central Bank

'This is not a regulatory challenge, but a commercial one,' said Patrick Casey, registrar of credit unions at the Central Bank

The regulator of credit unions at the Central Bank has said lending limits are “not the barrier” to more credit unions offering mortgages, cautioning the sector against calls for further capacity.

Patrick Casey, the registrar of credit unions at the Central Bank, made the comments at an address at the Irish League of Credit Unions’ (ILCU) 2022 annual conference yesterday in Belfast.

The ILCU is a representative body for credit unions across the island of Ireland. In March, it said lending rules had limited credit unions to just 3pc of the mortgage market and less than 10pc of the small business loan market. The body added that credit unions had €15bn of surplus funds.

During his speech, Casey said total house loans outstanding by credit unions were valued at €260m, or 10pc of maximum capacity, and business lending was €128m, or 5pc of capacity, as of the end of last September. He added that 99 credit unions, roughly half of them, had decided not to engage in house lending.

Casey insisted regulatory limits are not a barrier to more credit unions offering house lending. He cautioned against calls for additional lending capacity to be made available, adding that the scale of unutilised available capacity was at 90-95pc.

“The commercial reality is that it is simply not enough just to have the surplus funds available for house loans,” he said. “Credit unions must have more advanced competence and capability to compete with others for market share.

“You still need to build a compelling mortgage proposition which attracts borrowers – one that delivers a sustainable return for the credit union over the economic cycle. This is not a regulatory challenge, but a commercial one.”

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Casey said the Central Bank wanted to see a strong sector. He added credit union commercial challenges were “well known” and required commercial answers to reverse the growing gap between members’ savings and loans. He said the sector loan-to-asset ratio was around 27pc, close to historically low levels.

“Without business model transition by credit unions, many will face real financial viability risk,” he said.


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