Rules for smaller credit unions should be relaxed - Oireachtas Finance Committee
Smaller credit unions should not be subjected to the same stringent regulation as ones with multi-million euros in assets, the Oireachtas Finance Committee has recommended.
The committee has also recommended that credit unions be allowed to lend more of their money for the likes of mortgages.
There are currently restrictions on the level of long-term lending.
Just 10pc of the loan book of a credit union can been lent out for more than 10 years, severely restricting the amount of mortgage lending they can do.
But the TDs and senators said this strict rule should be relaxed.
The committee also wants the Central Bank to move to tied regulation, which would mean tougher rules for larger lenders.
But as part of this the bigger ones would also be able to introduce services that smaller, and less sophisticated credit unions, would not be allowed to offer.
A report from the committee states: “The objective of introducing a tiered regulatory structure is to deliver a framework that will allow small and simpler credit unions to continue to operate with proportionate regulations as well as setting out the requirements to allow larger, more complex credit unions to avail of more permissive business models than they currently can avail of.”
The committee, chaired by Fianna Fáil’s John McGuinness, said it is concerned that lending is at such low levels at the State’s credit unions.
Only a quarter of the assets of credit unions have been lent out. The figure should be nearer half.
At the moment there are less than 300 credit unions, and they are all subject to the same level of regulation, whether they have €20m in assets, or €400m.
Mr McGuinness said the low-level of lending is despite the fact that on the surface the credit union sector appears strong.
Sector assets have increased by €2bn between 2011 and 2016 from €14bn to €16bn.
And the committee said the ability of credit unions to withstand additional financial stress is strong, despite the High Court-ordered wind-down of Charleville last month.
The Finance Committee said the sector has about €880m of surplus capital.