The Central Bank of Ireland issued new lending measures for credit unions and these measures will come into effect from January 2020. These measures will allow credit unions to undertake increased longer term lending, including home mortgage and business lending. Further additional capacity is to be extended to larger, stronger credit unions that meet certain requirements.
The changes in the measures with respect to the proposed measures include removal of the existing lending maturity limits, which cap the percentage of credit union lending that may be outstanding for periods of more than 5 and 10 years. The maturity limits will be replaced by the new concentration limits, on a tiered basis, for home mortgage and business loans, expressed as a percentage of total assets. There are the following three tiers under the changes:
- A combined concentration limit for house and business loans of 7.5% of total assets for all credit unions
- A 10% limit, conditional on a credit union satisfying asset size (at least EUR 50 million) and regulatory reserves qualifying criteria and notifying the central bank in advance
- A 15% limit for credit unions with total assets of at least EUR 100 million, subject to the approval of the central bank
These changes follow a comprehensive review of the lending framework for credit unions. Following the review, on October 24, 2018, the Central Bank of Ireland had published a consultation on potential changes to the lending framework for credit unions. The consultation had sought views from credit unions and other sector stakeholders on the proposed changes. The Central Bank of Ireland has also published the responses received to this consultation, along with a Feedback Statement.
Keywords: Europe, Ireland, Banking, Credit Unions, Lending Rules, Credit Risk, Regulatory Impact Analysis, Central Bank of Ireland
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