ILCU says strict lending rules limit Louth credit unions to just 3% of mortgage market

The Irish League of Credit Unions (ILCU) is calling for an urgent and thorough review of the regulatory restrictions on credit unions, which have more than €15 billion in excess funds. It indicates that a significant portion of these funds could potentially be used for:

  • ensuring competition in the mortgage market
  • support first-time buyers
  • supportive housing
  • supporting small businesses through SME loans as they recover from the impact of Covid

Under current lending limits set by the Central Bank, credit unions can only offer 3% of mortgages and less than 10% of SME loans in the market. By comparison, Ireland’s three anchor banks share 70% of the mortgage market, with the rest mainly held by KBC and Ulster Bank, which are pulling out of the market. The SME lending market is also highly concentrated, with the top three banks holding 90% of the market share.

“Credit unions cannot reach their potential and become a key provider of community banking services, as the government has committed to in the program for the government, with such restrictive lending limits,” said David Malone, Deputy Director General of ILCU.

“At a time when the banking duopoly is not subject to the restrictive measures imposed on credit unions and competing in the mortgage and SME market, it is time for the government to level the playing field and allow cooperatives to Credit to provide Irish consumers and businesses with an alternative banking solution.

“Right now, when we need money circulating in the economy to support first-time buyers, housing supply and support post-Covid business recovery, the restrictions on credit unions effectively take the circulation money when it is most needed.”

The call for an urgent review follows recent remarks by Seán Fleming, the Minister responsible for Financial Services, Credit Unions and Insurance, who said he would like to see the credit union sector “fill the void” in the lending market following the departure of Ulster Bank and KBC.

However, ILCU believes that the full potential of the credit union movement in the financial services sector can only be fully realized if and when there is a level playing field and policy is fair and inclusive in all financial institutions.

The ILCU says it welcomes the Minister’s comments in the Seanad that its policy review will seek to include proposals to support regulatory engagement while respecting the need for regulatory independence. In this context, prior to a meeting with Minister Fleming where the details of his legislative framework policy review document and his proposals are to be presented, the ILCU is also requesting the establishment of a working group on policies, involving the Ministry of Finance, the Bank and the representative bodies of the credit unions.

The creation of such a working group, according to the ILCU, would ensure that policy-making is fully informed, fit for purpose and sustainable, and would support the roll-out of a cooperative-led community banking model. credit for Ireland. Without such a forum involving key stakeholders at the policy initiation stage, Irish credit union policy will continue to be developed in a vacuum, he adds.

David Malone, ILCU Deputy Chief Executive, said: “We are asking for a level playing field and the opportunity to compete meaningfully in the marketplace. With a network of credit unions across the country, we have the capacity, the resources, and most importantly, the funds to help many people buy homes, support local businesses, and provide the full range of banking services. to communities. Regulatory constraints, particularly lending limits, severely limit the potential of our credit unions, and it is Irish consumers, businesses and future homeowners who lose out.

“Internationally, we are outliers. The regulatory environment in which international peers operate is competitive and acts as an enabler for business and supports a competitive financial services market. The regulatory hurdles imposed on Irish credit unions are archaic and outdated. Our policy is lagging behind.

“At a time when retail banking in Ireland is undergoing fundamental change and demand for the community banking role that credit unions can play is stronger than ever, an urgent review of the regulatory constraints placed on credit unions is now necessary, with a view to unleashing their potential to enable them to compete on a level playing field We are considering the creation of a working group on credit union policy, with which we are fully committed, as the appropriate to conduct this review, ensuring that the policy is not developed in a vacuum.