When it comes to competition for Irish banks, most commentators pin their hopes on new entrants coming into the market from abroad. But it is increasingly likely that the real competitive force that will emerge in the coming years will be from credit unions.
For years, the credit union sector has been constrained in its ability to compete across the full breadth of the personal and business market in financial services.
In recent months, a number of developments have taken place that might finally unleash its potential. The prize for credit union members could be the release of up to €7 billion in lending – including, on a significant scale for the first time, mortgages and business lending.
On top of that, smaller credit unions could work with their larger peers to offer members products and services that are beyond their reach at the moment and the sector as a whole will be able to use its combined size to support competitive lending on a scale that has been impossible until now.
READ MORE
What has changed to bring this opportunity about?
In September 2025, new regulations introduced by the Central Bank of Ireland permitted credit unions to increase the proportion of their total assets that can be used for home loans and business lending.
The Central Bank has expressed its expectation that credit unions planning to avail of these changes do so in a phased, prudent and sustainable manner as well as continuing to develop the skills, expertise and risk management, including asset and liability management, necessary for these types of lending.
Coinciding with this, the boards of 26 credit unions, representing almost €9 billion in assets, gave their approval to join a new Credit Union Services Organisation, which will be known as CCU-CUSO.
Already, CCU-CUSO is beginning to roll out a standardised framework for asset and liability management (ALM) to enhance the skills and capability of the 26 credit unions in this critical area and to establish a solid foundation for a centralised treasury function.
Membership of CCU-CUSO is open to all credit unions in the Republic and it is anticipated that more will join, once the initial 26 are fully onboarded to the standardised ALM framework.
In time, and subject to regulatory approval, CCU-CUSO will evolve into a centralised treasury function for the sector.
Essentially a credit union for the credit union sector, the concept of a Corporate Credit Union (CCU) is common internationally and is provided for, subject to a commencement order, in the Credit Union Amendment Act (2023).
It is expected that regulations will be introduced by the Central Bank in due course, which will define the regulatory requirements of a CCU.
The notion of a corporate credit union is key to unlocking the potential of the sector. While it can provide a range of services to its member credit unions, the need for a centralised treasury function to support liquidity management has often been the core activity that has prompted the formation of a CCU in other countries.
In Ireland, there are 172 credit unions and between them they have about €22.5 billion in assets. They focus primarily on short- to medium-term lending, and while recently some credit unions have started providing home loans, they do so under the constraint that their only real source of funding is the savings they get from members.
These savings are typically withdrawable on demand.
Increasing long-term lending leads to a mismatch between the maturity profile of the credit union’s assets and liabilities, requiring a more robust asset and liability management framework as well as access to the full range of instruments to help them manage these mismatches.
Therefore, compared to banks, credit unions tend to retain a greater proportion of their balance sheet in highly liquid investment assets and bank deposits so they can meet any requests for withdrawals from members, at all times and in all market conditions.
In addition, because of their balance sheet size, banks enjoy the benefit of scale economies in their asset and liability management activities relative to individual credit unions.
To compete effectively in the retail and business market credit unions require economies of scale.
In recent years, individual credit unions have merged to achieve scale while preserving their local community-based and not-for-profit ethos. Since 2015, the number of individual credit unions has reduced from 339 to 172.
While this merger trend is expected to continue, taking steps to implement a centralised treasury management operation will deliver new opportunities for economies of scale by supporting individual credit unions to manage their asset and liability requirements.
This will allow individual credit unions to further expand their product offering, underpinned by the collective strength of the movement. In addition, by combining their individual balance sheets though a centralised treasury mechanism, this should open up opportunities to access new sources of funding – including long-term funding – and so reduce the risk from having an over-reliance on members savings.
The decision by 26 credit unions to join CCU-CUSO demonstrates the sector’s determination to respond to the calls by the Central Bank and Government to further strengthen their asset and liability management capability, underpinning the sector’s ability to compete in the personal and business market in Ireland.
John Webb is acting chief executive of CCU-CUSO
