Call for credit unions to have greater role in mortgage lending

Sinn Féin TD Brian Stanley says existing rules leave credit unions ‘handcuffed’

Credit unions are being "handcuffed" by overly strict legislation that effectively prevents them from offering more mortgages and should be allowed to play a greater role in home lending, according to the chairman of the Public Accounts Committee (PAC).

Brian Stanley, the Sinn Féin TD for Laois-Offaly, cited the sector's concerns that current lending limits mean credit unions can effectively only offer a maximum of 3 per cent of all mortgages in the State and less than 10 per cent of loans to small and medium-sized enterprises (SMEs).

This compares with a combined market share for Bank of Ireland, AIB and Permanent TSB of 69 per cent in 2020, he noted.

“Credit unions want to offer more mortgages to potential homeowners but are severely limited by legislation introduced following the financial crash, a crash caused by commercial banks,” Mr Stanley said.

‘Level playing field’

"In Australia, Canada and the US, credit unions have a level playing field with commercial banks and that is all we are asking for in Ireland. "

Irish credit unions have assets of almost €17 billion, but currently only lend 27 per cent of that amount as a result of Central Bank restrictions.

Mr Stanley said he knew of one credit union with assets of €68 million that has been told it can only loan less than €5 million in mortgage home loans and business loans combined.

"They are being handcuffed," he said, adding that he has asked the Department of Finance to address the constraints as part of its current review of the credit unions sector.

The Central Bank eased some of its lending restrictions in early 2020 to allow credit unions to engage in more longer-term lending, including home mortgages and business lending. But the sector remains frustrated by the limits that continue to apply.

Community banking

David Malone, interim chief executive of the Irish League of Credit Unions (ILCU), said in March that credit unions could not "reach their potential" and become a key provider of community banking, as envisioned by the programme for government, with the limits in place.

However, the regulator of credit unions at the Central Bank has said the lending limits are “not the barrier” to more credit unions offering mortgages.

Patrick Casey, the registrar of credit unions, told ILCU's annual conference in Belfast last month that total house loans by credit unions remained well below the maximum capacities already permitted and that about half of credit unions had decided not to offer mortgages.