Mortgage lending not for smaller credit unions, says registrar

Patrick Casey sets out plans to review overall lending framework of credit union sector

Smaller and weaker credit unions may not be best placed to engage in mortgage lending, the registrar of credit unions, Patrick Casey, said on Tuesday, as he set out plans for a new CEO forum and indicated a review of the overall lending framework for the credit union sector.

Speaking at the Credit Union Management Association (Cuma) spring conference in Athlone, Mr Casey criticised the “limited clarity” credit unions have displayed in terms of future vision and strategy, and questioned the focus on a “product-led” strategy, which, he said, can undermine prudent development of the sector.

On repeated efforts by the credit union sector to be allowed ramp up its mortgage lending capabilities, Mr Casey said: “One could be excused for thinking that mortgage lending is the most important strategic issue for credit unions right now.”

‘Broader perspective’

He countered this by suggesting that credit unions display “a broader perspective on business model opportunities”.

However, he added that the regulator is supportive of credit unions engaging in longer-term lending, such as mortgages, “as part of a balanced loan portfolio”, although he suggested that specific features of the mortgage market, such as its low margins and payback activity, mean that “this is not a product for smaller or weaker credit unions”.

On the back of this interest in mortgage lending, Mr Casey said that the regulator will examine the overall lending framework for credit unions, and has recently issued a questionnaire to credit unions in this regard.

On the potential future for smaller, weaker credit unions, “with emerging viability challenges”, Mr Casey said he we would expect the strategic discussion of these credit unions “to focus on solutions such as a transfer of engagement to a stronger credit union in the interests of all members”.

Different approach

With respect to the Central Bank’s supervisory approach, Mr Casey said that it would take a different approach this year, to further differentiate on a proportionate basis between small (under €40 million total assets), medium (€40 million-€100 million total assets) and large credit unions (over €100 million total assets).

Mr Casey also outlined plans for a new CEO forum, which will allow the regulator to engage directly with credit union CEOs/managers.

“The new CEO forum will give those progressive credit unions with the capability and desire to undertake business model transformation a mechanism to avail of practical regulatory support when seeking to address their commercial challenges,” Mr Casey said.