Savvi credit union fined for breaching lending rules

State’s second-largest credit union breached loan regulations

Savvi, has been fined €185,500 by the Central Bank for breaching its long-term lending limits and paying remuneration to a directo

Savvi, has been fined €185,500 by the Central Bank for breaching its long-term lending limits and paying remuneration to a directo

 

The State’s second-largest credit union, Savvi, has been fined €185,500 by the Central Bank for breaching its long-term lending limits and paying remuneration to a director.

Savvi, formerly St Patrick’s Credit Union, which has more than €377 million of assets and 21,000 customers, notified the regulator in July 2017 that it had breached regulations and its credit policy, which stipulate that no more than 15 per cent of its loans can have a term of over 10 years outstanding.

“The Central Bank’s investigation found that between July 2017 and December 2017, Savvi issued nine further long-term loans, so that by December 2017, its rate of long-term lending was 16.9 per cent,” the regulator said in a statement on Thursday.

Savvi ceased issuing all long-term loans from January 2018 and by the middle of this year its ratio of loans with at least 10 years to maturity had reduced to 14.7 per cent.

The Irish Times first reported in January 2018 that Savvi had breached the rules.

Meanwhile, the Central Bank found that Savvi had reimbursed travelling expenses, totalling €28,341, over a period of four years in excess of the applicable Civil Service rates. This constituted a payment of remuneration to a director, which is explicitly prohibited under credit union legislation, it said.

“We welcome that credit unions seek to grow and develop their businesses, however regulations and safeguards still apply and, must be adhered to at all times,” said Seána Cunningham, head of enforcement and anti-money laundering at the Central bank. “Lending limits act as a safeguard to mitigate the specific risks associated with different types of lending. As such, Savvi’s breach of the long-term lending limit is a serious matter for the Central Bank.”

The bank has raised almost €100 million in fines imposed on firms under its so-called administrative sanctions procedure since 2006.

The regulator has consulted on a potential easing of lending restrictions at credit unions and expects to publish final proposals in the coming weeks, which will take effect at the beginning of 2020.

The consultation paper, issued last year, proposes removing lending maturity limits and replacing them with “concentration limits” for house and commercial lending, the two main forms of long-term lending.

Under the blueprint, all credit unions would be allowed to lend for housing and commercial loans to a limit of 7.5 per cent of the total assets of the union.

An increased concentration limit of 15 per cent would be available, subject to the Central Bank’s approval, for unions that can demonstrate that they have financial firepower.