Ask credit unions to play a bigger role in mortgage lending

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

Brian Stanley, the Sinn Féin TD for Laois-Offaly, cited industry concerns that current loan limits mean credit unions can only effectively offer a maximum of 3% of all mortgages in the state and less than 10% of loans to small and medium enterprises (SMEs).

That compares to a combined market share for Bank of Ireland, AIB and Permanent TSB of 69% in 2020, he noted.

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

“Rules of the game”

“In Australia, Canada and the United States, credit unions have a level playing field with commercial banks and that is all we ask in Ireland.”

Irish credit unions have assets of nearly €17 billion, but currently lend only 27% of that due to Central Bank restrictions.

Mr Stanley said he knew of a credit union with assets of €68m who had been told they could only lend less than €5m in home mortgages and loans to combined companies.

“They are handcuffed,” he said, adding that he had asked the finance ministry to address the constraints as part of its current review of the credit union sector.

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

Community banking

David Malone, acting chief executive of the Irish League of Credit Unions (ILCU), said in March that credit unions could not “achieve their potential” and become a key provider of community banking services, as envisaged. the government program, with limits in place.

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

Patrick Casey, the Registrar of Credit Unions, told the ILCU’s annual conference in Belfast last month that the total home loans made by credit unions remained well below the maximum capacities already authorized and that around half of the credit unions had decided not to offer mortgages.

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