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Central Bank of Ireland

Dec 11 2024

CUDA Comments on the Central Bank of Ireland’s Public Consultation on Proposed Lending Limit Changes

By News

Commenting on the Central Bank of Ireland’s public consultation regarding significant changes to lending limits and underwriting requirements following the enactment of the Credit Union (Amendment) Act 2023, Kevin Johnson, CEO of the Credit Union Development Association (CUDA), said:

“we are pleased that this modernising of the lending framework regulations for credit unions is in line with our request submitted to the Central Bank of Ireland in February ’24.

The Credit Union (Amendment) Act 2023 was designed to give credit unions greater flexibility, enabling them to engage in loan participation and syndication, which allows lending risks to be shared among credit unions. The combination of the legislation and these proposed regulatory changes mark a major step forward for the sector, empowering credit unions to enhance their offerings in both the mortgage and business lending markets. A significant move towards our vision where everyone in Ireland will have access to all Credit Union services​.

Credit unions have already begun to account for a growing share of mortgage switches. With these enhanced lending limits, more credit unions will be attracted to helping members finance their home purchase and collectively the sector is  poised to more than triple their current mortgage loan books to over €2 billion in the coming years, further establishing themselves as strong contenders in the Irish mortgage market.

In 2017, the average credit union mortgage was approximately €110,000. Today, that figure has risen to over €200,000, though it remains below the banking sector average, which exceeds €300,000. Credit unions cater to a broader range of applicants, as reflected in the average household income of their mortgage holders, which is around €75,000—significantly lower than the €100,000 average for bank mortgage customers.

Business lending has also seen considerable growth across the sector, supported by the recruitment of specialists in this area. These enhanced lending limits and positive adjustments to underwriting requirements will enable credit unions to compete more intensively for business loans within their local communities.

Under the new legislation, credit unions will also be permitted to collaborate with one another to offer services such as home loans to members of other credit unions. For the first time, credit unions will have the ability to refer mortgage or business loan applications to other credit unions when they are unable to provide the loan themselves. This effectively means that every credit union in the country will be able to offer mortgages—a significant milestone for the sector.

The appetite for credit union mortgages continues to grow among the public, reflecting a clear demand for alternatives to traditional banks. Credit unions are stepping up to meet this demand by upskilling, modernising their offerings, and bringing much-needed competition to the market. For several years, regulators have encouraged credit unions to expand their lending, and the sector’s efforts are now bearing fruit.

The success of credit union mortgage lending was recently acknowledged by Sharon Donnery, Deputy Governor of the Central Bank of Ireland, who stated: ‘Over the years since these lending regulations were introduced, I am happy to say that our supervisory experience tells us that many credit unions in the sector have built this capacity, and they have prudently engaged in business and mortgage lending. 11% of Credit Union loan books are now in mortgages.’

Credit unions are uniquely positioned to drive competition and provide real alternatives in Ireland’s financial services market. These proposed changes will help credit unions continue their phenomenal growth in lending, further cementing their role as key players in the Irish financial landscape.”

ENDS

 

Nov 20 2024

Credit Unions Welcome Deputy Governor’s Positive Remarks and Anticipate Upcoming Regulatory Changes

By News

CUDA warmly welcomes the positive comments made by Deputy Governor Sharon Donnery in her recent speech, “Evolving with the times, credit unions in a changing landscape.” Her recognition of the significant progress made by credit unions over the past decade, particularly in terms of asset growth, diversification of services, and strengthened governance, is greatly appreciated.

Reflecting on the speech, Kevin Johnson, CEO CUDA stated “We would like to extend our thanks to the CBI Deputy Governor Sharon Donnery for acknowledging that “many credit unions in the sector have built this capacity, and they have prudently engaged in business and mortgage lending.”

This recognition is a testament to the hard work and dedication of credit unions. He added “we firmly believe that the existence of the SAM platform for mortgages and business lending, along with their related support services, has played a significant role in this achievement. The SAM platform has provided the necessary tools and resources to help credit unions expand their lending capabilities and better serve their members.”

“We are particularly encouraged by the Deputy Governor’s announcement of planned changes to the concentration limits and underwriting requirements. These changes, aimed at enabling increased lending activity, represent a significant opportunity for credit unions to further support their members and communities.”

The proposed regulatory adjustments will be subject to a public consultation in early December. CUDA looks forward to actively participating in this consultation process and making a comprehensive submission on behalf of our member credit unions. Our goal is to ensure that the final regulations support the sustainable growth and development of the sector, allowing credit unions to better serve our members’ needs.

We thank Deputy Governor Donnery for her continued support and wish her every success in her new role at the ECB, and we look forward to working closely with the team in the Registry of Credit Unions to implement these important changes.

May 28 2024

CUDA welcomes the publication of the ICURN report

By News

CUDA welcomes the publication of this awaited ICURN peer review report. It contains several key recommendations which the Regulators Network believes will improve the effectiveness of compliance within credit unions. We note that the report considers the financial performance of credit unions up to year-end 2022, and therefore does not have the benefit of the improvements achieved in 2023.

From our initial read of the report, we welcome suggestions calling for the CBI to update aspects of the Credit Union Handbook related to operational risk, fraud reporting requirements, and increase engagement with credit union boards and staff on risk management practices.

We particularly welcome the suggestion for further development of the Regulatory Framework to accommodate the growing diversification of credit union business lines, provided credit unions demonstrate the necessary capability and competence. This involves acknowledging and supporting the expanding roles and services offered by credit unions while ensuring they remain within a safe and sound operational framework.

The report notes that the CBI “remain of the view that there is no rationale to change to a risk weighted approach” for determination of capital which is disappointing and this ties up excessive capital. That said we look forward to working with the CBI on their ongoing lending framework review and the associated liquidity regulations. CUDA maintains that a ‘One size fits all’ regulation approach damages both large and small Credit Unions, a new model is required for the sector to sustain and achieve its full potential.

Apr 08 2024

CUDA comments on CBI Financial Conditions of Credit Unions Report

By News

Commenting on the ‘Financial Conditions of Credit Unions’ report, published by the Central Bank this morning, Kevin Johnson, CEO of CUDA (Credit Union Development Association) said “This morning’s report shows that lending is strong across the credit union sector, with a 12pc increase in loans for the financial year ended 30 September 2023. Loan growth has continued into 2024 and this is reflective of the huge demand for credit union loans and the increased ability of credit unions to meet this demand across multiple channels. Furthermore, thanks to legislative changes signed last February, we expect the scale of credit union lending to significantly increase in the coming months and years – because from September 2024, for the first time, credit unions will be able to offer a service or product such as a home loan to a member of another credit union – under a formal arrangement with that other credit union. For householders and aspiring homeowners, this means there will be greater access to fairer mortgages as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide a mortgage themselves. This effectively means that every credit union in the country will be able to offer mortgages. As a result of these changes, CUDA contends that total new credit union mortgage lending could reach €1 billion per annum by 2027, which could put credit unions in the top five mortgage lenders.

Furthermore, the Credit Union Regulatory Lending Framework review is ongoing in the Central Bank at present and is due to be published by the end of June. On foot of this review, we would hope going forward that further changes will be implemented which will permit credit unions to lend more.

While after falling to a seven-year low the last time this report was published[1], the slight increase in arrears captured in this morning’s report is a sombre reminder of the pressure that the increased cost of living has brought on people. Credit unions are very cognisant of this and continue to remain supportive of anyone who is experiencing difficulties.  We believe the low increase is testament to the competitive interest rates available from credit unions as well as the work that credit unions do with any customers who may run into difficulties repaying their loans.

This morning’s report also shows that there’s been an increase in reserves across the sector, with all credit unions reporting regulatory reserves that are comfortably above the required regulatory minimum. This is evidence of prudent financial management by credit unions – which in turn underpins member confidence and enables credit unions to expand on their service offerings and continue to win more of the mortgage and lending pie from the Irish banks and non-banks alike.”

 

ENDS

 

[1] As per Financial Stability Report for financial year to 30 September 2022, published in March 2023

Mar 30 2023

CUDA comments on the CBI Report on Financial Conditions of Credit Unions

By News

The Central Bank of Ireland have today (30th March 2023) published its ninth edition of the Financial Conditions of Credit Unions Report.

Commenting on the Central Bank’s report on the Financial Conditions of the Credit Union sector, ‘Kevin Johnson, CEO of the Credit Union Development Association, which works with over 50 credit unions, said

“Loan volumes are up, and the loan-to-asset ratio is definitely improving, but not by as much or as quickly as we would like. We believe that there’s an absolute need to resolve this by expanding the loan profile of credit unions and prudently growing loan books across the sector.  

Competition in the mortgage market has reduced following the departures of Ulster Bank and KBC, and with the non-banks struggling to offer competitively priced products, there’s a clear opening for credit unions to substantially expand their mortgage products. CUDA has been at the forefront of this, with its members initially entering the mortgage market in 2018 targeting specific lending needs, since 2021 we have worked with credit unions to expand their offerings and we are now working to expand this to more credit unions. 

New legislation that is progressing through the Oireachtas and scheduled for enactment this year will support this, as it will allow credit unions to refer lending business to each other which means that even those credit unions without mortgage lending underwriting skills will be able to facilitate their members. 

Each credit union is a separate legal entity with its own Board and management team, and they are not currently permitted to share business. These changes will help credit unions make a greater financial, social, and environmental contribution as their legislation framework is modernised.

Credit Unions have significantly modernised in the past decade – their structure, legal and regulatory status, product offerings, and service delivery methods have advanced considerably. In particular their digital capabilities were accelerated during the Covid-19 pandemic. Members can still access the traditional set of personal loans and savings, and now they can also avail of current accounts, ‘one stop shop’ retrofit loans, mortgages, revolving credit, debit cards, community loans, agricultural loans, as well as loans for small businesses.  These are accessible face to face, over the phone or via online facilities.  Recent rises in interest rates will have a significantly positive impact on the ROA for all credit unions as this will result in them getting a better return on their investments.”

Nov 17 2022

CUDA Congratulates New Registrar of Credit Unions on her Appointment

By News

The Central Bank of Ireland has today announced the appointment of Elaine Byrne as the new Registrar of Credit Unions (CBI press release available here.)

CUDA CEO, Kevin Johnson stated ‘We have had the pleasure of working with Elaine in her role as Deputy Registrar for the past 16 years.  In congratulating Elaine on her appointment we very much look forward to a constructive and positive engagement with her and her team.  Elaine takes on the important role of Registrar at an incredibly busy time for credit union regulation, an agenda that includes implementation of the outcomes from the Credit Union Policy Review, role of CUs in the Consumer Protection Code review, impacts of the Individual Accountability Framework, business development initiatives, role of credit unions in the Retail Banking Review, various EU / EBA directives as well as our ongoing work on capital and liquidity requirements for credit unions.

 

Dec 14 2021

Central Bank of Ireland’s Update on Financial Condition of the Credit Union Sector

By News

The Central Bank today (14 December) published its eighth edition of the Financial Conditions of Credit Unions Report. The report provides an update on the financial performance and position of credit unions, to inform credit unions and provide input for boards as they undertake their own strategic analysis and decision-making.

Commenting on the Central Bank of Ireland’s update on the financial condition of the Credit Union sector, Kevin Johnson CEO of CUDA (Credit Union Development Association), stated

“As seen in the report credit unions have the funds and the market reach, and we are delighted to see the breadth of services now available from many of them. The credit union movement could play a more active role, within their respective communities, in supporting housing association ownership, home ownership and retrofitting through sustainable and prudent lending, particularly as banks continue to reduce their presence in local towns and villages across the country. While credit unions have invested heavily in their digital capabilities in recent years to meet the convenience needs of many consumers, they have not abandoned those, of all ages, that prefer the face-to-face customer experience, whether it’s a simply transaction or a complex query.

The sector can only achieve its potential though continuing with their business model change, and this has to be enabled by an appropriate legislative and regulatory framework. Given the right structure, this could increase from current level of €5.25bn to €10.5bn.  We are constructively engaged in the Government Policy Review process and look forward to amended legislation that will enable all credit unions and their members prosper.”