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The Central Bank is limiting how much you can save in a Credit Union

Irish Credit Unions have said new rules will damage their competitiveness.

Image: Sam Boal/RollingNews.ie

THE CENTRAL BANK is set to apply limitations to the amount you can save with the Credit Union and limit the periods on loans from the institutions to 25 years.

The new regulations have been heavily criticised by the credit unions who have said that they will damage their ability to compete in the market.

This follows the publication of feedback from the Central Bank on Consultation Paper 88 which outlines the forthcoming regulation.

In total, there were 117 submissions to the consultation paper, the majority of which expressed opposition to the proposed changes.

What will change? 

The new regulation from the Central Bank covers a number of areas including lending, investments, savings and borrowings. It builds upon prudential and governance requirements that are already in place.

One regulation limits individual members’ maximum savings to €100,000. This includes a transitional arrangement where members would have a period of six months to bring their savings into line with the new rules.

It also lays out that loans given by credit unions would be required to come to maturity over a period of no more than 25 years. A number of submissions received by the bank disagreed with this position, saying that it would restrict the ability of credit unions to undertake mortgages.

The Central Bank responded to this by saying that from the information provided to them, lending from credit unions on loans of more than 25 years represented less than 0.06% of total lending.

Other areas of potential difficulty that have been highlighted are rules under the Credit Union Act 1997 around loan maturity limits; the need for credit unions to maintain a ‘regulatory reserve ratio‘ (something designed to ensure their financial stability) of 10%; and limitations on credit unions investing in central investment vehicles.

Reaction 

The Irish League of Credit Unions (ILCU), the Credit Union Development Association (CUDA) and the Credit Union Managers Association (CUMA) have issued a statement outlining their opposition to the changes.

The associations have described themselves as “extremely disappointed” and that, “In simple terms, these new regulations will ensure that credit unions are restricted from competing effectively with other financial service providers into the future.”

Most importantly, those that will suffer most are ordinary members – current and future.

Prior to the publication of today’s feedback by the Central Bank the groups requested a joint meeting with the Central Bank but were refused by the Registrar of Credit Unions.

In their statement, the groups go on to say that they have written to Minister for Finance Michael Noonan to ask that he delays the signing of the commencement order on the new regulations.

michael noonan Minister for Finance Michael Noonan

When is this being introduced? 

In a statement today, the Central Bank has said that they have invited interested parties in the credit union to “participate in focused dialogue in the coming months”.

It is proposed that these new regulations come into effect on the 31 December this year. Strengthening of regulatory framework for credit unions has been ongoing since August 2013. 

Speaking about the proposed regulation, registrar of Credit Unions, Anne-Marie McKiernan, said:

The Central Bank is keen to ensure that the regulations remain appropriate for the credit union sector and will undertake focused engagement with credit unions to understand how the sector envisages future development of their business model.

Read: The crisis in Greece has the people of Ireland shaking a bit

Also: Dublin house prices have stopped rising because people just can’t afford them

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