A group of credit unions and two representative bodies are taking the first steps towards creating a centralised treasury function for the sector that they say will help unlock €9.9 billion in mortgage and small business lending.
The initiative, which is being spearheaded by five credit unions along with the Irish League of Credit Unions (ILCU) and the Credit Union Development Association (Cuda), is a significant step for the industry after the Central Bank of Ireland announced landmark changes to the credit union lending framework earlier this year.
The five credit unions involved in the initiative are Member First Credit Union, Health Services Staff Credit Union, Comhar Linn Into Credit Union, First Tech Credit Union and St Raphael’s Garda Credit Union.
However, a total of 35 institutions across Ireland have indicated their interest in participating in the project to create a central liquidity management mechanism for the sector, the group said in a statement on Thursday.
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Essentially a treasury function serving all member credit unions, the mechanism is seen as a step towards the creation of a corporate credit union, an idea detailed in the 2023 Credit Union (Amendment) Act.
A corporate credit union would provide alternative sources of funding for credit unions beyond member shares and also provide specialised services like asset and liability management.
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The group of credit unions met Minister of State at the Department of Finance, Robert Troy, to discuss the initiative this week.
“We have made good progress on this initiative since we first met with other credit unions in August,” a spokesperson for the group said.
“There is a lot of work to be done, but the goal is to transform the lending potential of the sector in Ireland. Our objective is to design the necessary infrastructure to enhance credit union resilience and enable the sector to grow substantially as it has in other jurisdictions.”
Speaking to The Irish Times, St Raphael’s Garda Credit Union chief executive Claire Byrne said the initiative has been in the pipeline for a “long time”, but the impetus came from a recent spike in demand for credit union mortgages.
“We were mindful that the only source of funding we have at the moment is member shares, which, of course, are repayable on demand,” she said, adding that the mechanism would be a “new source of funding” as well as acting as a “centre of excellence” to help credit unions manage risk.
The idea of a centralised treasury function is modelled on the Canadian, US and Australian credit union industries, where members are offered a much wider range of services, Ms Byrne said.
The move follows the Central Bank’s decision in August to widen the financial crisis-era limits on credit union lending from 15 per cent to 30 per cent of total assets.
At the time, the ILCU said the move would treble the sector’s lending capacity to €9.9 billion and help it meet growing demand from members for mortgage and SME loans.
