Credit unions face questions over their future "relevance"

Loan capacity and interest rate changes are on way for these institutions...

Credit unions face questions over their future "relevance"

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A government-appointed Advisory Committee has recommended a full review of current Central Bank lending limits on the country’s credit unions, in light of a sharp fall in the value of credit union loans relative to their assets.

This ratio has effectively halved from close to 50% in 2007 to just over 25% last year.

The Committee, chaired by Donal McKillop, Professor of Financial Services at Queens University, reports that this slump in lending ratios "is a situation for deep concern and raises fundamental questions about the relevance of the present credit union business model."

The Committee is about to commence a review of the current 1% a month interest rate cap on credit union loans which may also help as the sector broadens the types of loans it offers including mortgages.

According to the Committee’s Report, the bad debt provisions, liquidity and capital strength of the credit union sector, are now very strong.

Total income across credit unions fell to €562.4m - down from €860.6m in 2007.