Is the Central Bank killing credit unions?

St Raphael's, Ireland's largest credit union, takes direct aim at restrictive regulations on Breakfast Business...

St Raphael's Garda Credit Union (GCU) slammed the Central Bank and what it views as overly-restrictive regulations in no uncertain terms at its AGM last night.

The largest credit union in the state with over 34,000 members, nearly €400m in assets and a 2015 surplus of nearly €7m, it was heavily critical at the meeting and in its annual report of the constraints introduced since the Central Bank became regulator five years ago. It claims they have been preventing larger, stronger credit unions from competing on an equal footing with the banks.

Chairman Sean O’Brien writes of the "substantial and in many cases, unwarranted obstacles being placed in their way" and  “excessive restrictions, enforced through regulation are killing credit unions and making it impossible for them to compete in a commercial manner."

They have a big problem with two regulations in particular. Firstly, St Raphael's takes issue with the fact that they can only lend up to a limit of 15% of their total loan book in loans of a duration of more than 10 years (mortgages, essentially). This is despite the fact they say there is huge member demand for such loans and that those loans are on secured assets.

Secondly, members can currently only deposit a maximum of €100,000 with their credit unions – the amount covered by the State-backed deposit guarantee. This constraint does not apply to banks.

Speaking on Breakfast Business, St Raphael's chief executive Claire Byrne rejected suggestions that this latter point meant that there are many Garda members and families with more than €100,000 available that they'd like to deposit.


She said:

"We're not suggesting that but we're looking again to the future and saying that it doesn't seem fair that the regulator, who should be looking after the wellbeing of credit unions, is saying that you can't put more than a certain amount of funds with credit unions, and you're forcing people to think about banks for their savings.

"And I suppose the risk is, is that if they have to consider banks for larger amounts, perhaps they'd consider banks for all of their savings."

Here is the full Breakfast Business interview with Claire Byrne...