Credit unions may soon be able to help build social housing

THE CENTRAL BANK is considering allowing credit unions to branch out and invest in several different areas, including in social housing.

Today the regulator published a consultation paper on the investment framework for credit unions.

Under existing rules, credit unions can only invest in a range of specified investment classes. These include government securities, bank deposits and bank bonds.

Credit unions have long been lobbied to invest in different types of assets or to lend to approved bodies which build social housing.

The push has gained added impetus in recent years as low-interest rates across Europe mean that returns on bank deposits have become marginal, or in some cases non-existent.

In March 2016, the Irish League of Credit Unions said it was prepared to provide a fund of about €5 billion to assist in the development of social housing. The government said it would review the matter.

Changes

The Central Bank examined the investment rules earlier this year, and is now seeking submissions from credit unions and “other sector stakeholders” laying out what changes – if any – they would like to see in the industry.

“The Central Bank is considering the following potential additional investment classes for credit unions: Bonds issued by supranational entities, corporate bonds and investments in approved housing bodies,” the regulator said.

“These changes could facilitate investment in additional types of bonds and in social housing.”

The consultation will be open until 28 June.

Construction work

A spokesman for the Central Bank told Fora that a statement from the regulator based on the feedback will be published before the end of the year.

While it is possible that no changes could be introduced, he said that both the Central Bank and the credit union industry are amenable to shifts in regulation.

“There is an appetite on both sides to make changes,” he said.

Feeback

The Central Bank would have the power to draw up many of the required changes to regulations to allow credit unions to invest in different assets.

Its spokesman said that in the event that it is decided to allow the industry to invest in different assets, new legislation could be brought forward by the end of the year.

The Credit Union Development Association (CUDA), which represents some of the largest credit unions in the country, said it was pleased that the issue was being examined by the Central Bank.

Kevin Johnson, the CUDA’s chief executive, said: “Credit unions have significant funds to invest and are seeking opportunities to use these funds for the benefit of their members and the community.

“We have made proposals to the Central Bank and look forward to submitting our feedback and getting the appropriate regulations that will see credit union members savings be used to provide much-needed housing (and) a fair return for savers.”

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