The Central Bank of Ireland has launched a consultation on proposed new credit union regulations which it says will have a “significant impact” on the sector.
Current regulations enable credit unions to invest in various specified investment classes, such as government securities, bank deposits, bank bonds and collective investment schemes. This year, the bank began a review of these rules to see if this range of investment classes could be widened.
The consultation is aimed at getting opinions from credit unions and other stakeholders on the potential changes arising from the review.
In the paper accompanying the consultation, the bank said any changes to the investment framework for credit unions should reflect the fact that it is the savings of credit union members (which can be withdrawn on demand) that will be invested by credit unions, and that the risk profile of credit union investment portfolios should reflect this.
The bank wants feedback from the sector to see if there are additional investment classes appropriate for credit unions, taking account of the appropriate risk profile. These would include investment in additional types of bonds and in social housing and state projects.
The Central Bank is also asking respondents there are any additional investment classes for credit unions that it should consider.
Investments are particularly important to credit unions due to their low loan-to-asset ratio. The paper says many credit unions have become heavily reliant on investment portfolios to generate sufficient returns. The current low interest rate environment has impacted on the capacity of credit unions to generate income from investment portfolios.
The consultation ends on 28 June.
