A new report on the credit union sector from the Central Bank shows that despite growth in new lending and a decrease in the level of loan arrears, pressures remain on their business model.

The report reveals that total assets in the sector have increased by €3.1 billion between 2012 and 2017 and currently stand at €16.8 billion. 

Meanwhile, members' savings have increased by €2.3 billion over the same time. 

The report also noted that the loan to asset ratio - a key measure of financial health - is stable. The loan to asset ratio fell from 37% in 2012 to 27% in 2015, but has stayed at 27% since then. 

Today's report also showed that lending for over five years increased by €216m from €452m in 2015 to €668m in 2017. Lending in excess of 10 years increased by €59m from €87m to €146m in the same period. 

It also shows that lending for more than ten years is currently concentrated, with 15 credit unions representing 55% of such lending.

Average loan arrears in the credit union sector continue to show a decreasing trend, falling from 19.6% in 2012 to 7.4% in 201.

But income has reduced across the sector since 2012, due to lower loan interest income on the back of the decline in credit union lending since 2012.

The report also noted that investment income has reduced due to the low interest rate environment.

This resulted in the overall return on assets ratio for the sector falling from 2.3% in 2012 to 1% in 2017. 

Despite these trends, the Central Bank said a reduction in bad debt write offs as well as loan provision write backs have facilitated credit unions' ability to maintain surpluses. 

"However, given the non-recurring nature of these factors, it is recognised that they will not contribute to the future generation of surpluses across the sector," the Central Bank added.

The Registrar of Credit Unions, Patrick Casey, said that while some modest improvements are noted, work remains to be done to ensure a sustainable credit union sector into the future.

"In order to find the right product and service mix for credit union members and to compete sustainably with others, factoring in their own capabilities, credit unions need to exploit their uniqueness, the cherished nature of their brand, their local advantages and footprint and their high personal interface with their members," Mr Casey said.

Commenting on the Central Bank report, Kevin Johnson of the Credit Union Development Association said that  the introduction of tiered regulations at credit unions needs to be addressed. 

"When it comes to long-term lending, credit unions are more restricted now than even though they've introduced significantly higher governance standards and have never been financially stronger," Kevin Johnson said.

Mr Johnston said he would like to see the urgent introduction of tiered regulations as set out by the Commission on Credit Unions to enable them to lend out some of the €6 billion available to lend. 

"A modernisation of the current regulations will allow some credit unions to continue offering basic savings and loans only, while allowing other credit unions to develop and offer a greater range of services," he added.