The Irish League of Credit Unions has called on the Minister of State for Finance and the Central Bank to engage with the sector 'constructively and substantively' if it is to become a serious player in the mortgage market.

In comments quoted in the Sunday Independent at the weekend, Minister Sean Fleming said he would like to see the credit union sector filling the void in the lending market left in the aftermath of the impending departure of Ulster Bank and KBC.

However, the League says its members are restricted by the Central Bank regulations which mean that mortgage and SME lending are limited to a combined maximum 7.5% of total assets for most credit unions.

"That can increase to 10% of total assets but, to avail of that, they have to comply with regulatory requirements that are double that of the banks," David Malone, Deputy CEO of the ILCU said.

Mr Malone cited the example of a credit union with assets of €70 million.

Taking an average mortgage of €350,000, the credit union could only offer 14 mortgages under the current limits, he said, and that's exclusive of any SME lending.

In a statement, the Central Bank said credit unions have significant lending capacity following changes that were introduced in 2020 that allowed them to undertake increased longer term lending, including home mortgage and business lending.

Larger credit unions can apply for a 15% limit, if they have at least €100 million in total assets, the regulator pointed out.

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"If you look at the overall credit union sector, there's €1.5 billion in totality that credit unions can lend in mortgages," David Malone said.

"The total mortgage book in Ireland at the moment is €100 billion. That means that credit unions could only - at a maximum - have 1.5% of the the total outstanding mortgage book. That is a really significant curtailment of them playing an important role in the mortgage market," he said.

Mr Malone said he looked forward to the publication by the Minister of the policy review document which he described as a great opportunity to give credit unions the opportunity to unlock their potential.