The Central Bank's latest report on the credit union sector has found that the level of lending has returned to pre-pandemic levels, but cautioned that sustainability challenges remain.
The Financial Conditions of Credit Unions Report provides an update on the financial performance and position of credit unions for the financial year ended September 30, 2022.
It reveals that total loans outstanding are now back at pre Covid-19 levels, but despite the increase, the overall loan to asset ratio at 28.4% remains close to historically low levels.
The Central Bank noted that arrears have fallen to a seven-year low of 3%, but cautioned that credit unions should be cognisant of economic headwinds.
It said that significant capacity remains at a sectoral level for additional house and business lending. This capacity amounts to €1.06 billion, increasing to €2.1 billion if all eligible credit unions availed of increased concentration limits available.
Today's report also shows that while the rapid pace of savings during Covid-19 has reduced, savings continued to increase during 2022 and came to a total of €17 billion by the end of September.
Meanwhile, the average sector total realised reserves as a percentage of total assets increased marginally to 16.1% with all credit unions reporting regulatory reserves above the required regulatory minimum of 10% of assets.
The Registrar of Credit Unions, Elaine Byrne, said that while the financial trends observed over 2022 include some positive indicators, the low loan to asset ratios, increases in costs and falling return on assets, if not addressed by credit unions, will continue to impact on sustainability.
"The maintenance of strong reserves is key to underpinning member confidence, particularly in the challenging macro-financial environment and where sustainability challenges continue," Ms Byrne said.
She said that credit unions can offer a wide range of products and services to their members.
"Sectoral collaborative efforts to provide services are welcome, and forthcoming legislative changes should provide further opportunities for credit unions to expand their service offerings to members," she stated.
"It is important that credit unions clearly identify their members' financial services needs, recognising the financial and operational requirements to deliver an expanded range of services in a prudent and sustainable manner," she added.
