In line with concerns expressed recently by the seven local credit unions operating in The Avondhu area over proposed regulatory changes, local Minister Seán Sherlock said proposals will hamper growth in local branches.

The Cork East TD has written to Minister for Finance Michael Noonan to ask him to take into account the concerns of local credit unions’ ability to lend money into the local economy if new Central Bank rules are implemented.

“Proposed new Central Bank rules will place further restrictions on personal and home loans as well as capping savings if they are agreed,” said Minister Sherlock. “These draft proposals seems punitive and will hamper the growth of business in branches in Mallow, Mitchelstown and Fermoy in particular.”

“Credit unions are struggling under the current business model. If we are to help credit unions to get back to full recovery then the Central Bank shouldn’t be making proposals that are seen as a tool to drive business away from credit unions and towards banks. This is anti-competitive,” he stressed.

“The Central Bank has started a consultation process with Credit Unions with a view to putting another layer of regulation in place that could see credit unions having to keep as much as 10 per cent of their money in a ‘regulatory reserve’, to guard against future losses due to potential bad debts.”

Last week, Dermot Long, manager of Mitchelstown Credit Union, told The Avondhu the proposed changes would ‘create a trading disadvantage for credit unions’.

On the matter, Minister Sherlock added: “Nobody disagrees with the idea of creating a ‘regulatory reserve’. Credit unions always keep monies aside to cover losses on loans that are not repaid or that are in arrears.

“What is at issue here is the extent to which a reserve as high as 10% would have on a credit unions’ ability to lend out monies to account holders who form the backbone of the credit union movement.

“This appears to be a blunt instrument. I had hoped that the Central Bank would take a more innovative approach, especially given that some local credit unions are recovering well from the recession and are priming themselves to lend to account holders who depend on their local branch for domestic and small business requirements,” he concluded.