Ms Anne Marie McKiernan:

On the point of long-term lending, including mortgages, many credit unions can now do mortgage lending but with limits. These limits allow credit unions to lend potentially up to 15% of their loan book beyond ten years and up to 40% of the loan book for between five and ten years. What we found was that a very small number of credit unions use the available headroom relating to the existing limits. Even though they could lend up to 15% of the loan book for beyond ten years, current usage is just over 2%. If credit unions were to use the available headroom, we estimate it could give rise to an additional €500 million in lending beyond ten years to reach the current allowable limit of 15%. A very important point to note is while 11 credit unions have applied to us for discretion to apply the higher limit of 15% in long-term lending, only three of them use it. This suggests many credit unions are already adapting their risk appetite. Long-term lending, in particular mortgages, is a more complex business to get into and they are considering to a greater degree whether they are willing to do so. We have not received a structured proposal from the sector for a new higher limit than that currently in place and on how the sector would adapt its current business models to meet such a higher limit. We have engaged extensively with the sector regarding the issues that would need to be addressed in any proposal and we give guidance on this. We will shortly publish additional guidance in this area.

Regarding our view on greater long-term lending in mortgages, it is quite a different business to that in which credit unions specialise and it tends to be a more complex business model. Therefore, we certainly have highlighted to the sector that there is a need to greatly understand the impact on its business of the changes, for example, with regard to the its intentions regarding loan durations, the impact on credit unions' balance sheets, particularly in the context of funding, and how credit unions would deal with the additional capabilities required in this business, which has legal and collateral aspects. The mortgage market tends to be a high volume low margin business with experienced players. How would the credit unions propose to deal with these market environment issues? It is an area where shared services or collaboration on services would help to reduce costs for individual credit unions getting into it, so sector-wide solutions on shared services would be helpful.

Overall, the capability to do a significant amount of mortgage lending or long-term lending is quite different and it is not just related to larger asset size. We have made that it clear that if the sector wishes to make a proposal in this area we have given it a good grounding on our expectations as to what such proposals would need to address, and we are open to changes in limits when we see where the sector wishes to take it forward. Given all the complexities involved, we favour doing this in a multi-step and appropriately risk-managed way, because we want to ensure it does not unduly endanger members' funds or the financial security of the sector.