Changes to credit union investment regulations announced
01 February 2018
Press Release
- Announcement
follows public consultation on changes to the investment regulations.
- Changes
introduce three new investment classes for credit unions.
- Changes
will facilitate increased diversification in credit union investment
portfolios.
The
Central Bank of Ireland today announced changes to the investment regulations
for credit unions. Three new investment classes are being introduced,
accompanied by the introduction of specified credit quality, maturity and
concentration limits. The new investment classes being introduced are:
- Bonds
issued by Supranational Entities;
- Corporate
Bonds; and
- Investments
in Tier 3 Approved Housing Bodies[1](AHBs).
In
order to ensure that the investment framework remains appropriate for the
credit union sector, the Central Bank undertook a review of the investment
regulations in 2017. This review considered whether it was appropriate and
prudent to facilitate investment by credit unions in other classes of
investments. Consultation Paper 109 (CP109) set out our proposed changes to the
framework, which were primarily aimed at increasing diversification in credit
union investment portfolios, and invited feedback on these proposals. A feedback statement on CP109 including
amending regulations to give effect to the changes is
published today. The submissions received to the consultation are also published.
The
Central Bank has given detailed consideration to the submissions received on
the proposals set out in CP109 and this
feedback has influenced the approach in areas such as:
- Concentration
limits for new classes of investments;
- The
application of liquidity requirements; and
- Transitional
arrangements for the revised counterparty limit.
The
amending regulations introduce changes to the liquidity framework. This
reflects the significant feedback which was received on this topic through the
consultation process.
Where
credit unions seek to diversify their investments it will be important that they
fully understand the risks associated with such investments. Credit union
boards must ensure that investment choices are taken in line with their risk
appetite bearing in mind the regulatory obligation under the credit union
investment framework not to expose member funds to undue risk.
Registrar
of Credit Unions Patrick Casey said:
“The revised framework announced today allows for
greater diversification in credit union investment portfolios, while recognising
that it is not appropriate for credit unions to invest in riskier, more complex
financial products. The sector’s desire to increase investment options has been
facilitated, with a recognition that the funds being invested are credit union
members’ savings.
These changes demonstrate the flexibility provided by the Central
Bank’s regulation-making powers. The sector brought forward detailed proposals
around the provision of funding to approved housing bodies for the provision of
social housing. Following comprehensive engagement and consultation, this is
now provided for.
The Central Bank is committed to reviewing and
updating credit union regulations following public and industry consultations
to ensure they remain appropriate and proportionate for the sector in the
future.”
Notes:
1 The regulatory code applied
to AHBs divides AHBs into three tiers – Tier 3 refers to larger AHBs.