Update on the financial condition of the credit union sector

01 August 2019 Press Release

Central Bank of Ireland

  • Fifth issue in the Financial Conditions of Credit Unions series released
  • Positive trends in the areas of new lending, strong overall reserves and sustained reduction in arrears
  • Challenges remain as savings continue to grow faster than loans whilst investment returns remain constrained in low interest rate environment

The Central Bank of Ireland today publishes its fifth issue of the report on financial conditions of the credit union sector.

Total sector assets continue to rise, now standing at a record high of €18bn. 55 credit unions, with balance sheets of at least €100m, now account for 58 per cent of total sector assets.

The report highlights improvements in the financial position of credit unions at a sectoral level, with a reversal in the decline in loan to asset ratios; a critical driver of income generation. Credit union boards continue to hold reserves in excess of minimum requirements, with the average reserve ratio of 16.5 per cent across the sector.

Incremental changes in the overall lending profile continue to be reported by some credit unions, with early indications of an increase in credit risk appetite and an increase in the proportion of larger loans and loans of a longer duration. Proposals in Consultation Paper 125 on Potential Changes to the Lending Framework for Credit Unions offer additional capacity for longer term lending, as part of a balanced loan portfolio, supported by appropriate prudential safeguards to manage resulting duration and concentration risks. Credit union boards must determine and adhere to their own stated credit risk appetite, calibrated within their overall strategy, capabilities and common bond dynamics.

The previously observed loan to asset ratio decline across the sector is beginning to reverse, however it remains close to an historic low level averaging 28 per cent across the sector. Whilst it ranges from 11 per cent to 72 per cent in individual credit unions, given the reliance on loans to generate income, a low loan to asset ratio in some credit unions presents sustainability challenges. The average cost-income ratio across the sector remains high at 78 per cent, highlighting the need for improved efficiencies.

The pace of decline in return on assets across the sector is also of concern given the current benign trading environment. The low loan to asset ratio, coupled with declining investment returns in a prevailing low interest rate environment, have continued to impact on overall returns across the sector.

Total member savings have increased from €11.8bn in 2014 to €15bn in 2019, with average savings per member in the region of €4,400. While credit unions are permitted to hold savings up to €100,000 per member, individual credit unions may set individual savings limits which are below €100,000 to take account of their particular business requirements and strategy.

Commenting on the report, Registrar of Credit Unions Patrick Casey said:

“It remains a challenging commercial environment for credit unions in the context of a rapidly evolving external environment and in meeting member expectations for choice, access and speed of decision-making. Changes are required to the traditional credit union business model to meet those needs. The financial metrics presented in the financial conditions report should be considered in that context.

"Credit unions deservedly have a highly respected brand and continue to have the loyal trust of members. This trust, coupled with a member-centric ethos, is a competitive difference upon which to build the future business model of the credit union sector. Transformation in all its forms, will take shared co-operative leadership and collaboration.”


  • The Central Bank is committed to producing regular reports on the financial condition of the credit union sector, as one of its regulatory supports to the sector. The primary focus of this publication is to provide analysis of data to credit unions to support them in analysing their own performance alongside the sector and peers.
  • Data in the report focuses on trends in the period 31 March 2014 to 31 March 2019. The report includes analysis by credit union asset size and common bond type. In addition, there is further analysis on credit union lending including new lending, maturity profile and lending categories.
  • Credit unions with assets of at least €100m can apply to the Central Bank for approval to increase individual member savings in excess of €100,000.
  • Read previous reports.