08 Jan 2019

Irish Banks: Credit Unions to be allowed to raise maximum lending rate

The Irish Minister for Finance is set to raise the maximum lending rate which the Irish credit union sector can apply to customer loans, in a measure that should allow the sector to expand services to riskier borrowers and loan types.

Currently, the credit unions can apply a maximum lending rate of 1% per month, but this is set to be doubled to 2% per month under proposals published by the Irish Department of Finance yesterday (CUAC Implementation Group Report). The current lending rate cap limits how far out the risk curve the credit unions can lend, with the doubling of the rate allowing them to move into riskier lending categories.


This should allow the credit unions to compete against riskier lenders such as credit card companies, short term pay-day lenders and other higher risk unsecured lenders. The CUAC report also recommended that some of the larger and better resourced credit unions currently designated as “exempt” be allowed to increase their proportion of long term lending (> 10 year maturity) from the current 15% of the loan book to 25-30% of the loan book or 10-15% of assets (whichever is larger). This would allow the better resourced credit unions to compete more meaningfully with the banking sector in the mortgage market.


We expect these and other accompanying recommendations to be a marginal additional positive over the medium term in allowing the credit union sector to expand its challenger bank product offering, albeit we would expect material lending increases to only arrive in a slow and cautious manner (for both regulatory and individual credit union reasons).


Market Orders – Take advantage of volatility


EUR/GBP still remains above the 0.8950 level this morning, with the meaningful vote looking to be going ahead next week the markets arehypersensitive to any Brexit related news. Orders are an excellent tool to take advantage of volatility.


If you wish to know more, please call the Treasury team.


UK looking for an Article 50 extension


The Daily Telegraph reported overnight that (according to unidentified EU sources) UK Brexit officials have been “testing the waters” in relation to an extension of Article 50. As the ever encroaching March 29th deadline approaches, fears that a deal will not be reached has apparently pushed the UK government to discuss the option of pushing out the date. There has been no mention of how long they have been looking to postpone it for but Downing Street was quick to downplay the report, saying that “The PM has always said that we would be leaving the EU on 29 March 2019, and we would not extend Article 50.” General consensus now favours the Commons ‘meaningful vote’ on UK PM Theresa May’s Brexit deal will now take place this day next week but there is every possibility that may also be postponed putting even more pressure on the March 29th deadline.


Softest German IP data in a decade


German industrial production figures released earlier this morning delivered a sharp disappointment against expectations with a drop of 1.9% on the month recorded in November, against expectations of a 0.3% rise. On a year-over-year basis this leaves industrial output 4.7% lower; this was the biggest yoy decline since December 2009. The sharp November drop also followed a downward revised October reading, now seen 0.8% lower (previously -0.5%).  Clearly, this will not help to settle sentiment with regards to a continued weak run of data in the Euro area’s largest economy, as further questions are raised as to how much of the recent weakness is related to car emissions standards changes and how much is more fundamental.


Today’s economic calendar


10.00 EZ Consumer Confidence
15.00 US JOLTs Job Openings