CREDIT UNIONS ARE GROWING their assets “despite the economic climate”.
These financial institutions are, however, facing some risks including credit quality.
This information is contained in the latest Financial Stability Report issued by the Central Bank and Financial Services Commission (FSC), the latter which regulates credit unions.
“Total assets of the sector continued to grow, reaching $1.9 billion and representing a seven per cent increase compared to the similar period of 2014. Loans to members continued to be the largest contributor to growth, increasing by seven per cent, followed by investments (six per cent),” the report said.
“As at September 2015, loans were recorded at approximately $1.38 billion, accounting for approximately 77.8 per cent of total assets and slightly up from 77.2 per cent of total assets in 2014.
“Over the January to September period, total new credit issued (not including repayments) was approximately $208 million, driven mainly by consumer credit ($106 million), real estate ($62 million), and lending for transport ($36 million).”
In terms of the “key areas of risk” facing the credit unions, the FSC said “due to the inherent nature of the credit union business model, loans have specific target markets and are concentrated in real estate and consumer loans”.
“In particular, the growth in mortgages for private individuals has grown significantly over the past couple years. In terms of credit quality, the level of non-performing loans also remains high at 8.9 per cent, compared to the FSC’s benchmark of five per cent,” it explained in the report.
“An additionally source of concern for the credit union movement is the overall level of liquidity. The FSC’s Credit Union Guideline 5 states that the standard of liquidity is eight per cent, while the industry’s ratio currently stands at 5.7 per cent.”
The report said the FSC “has enhanced its monitoring of the credit unions and encouraged changes to some of their business models, in order to ensure that risks are mitigated in these areas”. (SC)
