How to build a solid business case for lifting lending restrictions.

1. CREDIT UNION SECTOR
HOW TO BUILD A SOLID BUSINESS CASE FOR LIFTING LENDING RESTRICTIONS
JUSTIN MORAN FCA, CISA
June 2015

2. CONTEXT
Lending restrictions on 189 credit unions, which is close to half of all credit unions in the
State.
At a time when the amount of lending being issued by credit unions is at an all-time low.
Calls for a concerted policy initiative to ensure the full potential of the credit unions are
realised.
Earlier this year, the registrar for the sector, Anne Marie McKiernan, invited credit unions
that have lending limits imposed on them to apply to her office in the Central Bank by
September to get the restrictions lifted.
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3. HOW TO BUILD A SOLID BUSINESS CASE FOR LIFTING
RESTRICTION(S)
Analyse non-performing loans, bad debts written off & rescheduled loans
- arrears are often skewed by older non-performing loans still contained within the loan book.
- seek to isolate those loans for members who last received a loan in the last 2 years and quantify
principal arrears as % of the total principal arrears. Indicator of recent changes in underwriting
practices.
- analyse the reasons for all loans over 9 weeks in arrears where the member was last granted a
loan in 2014/15. Identify any trends where non-performance of the loan is owing to a change in the
member’s personal circumstances and a potential further indicator of underwriting process and
controls.
- perform an analysis and movement on loans previously written off to further demonstrate whether
problem loans are historic in nature.
- analyse the performance of rescheduled loans.
- identify and analyse top ups, including performance. Assess improvements in underlying controls.
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4. HOW TO BUILD A SOLID BUSINESS CASE FOR LIFTING
RESTRICTION(S)
Demonstrate the “origin” of performing loans to further support changes in underwriting
practices implemented
Analyse provisioning levels
- analysed the total reserve ratios, the loan maturity & the provision levels, including movements in
general and specific.
Analyse the performance of large/top loans, including related provisioning
Perform an independent review of a sample of loans to demonstrate adherence to lending
policy & controls
Obtain confirmation of reviews performed by risk officer and internal audit, including
assessment
Communicate the results of external audit testing to further demonstrate independent
validation
Validate and re-communicate the risk appetite statement to ensure aligned to strategic
plan, lending policies and practices
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5. mazars.ie
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CONTACT
Justin Moran
Governance, Risk & Control
Mazars
Harcourt Centre Block 3, Harcourt Road
Dublin 2, Ireland
Tel: +353 (01) 4494461 / 087 2759758
Email: jmoran@mazars.ie
Mazars Place, Salthill
Galway, Ireland
Tel: +353 (091) 570100
Email: mt@mazars.ie