Provisioning Guidelines for Credit Unions

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Provisioning Guidelines for Credit Unions

The Central Bank’s expectation on provisioning in credit unions is outlined throughout these guidelines. Credit unions should give due consideration to these guidelines when developing and implementing their provisioning frameworks and when assessing the adequacy of provisions held for loans.

This document sets out the Central Bank of Ireland’s guidelines regarding the policies and procedures which credit unions should adopt to support the development and implementation of an appropriate provisioning framework.

An appropriate provisioning framework is essential for:

– the recognition of loan losses as early as possible within the context of accounting standards;

– the adoption of a sufficiently conservative and comparable approach to the measurement and recognition of provisions in the loan book; and

-appropriate disclosures to support members’ understanding of the performance of the loan book and the credit union’s credit risk management practices.

Appropriate procedures and guidelines for assessing and measuring credit risk will provide relevant information for a credit union board to make judgements about the credit risk of its lending exposures and will facilitate the recognition of losses within the loan book as early as possible.

The Central Bank’s expectation on provisioning in credit unions is outlined throughout these guidelines and credit unions should give due consideration to these guidelines when developing and implementing their provisioning frameworks and when assessing the adequacy of provisions held for loans. In particular, section 6 outlines the Central Bank’s expectations on specific categories of loans in credit unions.

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Provisioning Guidelines for Credit Unions