Dáil Éireann Debate, Tuesday - 30 January 2018
78. Deputy Willie Penrose asked the Minister for Finance if his attention has been drawn to a report (details supplied); his plans to address the problems highlighted in the report; his further plans to ensure the sustainability of future growth of the credit union movement here; and if he will make a statement on the matter. [4301/18]
View answerI ask the Minister if he has read the recent report by the Centre for Community Finance Europe regarding the fitness for purpose of the Irish credit union model reported in the Irish Independent and many other newspapers and how upset many credit union volunteers and managers are about the nature of the report and what they see as its unfairness to them and to credit unions as institutions.
I can advise the Deputy that my Department is aware of the paper from the Centre for Community Finance Europe Limited, CFCFE, on Irish credit union business models which was commissioned by the credit unions that helped found the CFCFE, including a number of Irish credit unions. The paper argues that the traditional, simple business model of credit unions in Ireland needs to change if they wish to succeed into the future. It is fair to say that there is significant diversity in many aspects of the business model for credit unions which can be large or small, rural or urban, industrial or regional, and can have business models adapted to their particular membership base. The Government understands the challenges this raises and that flexibility and proportionality is required both in policy and regulation.
Credit unions have a unique role as a grassroots, not-for-profit, volunteer-based movement in our communities. They have a key role to play in providing access to credit and other important services in local communities. Indeed, the CFCFE paper acknowledges the strength of the credit union brand in Ireland. The paper's findings build on previous reports for Government by the Commission on Credit Unions in 2012 and the credit union advisory committee, CUAC, in 2016 and a recent report from the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach.
Business model development is one of the key issues that the implementation group which was set up to oversee the implementation of the CUAC’s recommendations is looking at and work is ongoing. The CUAC will also focus on this issue in 2018 and recently invited the CFCFE to meet it to discuss its paper. My Department continues to support credit union initiatives to develop services. In certain circumstances, the provision of new services must be approved, prior to their introduction, by the registrar of credit unions at the Central Bank, which acts as the independent regulator for credit unions.
The Government's priorities remain the protection of members' savings and the financial stability of credit unions and the sector overall, and I am determined to continue to support a strengthened and growing credit union movement into the future.
Can a coalition of willing credit unions establish a body or work collectively to provide mortgages or significant loans relating to, for example, refurbishing houses and making them fit in the context of climate change challenges and lack of insulation? Could a coalition of willing credit unions provide small and medium enterprise, SME, finance? Approximately just 26% of credit union members' funds are loaned out productively.
This is a financial scandal at a time when local financial institutions, bank branches and so on are closing. The report raises some important questions about the services offered by Irish credit unions and structures to underpin them. We need to rejuvenate credit unions and provide diversified financial services in Ireland. As referenced by the Minister, the Central Bank seems to be able to regulate but not able to engender activity.
I will allow a brief supplementary question from Deputies Michael McGrath and Pearse Doherty.
I am glad to hear that the credit union advisory committee, CUAC, will focus on business model development for credit unions in 2018, which the Minister will be aware is a clause of the confidence and supply agreement which we have not seen thus far. We need this to happen. There is no tiered regulation. One of the central recommendations of the commission in 2012 was tiered regulation. Instead, we have a one size fits all approach to regulation. The lending restrictions need to be reviewed, particularly around long-term lending. There are serious issues with communications between the registrar and the credit union sector. In regard to levies, the Minister's predecessor said in the Seanad in October 2011 that the cost of bailing out credit unions could reach €1 billion but there has been no net contribution by the State to rescue the credit union sector thus far because it paid for it itself through levies and that needs to be reviewed.
I am on record in regard to the lack of understanding on the part of the Department of Finance and, in particular, the Central Bank, in regard to the potential role of credit unions. Deputy McGrath spoke about the core issues, about which we have been talking for a number of years, including tiered regulation, fees and the credit union sector's desire to get involved in delivering the solution to the social housing crisis. The finance committee produced a report, which I assume the Minister has read. Does the Minister intend to respond to that report, in which his Department is tasked with carrying out certain actions, including to provide a roadmap for the future of credit unions in this State; the introduction of the necessary legislation; and oversight of various issues that have been identified. The Department is also tasked with interacting with the Central Bank because there are serious challenges identified in that report in relation to the Central Bank. Does the Minister, on behalf of the Government, intend to respond to the report and does he intend to carry out any of the actions of that report or is it just another credit union report that will gather dust on the shelves?
As I said in my initial response to the question, the credit union advisory committee, CUAC, will focus on this issue in 2018. I believe that is the appropriate way in which this happens. In regard to the various points put to me, it is not the role of the Central Bank to engender activity. Rather, it is the role of the Central Bank to regulate.
And to enable.
I want to see a credit union movement in Ireland that is sustainable, vibrant and meets the level of social and economic need that I know exists within this country. I have met the representative bodies of the credit union movement and I emphasised that point to them. While I am not a decision maker in regard to communication between the Central Bank and the credit union movement, I am aware of what is going on because I am notified of contact between them. I am eager to work with everybody on how we can create the foundations for the credit union movement in Ireland to be even more successful in the future.
