I can advise the Deputy that the following funds are in place which can be utilised under certain conditions to provide stabilisation, resolution or member deposit protection support respectively to credit unions.
1. The Credit Institutions Resolution Fund (CIRF)
The CIRF was established under Section 10(1) of the Central Bank and Credit Institutions (Resolution) Act 2011 (2011 Act). The Government contributed €250 million to the Fund in December 2011 to provide a source of funding for the resolution of financial instability in, or an imminent serious threat to the financial stability of an authorised credit institution, and in particular-
- To reimburse the Minister for any provision of a financial incentive pursuant to section 46;
- To provide funds for any payment required pursuant to section 37(1), 42(5), 48 or 98;
-With written consent of the Minister, to provide capital for a bridge-bank; and
- To meet the Bank's expenses in discharging its functions under this Act.
The total asset value of the CIRF Fund as at 31 December 2017, per the draft financial statements which are currently being audited by the Comptroller and Auditor General, is €269.7 million. The drawdowns (receipts) on the fund for each of the last five years are as follows:
2017: €0.52m
2016: €0.27m
2015: (€0.88m) net receipt
2014: €6.9m
2013: €26.9m
Under section 15(1) of the 2011 Act the Minister for Finance is required to make regulations prescribing the rate of contribution or a method of calculating the rate of contribution to the Credit Institution Stabilisation Fund. To enable the levy to vary from year to year regulations are made annually prescribing the rate of the levy and the basis on which it will be charged. Under section 16 of the 2012 Act consultation is required with the Central Bank and the Credit Union Advisory Committee (“CUAC”).
2. The Stabilisation Fund
In accordance with Part 4 of the Credit Union and Co-operation with Overseas Regulators Act 2012 credit unions contribute annually to a statutory Stabilisation Fund. The Stabilisation Fund, contained within the Credit Union Fund, is available to all credit unions with a reserve ratio equal to or greater than 7.5% of the credit union’s total assets and less than 10% and where the Central Bank assesses the credit union as viable. Stabilisation support will be provided to address short-term problems at credit unions that are viable but undercapitalised. Payment of an annual Stabilisation Levy commenced in 2015 (for a period commencing on 1 October 2014) and to date levies collected amount to €12.6 million. There have been no drawdowns, to date, from the Stabilisation Fund.
Under section 59(3) of the 2012 Act the Minister for Finance is required to make regulations prescribing the rate of contribution or a method of calculating the rate of contribution to the Stabilisation Fund which is a part of the Credit Union Fund. To enable the levy to vary from year to year regulations are made annually prescribing the rate of the levy and the basis on which it will be charged. Under section 59(3) of the 2012 Act consultation is required with the Central Bank and CUAC.
A review of the Stabilisation Levy was carried out in October 2017 and was published on my Department's website. On foot of this review the levy has been lowered to a rate of 0.017% while still meeting the original target of €30 million over a ten year period due to growth in assets for the sector. I have committed to a review of the levy again in three years before the introduction of the 2021 levy.
3. The Credit Union Fund
The Credit Union Fund was established under section 57 of the Credit Union and Co-operation with Overseas Regulators Act 2012 (2012 Act) for a number of purposes including the provision of stabilisation support, but primarily to provide a source of financial support for the restructuring of credit unions under the Credit Union Restructuring Board (ReBo) and to meet the expenses of ReBo in discharging its functions. The Government provided €250 million? to the Credit Union Fund specifically for restructuring under ReBo. The Restructuring Levy (ReBo Levy) is provided for under section 47 of the 2012 Act and commenced in 2014. The ReBo levy for 2015 and 2016 collected €1.43 million and €6.58 million respectively. The total ReBo levy collected for the year ending 31 December 2017 was €1.63 million. Approximately €22.6 million has been drawn from the Credit Union Fund for restructuring purposes. ReBo concluded its restructuring work on 31 March 2017 and, as such, no further levies will be imposed after 2017.
4. Deposit Guarantee Scheme (DGS)
EU Deposit Guarantee Scheme Directive (2014/49/EU) protects depositors in the event of a bank, building society or credit union authorised by the Central Bank being unable to repay deposits. The DGS is administered by the Central Bank and is funded by the institutions covered by the scheme. The DGS protects:
- depositors if a bank, building society and/or credit union authorised by the Central Bank is unable to repay deposits;
- eligible deposits up to €100,000 per person per institution;
- current accounts, deposit accounts, share accounts in banks, building societies and credit unions.
Following the introduction of the European Union (Deposit Guarantee Schemes) Regulations 2015 (S.I. No. 516 of 2015), new funding arrangements, requiring the DGS to reach a target fund level of 0.8% of covered deposits by 2024 were introduced resulting in the establishment of the DGS Contributory Fund in 2016. A risk-based methodology, in line with European Banking Authority (EBA) guidelines, is employed to calculate annual contributions for each institution based on their degree of risk and level of covered deposits. The DGS fund currently stands at €157.3 million - the total contribution to the fund by credit unions to date is €25.7 million. The total drawdowns on the fund in each of the last five years are as follows:
2017: €39.8 million (Charleville Credit Union Limited)* - returns from liquidation not yet received but will be repaid to the DGS Contributory Fund.
2016: €22.8 million (Rush Credit Union Limited)* of which €15 million returns from liquidation to date has been repaid to the credit institutions in proportion to the amount which they contributed to the payout.
2015: nil
2014: €11.0 million (Berehaven Credit Union Limited)* of which €8.6 million returns from liquidation has been repaid to the credit institutions in proportion to the amount which they contributed to the payout.
2013: nil
* Includes small value payments issued in subsequent years in relation to these payout events.
