Thursday, 22 November 2018

Questions (21)

Michael McGrath


21. Deputy Michael McGrath asked the Minister for Finance his plans to develop a new strategy for the growth and development of the credit union sector; and if he will make a statement on the matter. [48564/18]

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Written answers (Question to Finance)

The Government has a clear policy to support the strategic growth and development of credit unions delivering the comprehensive recommendations set out in the Commission on Credit Unions Report and the Credit Union Advisory Committee (CUAC) report in 2016, both of which involved extensive stakeholder engagement. CUAC remains an important advisor to me on strategic issues facing the sector.

Since 2011 my Department has put in place a number of measures to assist the credit union sector, including the establishment of the Commission on Credit Unions, introduction of the Credit Union and Co-operation with Overseas Regulators Act 2012 and the establishment of the Credit Union Restructuring Board which oversaw 82 restructuring projects involving 156 credit unions during its lifetime.

More recently an Implementation Group was established to oversee and monitor the implementation of the CUAC Report’s recommendations. The group is chaired by my Department and consists of one member from each of the representative bodies, one member from CUAC and a member from the Central Bank. This group is an important forum for key stakeholders in the sector and has submitted papers on long-term lending and consultation and engagement to the Central Bank. The Implementation Group is expected to issue a final report to me in December 2018.

While there are challenges to returns arising from the low yield environment and low loan to asset ratios, the sector continues to show signs of improvement reflected in growth in new lending, delivering c. 35% of all unsecured consumer lending in 2017, a decrease in the level of reported arrears and an increase in reserves. Total assets have increased consistently for many years and currently stand at approximately €17.5 billion.

Business model development is another challenge and opportunity facing the sector and to this end the Central Bank has set up a dedicated Business Model Unit within the Registrar of Credit Unions and has developed initiatives such as the CEO forum to address key constraints to, and enablers for, business model development. Business model development is also a focus of the CUAC, and I have specifically requested the committee to review barriers to and supports for collaborative efforts as well as SME lending, linking with the outcomes of the Local Public Banking report.

It should be recognised, however, that there are many positive developments taking place in the sector, led by Credit Unions and their representative bodies. Next year will see around 50 large credit unions, encompassing almost half of sector assets, providing Member Personal Current Account Service (MPCAs), a Central Bank-approved suite of services which includes personal current accounts, a range of payment services including debit cards, and overdrafts.

2019 will also see a new regulatory framework for lending being introduced, which should materially increase the scope for credit unions offering mortgages to their members. The proposal would allow sectoral capacity of up to at least €861m for mortgages, with this figure rising if Credit Unions are approved for higher limits. To put this figure in context there is approximately €165m of house loans currently outstanding within the credit union sector. This new lending framework, which is in a consultation process at present, follows the recent significant regulatory changes to the Investment Framework which includes provisions that would allow up to €700 million of Credit Union investment for funding social housing.

This Government recognises the important role of credit unions as a volunteer co-operative movement and its priorities remain the protection of members' savings, the financial stability of credit unions and the sector overall. The Government is determined to continue to support a strengthened and growing credit union movement. Credit unions are member owned and it is these members, with support from their representative bodies, who ultimately are responsible for setting and implementing their own individual strategic plans, with appropriate support from Government.