Dáil Éireann Debate, Thursday - 28 February 2019
4. Deputy Mattie McGrath asked the Minister for Finance the status of the proposal to allow credit unions to offer residential and commercial mortgages to their members; and if he will make a statement on the matter. [10011/19]
View answerWill the Minister provide an update on the status of the proposal to allow credit unions to offer residential and commercial mortgages to their members? Specifically, he might comment on the status of some of the 27 recommendations in the report of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on the credit union sector. When the report was laid before the House, I understood the Government to be generally positive about allowing the sector the opportunity to become a co-operative movement that was fit for purpose in terms of mortgage and residential loans.
Credit unions are already allowed to offer mortgages to their members. Indeed, a number of them do. As of September, there were mortgages worth €171 million outstanding across the sector, representing a 17% increase year on year. However, the amount of mortgage lending that credit unions can engage in is limited by the Central Bank's lending regulations for credit unions, which allow only a certain proportion of a credit union's loans to be long-term loans due to lending maturity limits. These lending regulations have been under review since last October when the Central Bank commenced a public consultation. Reviewing these lending regulations is an important matter and one for which I have previously outlined my support, including in a letter that I wrote to the Central Bank Governor, Professor Philip Lane.
The proposed revisions to the lending regulations from the Central Bank contain a number of positive elements. The proposals change the basis of calculation for the limits from a percentage of loans to a percentage of assets, which is something for which the sector has been calling. The proposals would also allow larger and capable credit unions to do significantly more mortgage lending than is currently the case.
Based on the data supplied in the consultation paper, the proposals would allow in the first instance a sectoral capacity of €861 million for mortgages, which should be seen in the context of the €171 million of mortgages outstanding across the sector as of last September. This capacity would increase if applicable credit unions were approved for the higher limits. Were all credit unions with assets greater than €100 million to be approved for the higher limit, sectoral capacity could increase to a maximum of approximately €1.8 billion.
The Central Bank is in the process of reviewing the submissions received and expects to publish a feedback statement and draft regulations in the second half of 2019.
It is good to hear the Government acknowledging the powerful work that credit unions do in communities across the State. Were it not for credit unions, many more people would have suffered significant turmoil during the past decade.
In 2018, the Central Bank conducted a review of house loans in credit unions. This was the same year that the credit unions were voted the most highly regarded organisation in Ireland in the Ireland RepTrak report. That said, we can all acknowledge that engaging in lending for house loans represents a change in strategy for credit unions, one that requires a specific understanding of the risks associated with this type of lending. The credit union movement is well equipped to meet this challenge.
We should not forget that the findings of the Central Bank's residential mortgage arrears and repossessions statistics for quarter 2 of 2018 showed that accounts in arrears over 720 days constituted 42% of all accounts in arrears. That is a staggering figure. At €2.5 billion, this represents 91% of the arrears balances outstanding.
I thank the Deputy for recognising our acknowledgement of the credit union movement and the support that we have put in place for the sector in recent years. A review of whether it would be appropriate to allow the movement to play a larger role in the provision of mortgage loans is under way. I expect that work to come to an end later this year. It is appropriate that we allow it to conclude, given that the proposed increase in the movement's ability to lend would be significant. I expect to see draft regulations later this year, which the movement, other stakeholders and I will be in a position to evaluate.
The €2.5 billion represents 91% of the arrears balances outstanding. Non-bank entities now hold 61,446 mortgage accounts for principal dwelling houses and buy-to-lets combined. Of this number, 47,820 relate to principal dwelling house mortgage accounts.
These numbers provide us with important context for the argument to extend the ability of credit unions to provide residential mortgages. It is a very important context as these institutions are sure-footed. If we need to develop new methods of regulation specifically for credit unions, let us do that, but let us not have the Central Bank putting its claws into these people and keeping them down. They are of the people and for the people. Ní neart go cur le chéile. We should treat them the same way we treat the banks if there are similarities in terms of loans, etc. There is no one-size-fits-all regulation, so they need specific legislation. The credit union movement must be supported in playing the part it wants to play and has played since its inception. There has been a major voluntary effort in it.
The credit unions are being supported precisely because we are recognising the potentially larger role they could play in the sector. A review of this has been under way and it has been led by the Central Bank because it is the regulatory body for the credit unions. I met representatives of all the credit unions a number of weeks ago in my Department and it was a very productive meeting to review the different actions we are taking and the opportunities and issues that present. The Central Bank will conclude its work during the year and will then provide us with the ability to assess whether this move should happen in addition to the significant volume of mortgage lending that a number credit unions provide.
