Tuesday, 23 July 2019

Questions (253)

Michael McGrath

Question:

253. Deputy Michael McGrath asked the Minister for Finance the revenue received by the Central Bank from the credit union industry funding levy; the extra revenue the Central Bank will receive each year to 2022 from the levy; if an impact assessment was undertaken by either the Central Bank or his Department; if so, if the impact assessment will be published; and if he will make a statement on the matter. [34063/19]

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Written answers (Question to Finance)

I have been informed by the Central Bank that a key element of their 3 year funding strategy is to increase the overall recovery rate of the cost of regulation from industry, thereby reducing the level of taxpayer subvention. 

Since 2015, following a public consultation, the financial services industry has moved from paying approximately half of the costs of financial regulation to paying approximately two-thirds of these costs in 2018. The Central Bank recently published the expected path towards 100% industry funding over the next five years. While the majority of industry funding categories (regardless of size) will move to 100% funding over the period 2020 to 2024, the recovery rate for credit unions will move to 50% for the 2021 levy cycle (payable in 2022) with any further proposed increases subject to public consultation and Ministerial approval.

The impact of the increase in recovery rates is set out in Table 1 which assumes that the baseline cost of regulation is the same as the 2018 cost of regulating the sector.

While in 2018 all other industry funding categories funded a minimum of 65% of the cost of financial regulation, the credit union sector contributed 9% of the cost of regulation (due to the cap on the levy payable by credit unions) and 1.2% of levy income.

Table 1: Estimated impact on levy income from credit unions of increase in recovery rates  

Cost of Regulation 

Cost of Regulation 

Implied Recovery Rates

 Levy Income

€'M  

  €'M

2018 Actual

16.4

10%

1.7

Assumed baseline cost of Regulation

Ministerial Approved Recovery Rate

Projected Levy

Additional Levy Income

Projected

€'M   

€'M   

€'M   

2019

16.4

20%

3.3

1.6

2020

16.4

35%

5.7

4.1

2021

16.4

50%

8.2

6.5

2022

16.4

50%

8.2

6.5

The Central Bank has further informed me that there is no requirement to carry out an impact assessment for the Industry Funding Levy, nor has one been carried out as levies have increased in recent years across all industry sectors other than credit unions. While there is a requirement under legislation for the Minister for Finance to have regard to the financial viability of credit institutions when prescribing certain levies, no such legislative requirement applies to the Central Bank when introducing a levy to fund the cost of regulation.