Niall Collins
Question:64. Deputy Niall Collins asked the Minister for Finance if concerns raised in correspondence by a person (details supplied) will be addressed; and if he will make a statement on the matter. [10073/20]
View answerTuesday, 9 June 2020
Questions (64, 65)
Brendan Griffin
Question:65. Deputy Brendan Griffin asked the Minister for Finance if the Central Bank regulations on credit unions will be reviewed (details supplied); and if he will make a statement on the matter. [10101/20]
View answerWritten answers
I propose to take Questions Nos. 64 and 65 together.
First of all, I wish to inform the Deputy that both I and my officials have engaged extensively with the credit union representative bodies since the beginning of the COVID-19 pandemic.
I spoke with the credit union representative bodies, by conference call on 23 March 2020 and again on 22 April 2020 to discuss the challenges and emerging issues facing the credit union sector as a result of the COVID-19 crisis. I noted the vital work the credit union sector is carrying out, which builds on the government’s call for solidarity and community spirit which is synonymous with credit unions.
In addition to the above, my officials have had regular calls with the credit union representative bodies and with the Registry of Credit Unions in the Central Bank to review any emerging issues in the sector resulting from the pandemic, and to ensure smooth information flow between the sector and Government. The Credit Union Advisory Committee (CUAC) is also meeting regularly.
I recognise the key role that credit unions play in the delivery of financial services in local communities across Ireland, the need for which is heightened at this time. Credit unions account for approximately one third of the consumer credit market and are well positioned to provide access to credit to support the recovery from the current crisis.
In terms of the overall financial position of the sector, credit unions have come into this crisis with a strong reserves position, with a sector average reserve ratio of 16% as at 31 December 2019. This highlights that many individual credit union boards have chosen to prudently maintain additional reserves over the 10% regulatory minimum requirement. Credit unions have also maintained high levels of liquidity, with a sector average liquidity ratio of 39% as at 31 December 2019. Notwithstanding the strong financial position of the sector at December 2019, sustainability is a challenge for many credit unions.
Generally speaking, the current business model of Irish credit unions is suffering from low growth rates in loan demand over recent years (outpaced by stronger savings growth). Surplus funds not lent out to members yield limited investment returns reflective of the current low interest rate environment. This has translated into low loan to asset ratios (sector average 28%), low return on assets (sector average 0.6%) and high cost income ratios (sector average 82%).
The economic outlook arising by virtue of COVID-19, including reduced demand for new lending, has increased the challenges the sector is already facing. As a result it was agreed that the CUAC would report to me by 30 June on challenges and opportunities for the sector, incorporating implications of COVID-19, the role credit unions could play in the economic recovery and any relevant recommendations.
You may also wish to note that I have committed to a review of the Stabilisation Levy prior to introduction of the levies for 2021. As part of this review process the views of the credit union representative bodies will be sought and will help inform any decision I make. You may also be aware that a review of the Resolution Levy was completed in 2019, following which I made the decision to reduce the Resolution Fund levy for 2020, and that it is 44% lower than 2019. I will consider the Resolution Levy for 2021 this autumn.
The Central Bank also recognises the challenges being faced by many credit unions to continue providing services to members in light of COVID-19. The Central Bank has introduced some temporary flexibility for credit unions – alongside similar measures for other regulated sectors - in the areas of reporting deadlines and is taking a pragmatic approach to Fitness and Probity requirements where particular roles in a credit union may need to be filled on a temporary basis, as a result of COVID-19. The Central Bank has formally responded in writing to regulatory requests made by the representative bodies.