Dáil Éireann Debate, Tuesday - 26 April 2022
478. Deputy Carol Nolan asked the Minister for Finance the steps he will take to enable the credit union movement to grow as a key provider of community banking in the country; and if he will make a statement on the matter. [19533/22]
View answer479. Deputy Carol Nolan asked the Minister for Finance if he will examine the suggestion by the credit union movement to review the policy framework within which credit unions currently operate; if he will allow for the creation of a regulatory and legislative credit union policy committee and a business model taskforce; and if he will make a statement on the matter. [19534/22]
View answer480. Deputy Carol Nolan asked the Minister for Finance the steps he is taking to enable and support the growth of the credit union movement; and if he will make a statement on the matter. [19535/22]
View answerI propose to take Questions Nos. 478, 479 and 480 together.
This Government recognises the importance of credit unions. The Programme for Government contains commitments to:
- Review the policy framework within which credit unions operate;
- Enable and support the credit union movement to grow;
- Support credit unions in the expansion of services, to encourage community development;
- Enable the credit union movement to grow as a key provider of community banking in the country.
Review of the Policy Framework
With regard to fulfilling the commitments in the Programme for Government for credit unions, the Review of the Policy Framework has been completed following a recent engagement session with all the credit union representative bodies. The proposals arising from the Review received broad support from the representative bodies and will go to Cabinet shortly for approval to draft legislation. The proposals being considered aim to better position credit unions to grow as a key provider of community banking.
In developing these proposals Minister of State Sean Fleming TD has met the Irish League of Credit Unions, the Credit Union Development Association, the Credit Union Managers Association, the National Supervisors Forum, the Registrar of Credit Unions, the Credit Union Advisory Committee, the CEO Forum, collaborative ventures and many individual credit unions. In total, Minister of State Fleming has held over 40 stakeholder meetings with the credit union sector and well over 100 proposals were considered.
I will refer specifically to the creation of a regulatory and legislative credit union policy committee. Both the Department of Finance and the Central Bank already have a very substantial programme of engagement with the representative bodies. One example of this is the Credit Union stakeholder roundtable chaired by the Department, which facilitates dialogue between all the representative bodies, the Central Bank and the Department. The proposals will seek to support engagement between credit unions, the Department and the Central Bank, whilst respecting the Central Bank’s independence.
The proposal to establish a business model taskforce is not being progressed as there is no legislative barrier for credit unions to create such a taskforce at present. It would also not be appropriate for Government to have a role in setting the business model for credit unions, which are owned by their members.
In terms of supporting the sector to provide essential financial services to local communities, the following are some recent developments which highlight the potential of the sector to grow and fulfil a role in relation to community banking.
Lending and Investment
The Central Bank has in recent years reviewed both the lending and investment frameworks for credit unions. New lending regulations were introduced on 1 January 2020.
Credit unions can provide 7.5% of their assets to mortgage and SME lending - approximately €1.5 billion. Credit unions have the capacity to lend an additional €1.1 billion in mortgage and SME loans. Further additional lending capacity is available to credit unions who can comply with certain conditions or on approval by the Central Bank.
As of December 2021, credit unions had a combined mortgage and SME loan book of circa €408 million, an increase of 19% year-on-year.
Credit unions are permitted to place their surplus funds that have not been lent to members in a range of investments including Tier 3 Approved Housing Bodies (AHBs). Three credit union backed funds have received approval from the Central Bank. Credit unions will be able to invest up to €900 million in these regulated funds, which will subsequently lend to AHBs.
SME Lending
Nineteen credit unions were approved in early 2021 for participation in the Covid-19 Credit Guarantee Scheme. Further, in November 2021 five credit unions were announced as participants in the Brexit Impact Loan Scheme (BILS).
In total, SME lending has grown 9.5% year on year to end December 2021. Further development of SME lending in a controlled manner could also assist credit unions in growing and diversifying their loan book.
Other Services
Other than member savings and lending, in order to provide “additional services”, a credit union must receive approval from the Central Bank.
69 credit unions are approved to provide current accounts.
The Central Bank has prescribed a list of exempt services which may be provided without requiring approval. The Central Bank is undertaking a review of the Exempt Services Schedule to ensure that the services listed reflect the current financial services landscape. The Central Bank has commenced a public consultation seeking views from stakeholders on the proposed changes arising from this review.
