Seán Haughey
Question:9. Deputy Seán Haughey asked the Minister for Finance if he will report on his engagement with credit unions and representative bodies to date in 2022; and if he will make a statement on the matter. [29754/22]
View answerThursday, 16 June 2022
Questions (9)
Oral answers (6 contributions)
The Minister of State has been doing a lot of work and has engaged extensively with various elements of the credit union movement since his appointment. I want to get a sense of where we are at with the plan to support our credit unions in their ambition to grow and become a much bigger part of banking solutions, particularly community banking solutions.
To date in 2022, I have had 13 meetings with various credit union stakeholders, including the representative bodies, the Credit Union Advisory Committee, CUAC, and individual credit unions. I have also spoken at the AGMs of the Irish League of Credit Unions, the Credit Union Development Association, CUDA, and the Credit Union Managers Association, CUMA, as well as at the National Supervisors Forum summer forum just last weekend. I have met various credit union representative bodies which broadly supported the proposals emanating from the programme for Government review of policy framework. The review has been completed and legislative proposals will be brought to Cabinet shortly.
Significant work has been carried out in this area in the past 18 months. All the representative bodies attended a meeting in the Department that I chaired on 10 March 2022 and agreement was reached on 12 of the 14 proposals. The legislative proposals are scheduled to go to Cabinet in the next week or two, when we will have more information on them. I stress that we are not dealing with or infringing on the role of the Central Bank in terms of regulatory requirements. Those are for the Central Bank as regulator. The Department of Finance, politicians and the Government should not be involved in regulation, as I am sure the Deputy appreciates. We will have further information on the proposals as soon as they go to Cabinet.
There is general support for this area. The programme for Government has four measures on credit unions, all of which are important. The most important is the aim to grow the credit union movement. I have never engaged with credit unions without making a specific point, which I will repeat now. They must grow their lending books. I am aware that some people will talk about Central Bank restrictions. Those restrictions mainly deal with credit unions' deposit rates and how much they have to hold in reserve. The biggest issue facing the credit union movement is that a generation or two ago, credit unions were lending out 60% of their assets in loans. The majority of their members were saving and taking out loans. Recently, I have met with credit unions that are only lending to 15% of their members. The average loan-to-asset ratio in the credit unions is 26% or 27%. That is not sustainable. It has to be 36%, 46% or 56%. They lend money at a rate of 6% or 7%, on average. That is how they will become more sustainable in the future. They need to lend more money via credit, rather than serving as institutions for saving.
I acknowledge the Minister of State's engagement with the credit union movement. We cannot just dismiss the role of the Central Bank by saying this is a matter for the Central Bank. There is no doubt that the Central Bank's attitude and its regulation act as a brake on credit unions playing a bigger role in communities, in particular, in banking. That is historical. We need to reflect on how we can get the credit union movement to grow to the strengths it has in 2022, as opposed to ten years ago. Perhaps we have to review the regulations to allow credit unions to grow.
On the figures cited by the Minister of State, there are many credit unions that would like to lend, but cannot do so because they are not getting sanctioned for products or they are getting a large kickback. Credit unions are ideally placed to deal with the current cost-of-living crisis. As interest rates on home loans begin to rise, they are ideally placed to assist in the area of community banking, if they are given the flexibility to do so, by offering a home loan product that will reflect the area in which they operate.
I welcome that the Minister of State plans to bring proposals to Cabinet in the coming weeks. Will there be legislative leads out of those proposals? What does the Minister of State envisage will be the timeline for implementing those proposals?
The proposals being brought to Cabinet are specifically for legislation. They concern the 12 topics on which we want to legislate and there is agreement on those. After the proposals have been brought to Cabinet, I hope they will go for pre-legislative scrutiny as quickly as possible. On the timeline for getting the legislation through the Dáil in the second half of this year, the pre-legislative scrutiny process could take a day, a week or four or five months. That is outside my control. I know the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach has a very heavy workload. I ask the committee to prioritise pre-legislative scrutiny of the proposed legislation as soon as possible, so that we can get it through the Houses and enacted. The legislation will contain an element on a service level agreement between the Central Bank and the credit union movement, which does not exist currently. When a credit union contacts the Central Bank about a particular project or a new product it wants to offer, a timeline will be set out in the service level agreement. Currently, the process is open-ended. Many practical measures are being introduced in the legislation. I take on board the Deputy's point on the role of the Central Bank. It applies to banking as well.
I welcome movement on this matter. If the legislation is passed, how will it change the operation of the individual credit unions? Will it unleash them or give them the chance to be more responsive than they can be currently? As the Minister of State noted earlier, banks are withdrawing their physical services from communities, leaving many people who depend on branch banking exposed. The credit unions are perfectly placed to step in and provide physical banking services. Will there be provision in the legislation to assist them in doing that, particularly in communities where there might be a need for support to assist them in maintaining a physical presence, including through the provision of financial support similar to that being offered to post offices, in order that we have a certain viable level of physical financial transaction services in communities around the country?
The Deputy raised a number of points, which merit a more detailed discussion on another occasion, given the time constraints today. The levies the credit unions pay have been cut by 55% since this Government came into office, resulting in a very substantial saving of around €6 million. Three different credit union proposals have been approved by the Central Bank for lending to approved housing bodies, AHBs. It is now up to the credit unions and the AHBs to work out the commercial arrangements for that. The option to submit such proposals is open to every credit union in Ireland, if it chooses to avail of it. It is now up to the credit unions and AHBs to finalise the arrangements. The biggest thing the legislation will encourage is collaboration among the credit unions. No individual credit union can take on the big job of mortgage approvals. Back-office support and collaboration among credit unions are required. The service providers that supply the credit unions with current accounts or debit cards are being given statutory recognition in the legislation, which they do not have at the moment, to work on a collaborative basis at the request of individual credit unions. Most credit unions cannot take on the full range of services individually. Initiatives such as Cultivate, involving credit unions coming together voluntarily to offer new products, are the future of the movement.