The Government has a clear policy to support the strategic growth and development of credit unions delivering the comprehensive recommendations set out in the Commission on Credit Unions Report and the Credit Union Advisory Committee (CUAC) report in 2016, both of which involved extensive stakeholder engagement. CUAC remains an important adviser to me on strategic issues facing the sector, and the safety of members' savings and the security of the credit union sector as a whole are priorities for this Government.
Since 2011 my Department has put in place a number of measures to assist the credit union sector. These measures include:
- establishment of the Commission on Credit Unions in 2011;
- publication of the Credit Union and Co-operation with Overseas Regulators Act 2012;
- establishment of the Credit Union Restructuring Board, ReBo, which oversaw 82 restructuring projects involving 156 credit unions during its lifetime: these newly merged credit unions are now better positioned to harness the efficiencies of their increased scale to prudently develop products and services that their members are looking for now, and into the future.
- availability of €250 million for voluntary restructuring of credit unions facilitated by ReBo;
- establishment of a stabilisation levy to support credit unions that are undercapitalised but are otherwise viable; and
- establishment of a Resolution Fund for the resolution of financial instability in, or an imminent serious threat to the financial stability of, a Credit Union, as well as the provision of €250 million in 2011 to meet resolution costs anticipated at the time.
More recently, on the basis of a CUAC recommendation, an Implementation Group was established to oversee and monitor the implementation of the CUAC Report’s recommendations. The group, which meets monthly, is chaired by my Department and consists of one member from each of the representative bodies, one member from the CUAC and a member from the Central Bank. This group is an important forum for key stakeholders in the Credit Union Sector and has submitted papers on long-term lending and consultation and engagement to the Central Bank and is currently finalising a paper on Tiered Regulation.
In addition, following consultation with the Credit Union sector, revised regulations for credit unions commenced on 1st March 2018 which make changes to the investment and liquidity requirements and allow for greater diversification of investment income, including provision for up to c. €700 million investment in Tier 3 Approved Housing Bodies via a regulated vehicle.
While there are challenges to returns arising from the low yield environment and low loan to asset ratios, the sector continues to show signs of improvement reflected in growth in new lending, delivering c 35% of all unsecured consumer lending in 2017, a decrease in the level of reported arrears and an increase in reserves. Total assets have increased consistently for many years and currently stand at approximately €17.5 billion.
The Central Bank is due to publish a Consultation Paper in Q4 2018, as part of its review of the current long term lending limits for Credit Unions which may facilitate improvement in loan to asset ratios.
Business model development is another challenge facing the sector and to this end the Central Bank has set up a dedicated Business Model Unit within the Registrar of Credit Unions and has developed initiatives such as the CEO forum to address key constraints to, and enablers for, business model development. Business model development is also a focus of the CUAC, and I have specifically requested the committee to review barriers to and supports for collaborative efforts as well as SME lending, linking with the outcomes of the Local Public Banking report.
This Government recognises the important role of credit unions as a volunteer co-operative movement and its priorities remain the protection of members' savings, the financial stability of credit unions and the sector overall. The Government is determined to continue to support a strengthened and growing credit union movement. Credit unions are member owned and it is these members, with support from their representative bodies, who ultimately are responsible for setting and implementing their own individual strategic plans, with appropriate support from Government, which reflect the diverse nature of credit unions be they urban or rural, large or small, industrial or community.