Credit Union Services

Ceisteanna (97)

Michael McGrath

Ceist:

97. Deputy Michael McGrath asked the Minister for Finance his views on enabling credit unions to avail of debit cards for their members; if legislative changes are required; if it is solely a decision for the Central Bank; and if he will make a statement on the matter. [44451/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The Credit Union Act, 1997 (1997 Act) sets out the services that a credit union may provide to its members. In addition, the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (2016 Regulations) provides for services exempt from additional services requirements. Where a credit union wishes to provide services to its members, other than those services that are provided for under the 1997 Act or the list of services exempt from the additional services requirements set out in the 2016 Regulations, an application may be made to the Central Bank for approval to provide such additional services, in accordance with the provisions in sections 48-52 of the 1997 Act.

Debit card provision is subject to formal application and approval by the Central Bank, whether it be direct provision or distribution of third party debit cards under sections 48 and 49 of the Credit Union Act. There is no requirement for additional legislation.

There is currently a fully defined current account service including debit cards, called Members Personal Current Account Services (MPCAS), which is available to eligible credit unions as an additional service. The current eligibility criteria include a suggested minimum asset size of €75 million, reflecting the need for significant initial investment in start up initiatives of this nature. This also recognises the importance of  transaction volume necessary for scale discounts which requires the participation of larger credit unions.

The business of providing payment service instruments such as debit cards on current accounts is a complex, sophisticated and regulated business activity requiring a distinct business model and associated risk management capabilities and capacities. Furthermore, the provision of such services requires on-going investment, volume pricing and access to technical expertise which given typical credit union size is likely to require a shared service model.

The suggested limit of €75 million may be re-examined once the framework is established and operational, at which stage, smaller credit unions will have greater clarity regarding cost, experience and operational considerations necessary for informed decision making on participation.

Details and applications forms are available on the Central Bank website. www.centralbank.ie/docs/default-source/Regulation/industry-market-sectors/credit-unions/applying-for-approvals/mpcas-application-form.pdf. The Central Bank has also indicated it is open to applications for alternative debit card proposals and recommends the MPCAS framework as a scalar template for such alternative proposals.

The Central Bank has approved 47 credit unions for MPCAS and have another 5 in progress. Combined these 52 credit unions have c€7.6 billion in assets.

The Government wants not only strong, vibrant credit unions offering a safe and secure place for members' savings but also credit unions being appropriately positioned to offer their members a wide range of services including loans, debit card facilities and new products and services based on the needs of their membership.

Departmental Budgets

Ceisteanna (98, 99)

Barry Cowen

Ceist:

98. Deputy Barry Cowen asked the Minister for Finance the breakdown of the €945,000 capital allocation in the economic and policy division, that is, Vote 7 of the budget 2019 expenditure report of his Department for 2019 by specific project; the projects that will be commenced in 2019; the projects that will be completed in 2019, in tabular form; and if he will make a statement on the matter. [44463/18]

Amharc ar fhreagra

Barry Cowen

Ceist:

99. Deputy Barry Cowen asked the Minister for Finance the breakdown of the €945,000 capital allocation in the banking and financial service policy division, that is, Vote 7 of the budget 2019 expenditure report of his Department for 2019 by specific project; the projects that will be commenced in 2019; the projects that will be completed in 2019, in tabular form; and if he will make a statement on the matter. [44464/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I propose to take Questions Nos. 98 and 99 together.

My Department received a Capital Allocation of €1,890,000 in the 2019 Estimates.

Due to changes in the programme structure for 2019 it has been decided to allocate certain support costs such as IT and Office Premises Costs on a 50:50 basis to my Department’s two remaining programmes. As such the Capital Allocation which is a provision for Office Premises and IT and Office Equipment expenditure has been allocated on that basis.

The Capital budget for 2019 is to cover the projects outlined in the table below.

The amount relating to Various Office Premises Projects is a provision to allow us to engage OPW to carry out various necessary works on our buildings on a case by case basis as their resources become available.  

As of today’s date it is planned that projects will be commenced and completed in 2019 that will use the entire allocation.

Capital Expenditure Estimate 2019

Description

Various Office Premise Projects (Including new meeting rooms)

1,630,000

IT Capital

150,000

Registry Scanning project

80,000

Data Connection to Finglas

30,000

Total

1,890,000

Departmental Budgets

Question No. 101 was answered with Question No. 55.

Ceisteanna (100)

Barry Cowen

Ceist:

100. Deputy Barry Cowen asked the Minister for Finance the breakdown of the €24 million capital allocation to the Revenue Commissioners, that is, Vote 9 of the budget 2019 expenditure report for 2019 by specific project; the projects that will be commenced in 2019; the projects that will be completed in 2019, in tabular form; and if he will make a statement on the matter. [44465/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I am advised by Revenue that continued investment in information and communications technology (ICT) has been a major driver of productivity growth in Revenue, as well as enabling better service levels for the public.  Every year, Revenue needs to develop and implement a series of urgent ICT projects that ensure Revenue’s ICT infrastructure can support budgetary and legislative changes as introduced by the Government or the EU, very frequently within tight timeframes.

While Revenue’s capital expenditure largely relates to expenditure on ICT, it also must maintain its wider infrastructure including its fleet of vehicles, mobile scanners and other specialised equipment. In addition, it must maintain appropriate accommodation and furniture to support its 6,496 staff.

A table of target outputs for capital expenditure in 2019 is set out below.

  Project

Capital Allocation

ICT External Development: This is to assist Revenue’s internal ICT staff in meeting the required timelines for IT projects, while maintaining the high levels of confidentiality, integrity and availability expected within Revenue’s   systems. Major initiatives such as the introduction of PAYE real-time, a new Debt Management System and an Intelligence Management solution will be released in 2019. Ongoing work to implement the new EU driven Union Customs Code (UCC) system will continue through 2019 for release in 2020.  A series of Maintenance & Enhancement (M&E) projects for Revenue’s existing systems will also be delivered in 2019.

€14m

ICT Hardware Infrastructure: Revenue need to invest in ICT equipment and software on an ongoing basis. Circa €6m investment covers the acquisition of both new technologies and the upgrading/replacement of end of life equipment. This also covers technologies including storage, network and other infrastructure hardware and software. All investments are subject to public procurement. 

€6m

Motor Vehicles and Equipment   Maintenance: This subhead provides for the purchase, maintenance and running costs of official motor vehicles, Revenue Cutters, X Ray scanners and specialised equipment (e.g. detector dogs, diesel testing kits, radio equipment). This expenditure can vary from year to year depending on motor vehicle requirements, etc.   

€2m

Furniture and Fittings: This includes the provision of new furniture, repairs to existing furniture and replacing damaged floor coverings. It also includes some repairs/refurbishment of existing accommodation. In 2019 Revenue will also undertake refurbishment to accommodate additional staff for Trade Facilitation roles. This work is planned and implemented in conjunction with the OPW. 

€2m

 Total:

 €24m

Question No. 101 was answered with Question No. 55.

Banking Sector

Ceisteanna (102)

Eamon Ryan

Ceist:

102. Deputy Eamon Ryan asked the Minister for Finance the status of the establishment of the stakeholder forum on foot of the conclusions of the public banking investigation report; when a tender for the independent evaluation of the local public banking concept will issue; if the stakeholder forum will be involved in the selection of the external evaluator; and if he will make a statement on the matter. [44524/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

As the Deputy will be aware, my Department and the Department of Rural and Community Development published a Report on Local Public Banking at the beginning of July of this year.  The Report concludes that there is not a compelling case for the State to use Exchequer funds to establish a new local public banking system. 

However, as set out in the Report on Local Public Banking, my Department will be commissioning an independent, external evaluation to establish if there is a requirement for local and community banking in Ireland and, if so, whether there are other possible ways in which the broad objectives of local and community banking, could be furthered in Ireland. 

Officials in my Department are currently preparing for a tender process to engage an external consultant. It is envisaged that the tender process will be concluded by the end of this year, with a view for the evaluation process to begin in early 2019.  Part of the remit of the external evaluator will be to assemble and hold a stakeholder forum which will provide an opportunity for interested parties to share their views.

Inflationary Pressures

Ceisteanna (103)

Bernard Durkan

Ceist:

103. Deputy Bernard J. Durkan asked the Minister for Finance if inflationary tendencies in the economy have been detected which may arise from enhanced house prices leading to higher mortgage repayments which might lead to higher wage demands; and if he will make a statement on the matter. [44578/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

For the first nine months of the year, inflation as measured by the Harmonised Index of Consumer Prices (HICP) averaged just 0.7 per cent on an annual basis. House price inflation is not included explicitly in the calculation of the general level of inflation. However, accommodation costs are reflected in the HICP through rent costs which increased by 5.8 per cent in the year to September 2018. This reflects house price inflation of 8.6 per cent on an annual basis.

In general, higher house prices will, all things being equal, lead to increased accommodation costs which may lead to higher wage demands. However, such impacts are likely to be marginal in terms of the general labour force. The key issue for housing at present is to increase supply to match demand, and the Government has a comprehensive set of measures in place to achieve this, most notably Rebuilding Ireland.

A more important factor in relation to wage pressure is the rate of unemployment. The continued decline in the unemployment rate is expected to put upward pressure on wages, with wage inflation set to accelerate from 2.4 per cent this year to 3.0 per cent next year, as outlined by my Department’s macroeconomic forecasts published with Budget 2019.

The Government will continue to implement policies that increase the supply of housing and in turn help reduce inflationary tendencies in the housing market. 

Brexit Issues

Ceisteanna (104)

Bernard Durkan

Ceist:

104. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which adequate provisions have been put in place to safeguard the economy in advance of Brexit; and if he will make a statement on the matter. [44579/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The Government is fully aware of the scale of the political, economic and diplomatic challenge posed by Brexit. It has been clear and consistent about Ireland’s priorities:  minimising the impact on trade and the economy; protecting the Northern Ireland Peace Process; maintaining the Common Travel Area; and influencing the future of the European Union.

Over recent years, Ireland has laid the foundations for a solid and sustained economic recovery. Indicators such as consumer spending and labour market developments are consistent with an economy that is maintaining momentum.

The economic and fiscal policies implemented over recent years have placed Ireland in a stronger position to ensure that the economy will continue to remain competitive in the face of future economic headwinds.

Budget 2019 continued the overall approach of prudent financial management to strengthen the resilience of Ireland’s economy against the backdrop of heightened uncertainty, including from Brexit. It also builds on other Government initiatives, namely:

- investing in the future of the country through Project Ireland 2040, an ambitious and strategic vision for Ireland’s investment in critical infrastructure;

- the opening of new markets for businesses through the Global Ireland 2025 strategy;

- policies to adapt to changes in the world of work - such as artificial intelligence and automation through the Future Jobs Programme, which will be launched early next year.

Budget 2019 will ensure that the economy is prepared for the challenges of Brexit through continued prudent management of the public finances, including through:

-  Eliminating the headline deficit;

-  Achieving the medium term budgetary objective

-  Building up the Rainy Day Fund;

-  Reducing the debt burden;

-  Investing in infrastructure to boost competitiveness and productivity; and

-  Investing in education. 

The focus of Government budgetary policy is on having the appropriate fiscal stance. This facilitates the building-up of fiscal capacity which can help mitigate against future negative risks and potential shocks. In an increasingly unpredictable external environment, continued fiscal sustainability remains a priority.

Building on the measures announced in Budgets 2017 and 2018, Budget 2019 will help to ensure that Ireland is in the best possible position to respond to the challenges - and indeed the opportunities - that Brexit will bring. The measures introduced in Budget 2019 continue the process of ensuring that Ireland’s economy remains competitive and resilient against the backdrop of heightened uncertainty, including from Brexit.  

Code of Conduct on Mortgage Arrears

Ceisteanna (105)

Bernard Durkan

Ceist:

105. Deputy Bernard J. Durkan asked the Minister for Finance when the Central Bank will formulate a new code of conduct to regulate the repossession of properties in circumstances in which the borrowers have consistently made payments in line with their ability even though not to the satisfaction of the lender in view of the fact that the lending institutions in the first instance were culpable in the financial collapse (details supplied); and if he will make a statement on the matter. [44581/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

A key priority for the Government and the Central Bank is ensuring that the interests of consumers of financial services are protected.  A key element of the Central Bank’s role is ensuring that the consumer protection regulatory framework is fit for purpose and ensures that consumers best interests are protected.

Within the remit of the Central Bank’s responsibilities for safeguarding stability and protecting

consumers, its approach to mortgage arrears resolution is focussed on ensuring the fair treatment of borrowers.  This is realised through a strong consumer protection framework and ensuring that lenders have appropriate arrears resolution strategies and operations in place.  

The Code of Conduct on Mortgage Arrears (CCMA) forms part of the Central Bank’s Consumer Protection Framework.  It is a statutory Code first introduced by the Central Bank in February 2009, with the current CCMA becoming effective from 1 July 2013.   The CCMA provides a strong consumer protection framework, aimed specifically at the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner.

Banks, retail credit firms and credit servicing firms servicing loans on behalf of unregulated loan owners are all required to comply with the CCMA.  The overriding objective of the CCMA is to ensure the fair and transparent treatment of consumers in mortgage arrears or pre-arrears, and that there is due regard to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits.  The CCMA recognises that it is in the interests of borrowers and regulated firms to address financial difficulties as speedily, effectively and sympathetically as circumstances allow.  It sets out the Mortgage Arrears Resolution Process (MARP), a four-step process that regulated entities must follow: 

Step 1: Communicate with borrower;

Step 2: Gather financial information;

Step 3: Assess the borrower’s circumstances; and

Step 4: Propose a resolution

Each regulated entity must consider the borrower’s situation in the context of the solutions they provide, which may differ from firm to firm.  The CCMA does not prescribe the solution which must be offered. 

In relation to the Deputy's question about formulating a new code of conduct to regulate repossessions, already under the CCMA a regulated entity may only commence legal proceedings for repossession where it has made every reasonable effort to agree an alternative repayment arrangement (ARA) with the borrowers and other clear requirements are met or the borrower has been classified as not co-operating.  This framework requires lenders to exhaust the options available from the suite of ARAs offered before taking action which may result in the borrower losing his/her home (whether by voluntary sale or repossession).  During the legal process, borrowers have opportunities to re-engage with lenders to find a solution.  In some circumstances, however, loss of ownership may be unavoidable. 

As you will recall, earlier this year, I asked the Governor of the Central Bank to review the CCMA to ensure that it continues to be effective in the context of loan sales.  The Central Bank submitted their Report to me at the end of last week and I intend to bring it to Government at our next Government meeting on 6 November 2018. 

Brexit Issues

Ceisteanna (106)

Bernard Durkan

Ceist:

106. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which inward investment is likely to be affected by Brexit; and if he will make a statement on the matter. [44582/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

There have been a number of studies of the economic impact of Brexit, a number by my Department, some in conjunction with the ESRI. Recent analysis in an OECD staff working paper found that the boost to the Irish economy from additional Foreign Direct Investment would be modest with a 0.1 per cent increase in GDP compared to a no Brexit scenario.

The Government is taking the following approach to mitigate the economic impact of Brexit and to maximise opportunities:

- prudent management of our economy and the public finances to enable us to meet future challenges;

- negotiating effectively, as part of the EU27, with the objective of reaching an agreement that sees the closest possible relationship between the EU and the UK while also ensuring a strong and well-functioning EU; 

- supporting business and the economy through a broad range of Government measures, programmes and strategies;

- exploring existing and possible future EU measures that could potentially assist Ireland in mitigating the effects of the UK’s withdrawal on specific Irish businesses and economic sectors while also, in the light of developments, making a strong case at EU level that the UK’s withdrawal represents a serious disturbance to the Irish economy overall and that we will require support; and

- maximising any economic opportunities arising from the UK’s decision to leave the EU.

While the future trade path between the UK and EU is still unknown, it is nevertheless crucially important that we prepare our economy for the challenges and opportunities ahead. The Government has already taken a number of important steps both to prepare our economy for the challenges of Brexit and to maximise any opportunities that arise, including in Budgets 2017, 2018 and 2019, the Action Plan for Jobs 2018, our Trade and Investment Strategy and Project Ireland 2040.

In particular, Government and state agencies are working hard to exploit any opportunities from Brexit, including promoting trade and investment opportunities in Ireland, as an English speaking member of the EU with unfettered accesses to the EU market.

At the sectoral level new opportunities have also been identified – particularly in the international financial services sector which is heavily reliant on the need for access to the Single Market and ongoing compliance with EU regulatory standards. Brexit has already seen opportunities for Ireland to increase its share of financial services based inward investment. Public announcements to establish or expand operations have been made by a number of companies. In addition the Government will continue to leverage our IFS2020 Strategy to maximise those and other opportunities.

Fiscal Policy

Question No. 108 answered with Question No. 10.

Ceisteanna (107)

Bernard Durkan

Ceist:

107. Deputy Bernard J. Durkan asked the Minister for Finance if he remains satisfied regarding the attainment of budgetary objectives in 2019 notwithstanding international developments, Brexit and international trade disputes; and if he will make a statement on the matter. [44583/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

Against the potential challenges we face it is imperative to boost the resilience of the Irish economy in order to minimise – in so far as is possible – any future disruption brought on by potential international developments, including the UK’s departure from the European Union. This is why eliminating the budgetary deficit forms a key part of the Government’s policy response. Accordingly, in the recently published Budget 2019, I announced a balanced budget for next year. Thereafter we will see a return to surplus, better positioning the public finances to face into any uncertainty.

Our debt ratio has continued to improve. Having stood at 111 per cent of GNI* in 2017, this is forecast to reduce further to 105 per cent in 2018 and 101 per cent in 2019. While this still remains elevated, provided we continue to adopt the correct policy choices, this is on an improving trajectory. At the same time, the Government is committed to using receipts from the resolution of the financial crisis for public debt reduction.

The MTO is broadly achieved next year, again standing the public finances in good stead to help withstand any potential future shocks. Separately the Government is also establishing a Rainy Day Fund in order to create a fiscal safety buffer to help absorb inevitable future shocks to our economy, while at the same time ensuring the long-term sustainability of Ireland’s public finances. 

Finally, my Department will continue to monitor fiscal developments very closely during 2019. 

Question No. 108 answered with Question No. 10.

Housing Issues

Ceisteanna (109)

Bernard Durkan

Ceist:

109. Deputy Bernard J. Durkan asked the Minister for Finance if the provision of affordable and local authority housing is deemed by the Central Bank to be an overheating issue in the economy (details supplied); and if he will make a statement on the matter. [44585/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The provision of affordable and local authority housing is a matter for my colleague the Minister for Housing, Planning and Local Government.

Governor Lane addressed the issue that the Deputy is referring to in a pre-Budget letter to me on 3 August 2018.  In his concluding paragraph, he stated, “Finally, the additional spending pressures associated with an increase in public investment require offsetting balancing fiscal measures if the economy is operating in the neighbourhood of full capacity.  Otherwise, there is the prospect of short-term crowding out, with exporting sectors especially affected by the loss in competitiveness associated with a deficit-financed surge in public investment. In contrast, a fiscally-neutral increase in public investment would deliver the long-term gains without inducing short-term overheating." The Governor's letter is available in full at the following link:

www.centralbank.ie/docs/default-source/publications/correspondence/oireachtas-correspondence/03-august-2018-pre-budget-letter-to-minister-for-finance-paschal-donohoe.pdf. 

The issue was also addressed by the Central Bank, in a recent Central Bank Quarterly Bulletin article: “Irish Government Investment, Financing and the Public Capital stock”.  This article considered the appropriate financing of increased public investment, including the provision of affordable and local authority housing, in the context of an economy, such as Ireland's that was approaching full capacity. The conclusion of the article was that any increase in public investment should be financed in a budget neutral manner.  This would mitigate short term overheating risks arising from the unavoidable boost to aggregate demand while maintaining the long-term benefits of such investment.  The article is available in full at the following link:

www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/quarterly-bulletin-signed-articles/irish-government-investment-financing-and-the-public-capital-stock-(hickey-lozej-and-smyth).pdf?sfvrsn=2. 

Household Savings Rate

Ceisteanna (110)

Bernard Durkan

Ceist:

110. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which investment in property is competing with savings in financial institutions; if low interest rates appear to favour property investment instead of savings; and if he will make a statement on the matter. [44587/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The Central Bank publishes quarterly statistics on the growth in household deposits. The latest figures show that in June 2018 household deposits increased by 3.4 per cent on an annual basis.

The growth in household deposits reflects our strong and growing economy, lower unemployment and wage growth. This increase has occurred during a period of very low deposit rates. The ECB has maintained the interest rate on its main refinancing operations at zero since March 2016. In relation to household investment in the property market, the latest RTB data (Q2 2018) indicates that there has been no large scale increase in Buy to Let activity recently.

Taken together, the data do not provide evidence that low deposit rates are depressing household savings in Ireland, or encouraging a re-direction of capital into the property sector at a household level.

At a corporate level, the increasing presence of institutional funders in the property market has been well documented. Some of these investors may well be taking advantage of historically low interest rates to borrow funds on capital markets in order to invest in Irish property. There are a number of advantages of institutional investment in the housing market, not least a relative reduction in the volume of residential lending on the aggregate balance sheet of the Irish banking sector.

The main issue in the Irish housing market is a lack of supply. Private investors, whether diverting corporate or household savings into property investment of not, have a role to play helping to address this issue. 

Household Savings Rate

Ceisteanna (111)

Bernard Durkan

Ceist:

111. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which savings in the various financial institutions have fluctuated over the past ten years; and if he will make a statement on the matter. [44588/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I am informed by the Central Bank that it publishes monthly data on the total household deposits (as distinct from savings) with financial institutions (banks and credit unions) in Table A11.1 (available at the following link:

 CentralBankFinancialInstitutions Savings

The data show that since January 2009 household deposits declined from €98 billion to reach a low of €91 billion in November 2011, and have steadily increased since then to €103 billion in August 2018.