I propose to take questions Nos. 259, 261 and 263 together.
Section 32D of the Central Bank Act 1942, as amended, provides that the Central Bank may, with the approval of the Minister for Finance, make Regulations prescribing an annual Industry Funding Levy to be paid by regulated financial service providers to the Central Bank of Ireland. The Industry Funding Levy is not specific to credit unions and there is no requirement under the legislation for the Central Bank to consult with anyone other than the Minister for Finance. Nor is there any legislative requirement for the Minister for Finance to consult with the Credit Union Advisory Committee (CUAC) or with any other third parties prior to providing his approval.
It is worth noting that credit union sector was consulted on the proposed changes to the industry funding levy in 2012/2013 and in 2015 and that the final report of the CUAC Implementation Group published in January 2019 made specific reference to the Central Bank's intention to increase the industry funding levy for credit unions to 50% on a phased basis, which had been made public by the Central Bank in November 2018.
In relation to the organization referred to, I wish to inform the Deputy that I have had extensive engagement with them and the credit union sector to date this year. In February, I held a credit union stakeholder engagement event which was attended by the President of the organisation that the Deputy refers to in his question. I also attended and spoke at that organisation's AGM in April. These events provided me with valuable feedback from the credit union sector itself.
The Deputy will also be pleased to note that I intend to arrange a further stakeholder engagement session with the president of the organisation referred to, along with other credit union representative bodies, to cover a range of topics of importance to the sector including legislative and regulatory issues. The Deputy may also wish to note that officials within my Department have regular and extensive engagement with the sector, including the credit union representative bodies. In addition the Credit Union Advisory Committee is currently engaged in a comprehensive workplan, including a survey of all credit union directors, which I hope will provide valuable data to inform future policy.
Since 2004 the amount of the Industry Funding Levy payable by each credit union has been capped at a rate of 0.01% of total assets. The Central Bank indicated, in its Funding Strategy and 2018 Guide to the Industry Funding Levy, that it intended to seek my approval to increase the proportion of financial regulation costs to be recovered from credit unions on a phased basis setting out an initial target of 50% to be reached by 2021.
In response to the Central Bank's request I recommended that credit union contributions should not increase beyond the 50% target until:
1. The levy trajectory has reached the planned 50% rate, at which time the impact on the viability of the sector will be better understood; and
2. A public consultation regarding increasing the levy rate for credit unions beyond 50% is undertaken, which would include a regulatory impact assessment of such a change on the sector.
In contrast to this, recovery rates in 2018 for all other industry categories ranged from 65% to 100%, and the Central Bank intends to increase all to 100% funding over the next number of years.
It is not clear from the Deputy's question what funds he believes were generated from levies which were subsequently returned to credit unions. However, the Deputy might wish to note that the Department of Finance, in collaboration with the Central Bank, has prepared a public consultation paper on potential changes to the Credit Institutions Resolution Fund Levy, which is expected to reduce materially from 2020. This consultation, which has now been published on the Department of Finance website, is open to all persons and I would strongly encourage all stakeholders to submit feedback by 9 August 2019.
It is also important to note that as Minister for Finance I have reduced the Stabilisation Scheme Levy materially following a review process which included a submission from the organisation referred to and that since 2017 no further levies have been charged by the Credit Union Restructuring Board (ReBo). I have previously committed to a further review of the Stabilisation Scheme in 2020.