As the Deputy is aware, credit unions are regulated and supervised by the Registrar of Credit Unions at the Central Bank who is the independent regulator for credit unions. Within his independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability, and to protect the savings of credit union members.
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.
Consultation Paper 95 "Joint Public Consultation Paper - Department of Finance and the Central Bank of Ireland - Funding the Cost of Financial Regulation" (CP95) was published in 2015 and set out proposals to move from partial industry funding of financial regulation towards full industry funding, noting the proposal set out in an earlier consultation conducted by the Central Bank (CP61 "Consultation on Impact Based Levies and Other Levy Related Matters") to move credit unions to fund 50% of the cost of regulating the credit union sector.
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.
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.
The Deputy might also wish to note that the Department of Finance, in collaboration with the Central Bank, held a public consultation on potential changes to the Credit Institutions Resolution Fund Levy, which is expected to reduce materially from 2020. The outcome, following the public consultation, will be published shortly.
It is also important to note that as Minister for Finance I have reduced the Stabilisation Scheme Levy materially 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.
On 28th August last, I held a meeting with the credit union representative bodies to discuss their views on the Industry Funding Levy and other credit union related matters. I reaffirmed the decision, outlined above, for increases to the Industry Funding Levy.