Since 2004, the amount of the levy payable by a credit union has been capped at a rate of 0.01 per cent of its total assets as at 30 September of the previous year. The balance of regulatory costs has been funded by the Central Bank in accordance with the provisions of the Central Bank Act, 1942 (as amended). The cost of regulating the credit union sector has increased over recent years with the emergence of the necessity to increase the intensity of supervision of this sector. Given that total assets of the sector have remained relatively static, this has resulted in a significant reduction in the proportion of the total cost of funding provided by the sector as a whole. In 2018, the credit union sector contributed €1.7 million (circa 9 per cent of the total costs incurred in regulating the sector).
Earlier this year, I approved the Central Bank request to recover 50 per cent of credit union costs on a phased basis, starting with a 20 per cent recovery rate for the 2019 levy, which will be levied on an arrears basis in 2020, moving to 35 per cent in 2020 (levied in 2021) and to 50 per cent in 2021 (levied in 2022). In response to the Central Bank's request I also recommended that credit union contributions should not increase beyond the 50 per cent target until:
a. The levy trajectory has reached the planned 50 per cent rate, at which time the impact on the viability of the sector will be better understood; and
b. A public consultation regarding increasing the levy rate for credit unions beyond 50 per cent 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 per cent to 100 per cent, and the Central Bank intends to increase all to 100 per cent funding over the next number of years.
Exemptions from levies result in a burden on the tax payer through state subvention. Given that all other financial services sectors are at, or moving towards, 100% recovery, the move towards 50 per cent in respect of credit unions, with further increases at that time being subject to consultation and Ministerial approval, is measured and takes account of the role that credit unions play in Irish society.
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. Following this review I announced on 1 October 2019 a reduction in the levy rate which will result in a reduction of €4 million per annum from €9 million in 2019 to €5 million from 2020, or 44 per cent reduction.
As Minister for Finance I have also reduced the Stabilisation Scheme Levy materially and since 2017 no further levies have been charged by the Credit Union Restructuring Board (ReBo). I have also committed to a further review of the Stabilisation Scheme in 2020.