Mr. Kevin Johnson:

CUDA is grateful to the joint committee for the invitation to participate in this discussion on the recently published report on local public banking in Ireland. CUDA was formed in 2003 and represents many of the largest credit unions in the country. It also provides a wide range of support services for its members, as well as for a growing number of credit unions nationally. In its early days it was the representative voice of its owner member credit unions in communications with legislators and regulators. It has since evolved and provides not only a voice for members but also an increasing level of support facilities in the areas of regulatory compliance, risk management, shared services and competency development.

CUDA which also manages the Solution Centre has a vision for a credit union system in Ireland that builds on credit unions' standing as the trusted source of financial services for members. According to that vision, credit unions can help to shape the society in which we want to live through financial education and the provision of credit for small businesses and community purposes now and for future generations; continue to provide loans for members' individual everyday and longer term needs, while dramatically expanding the points of access to credit; continue to provide secure savings though enhanced investment options, and offer real choice to people to meet their financial needs. This is a comprehensive vision and we have delivered on several aspects of it, including through our mortgage support framework, a wide range of digital channels and digital engagement facilities and a green energy better home partnership. We continue to seek solutions to enable credit unions to contribute to resolving the housing emergency and are well on the way to delivering on other product and process solutions, including lending to small businesses.

CUDA has studied the report and agrees with its statement:

Credit unions are looking to play an increasing role in the Irish retail financial landscape into the future and the Central Bank is assisting credit unions in developing their business model. This may also provide a channel for increased lending to the rural SMEs in some cases, subject to the capacity of individual credit unions.

This is a key component of the societal element of our vision. The continued importance of the success of the SME sector to Ireland cannot be underestimated. Ireland has almost 250,000 micro and small enterprises and 43% of private sector employees work in these small firms. Many small business owners are existing members of their local credit union and their success and the continued success of credit unions are inextricably linked. That has always been the case. Faced with massive youth unemployment in the 1950s, a group of people came together around the idea that the solution to that crisis was co-operative self-employment. However, there was no money with which to start and grow businesses. As Nora Herlihy, one of the principal founders of the credit union movement in Ireland, said in 1982, "[the] object in promoting the Credit Union idea was to show the people how to accumulate that money from their own savings and resources."

The report defines public banking as involving a state or other public actor owning a financial institution. The stated purpose of the report was to investigate the possibility of local public banking in Ireland based on the Sparkassen model and evaluate its potential in an Irish context. The report states: "The ethos of Sparkassen is not profit maximisation; rather it is public interest based, promoting financial inclusion and economic development within their regions."

We could easily replace the reference to "Sparkassen" in that quotation with "credit unions" and have an excellent summation of the objects of credit unions contained in section 6 of the Credit Union Act 1997, as amended. According to the report, the evidence suggests applications for credit by SMEs are falling in Ireland and, conversely, the supply of credit, both to SMEs and retail customers, is increasing. However, the question arises as to whether prospective borrowers are receiving fair value. Speaking at a Small Firms Association event in November 2015, the previous Governor of the Central Bank, Professor Honohan, questioned the absence of interest rate reductions and wondered whether it was the result of limited competition in the sector. As he put it, "We could all do with more competition in the banking system." CUDA believes credit unions are naturally positioned to bring that competition to the market.

Credit unions are expert at providing consumer loans, savings and payment facilities and loans for owner-managed businesses. More credit unions are providing home loans and working to bring extended current account related facilities to the market. In the Solution Centre we have focused on making it easier and more convenient, through the use of technology, for members to engage with their credit union. The report correctly acknowledges that "Credit unions are looking to grow their services to small and medium-sized businesses and in doing so fulfil their role as an action group for community development through mobilising local resources for investment in the small firm economy". An essential ingredient of this development is the review of credit union lending terms and category limits. In November 2017 the CUAC review report implementation group forwarded a detailed submission to the Central Bank. We thank all stakeholders in the group, in particular the team at the Department of Finance for its very supportive work in this area. It is also very encouraging that a consultation paper reviewing the limits is imminent from the Central Bank, the recent references of which to this issue have been very positive.

The report correctly recognises that the credit union sector is active in the Irish SME lending market. As such, the independent external evaluation being commissioned by the Department of Finance should focus on addressing the elements that will facilitate credit unions in delivering the benefits anticipated from a local public banking concept. They will include utilising the credit union network and prudently using members' savings for productive and provident purposes such as loans to the SME sector. To this end, we will work with other stakeholders to apply expertise to a model that enables credit unions to bring a range of standardised credit facilities prudently to the market. Another element is an assessment of how the attractive interest rate frequently referenced in other jurisdictions might be replicated here and how it can be provided in a sustainable manner. Recognising that not all credit unions may have the capacity to provide these facilities, there should be a review of the common bond legislation to enable such credit unions to introduce members and/or collaborate on such loans with participating credit unions. A level playing field must also be provided for by regulating peer to peer lending to ensure protections apply to consumers of crowd-funding. The Central Bank's codes of conduct and the protections which they provide for consumers should also apply to crowd-funding platforms. Similarly, providers of PCP finance should be subject to the regulatory requirements credit unions must meet.

I again thank the committee for its kind invitation and look forward to addressing questions members may have.