Oireachtas Joint and Select Committees

Thursday, 31 January 2019

Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach

Credit Union Advisory Committee: Discussion

10:00 am

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will now discuss the final report of the credit union advisory committee implementation group. I welcome all the guests this morning. Mr. Corr is from the Department of Finance. Mr. Farrell is from the Irish League of Credit Unions. Mr. Kevin Johnson is from the Credit Union Development Association. Mr. Tim Molan is from the Credit Union Managers Association. Mr. Joe Tobin is treasurer of the National Supervisors Forum. I welcome all of you to our meeting to discuss the report.

I wish to advise witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if you are directed by the committee to cease giving evidence on a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I will now invite Mr. Corr to make his opening statement.

Mr. Brian Corr:

I thank the committee for inviting the credit union advisory committee report implementation group to attend the meeting to discuss our final report. As the Chairman stated, I am accompanied today by the credit union representatives of the implementation group, namely: Mr. Ed Farrell, chief executive of the Irish League of Credit Unions; Mr. Kevin Johnson, chief executive of the Credit Union Development Association; Mr. Tim Molan, chairman of the Credit Union Managers Association; and Mr. Joe Tobin, treasurer of the National Supervisors Forum.

The Central Bank representative on the credit union advisory committee report implementation group, Elaine Byrne, is not present today. However, the Central Bank has indicated that the registrar and deputy registrar are available to attend the committee if it wishes to extend them an invitation on another occasion.

I also note the positive contribution of Joe O'Toole who attended a lot of our meetings as a CUAC observer to assist our understanding of the CUAC report, which was issued in 2016.

The implementation group has its origins in the CUAC report. The report was requested by the Minister of Finance and presented to him in June 2016. The CUAC report contained ten recommendations along with an overarching recommendation to establish an implementation group for a specified period to oversee and monitor the implementation of the recommendations and to advise the Minister for Finance on progress. As such, the implementation group was established under tight terms of reference and was not tasked with addressing legislative or regulatory issues facing the sector other than those recommended, namely, tiered regulation; lending; consultation and engagement; governance; restructuring; business model development and three additional policy papers on an interest rate ceiling, AGM voting and a common bond, respectively.

The name "implementation group" is a slight misnomer given most of the CUAC recommendations could only be fully implemented by the Oireachtas, the Central Bank or credit unions themselves. The implementation group has worked, therefore, to progress each of the recommendations as much as possible and has monitored those which were being implemented. The group met 18 times during 2017 and 2018 and worked through each of the CUAC recommendations, prioritising work on recommendation 2 on lending and recommendation 3(a) on consultation and engagement. In addition to the final report, three papers were completed by the group on lending, engagement and tiered regulation, respectively, all of which were submitted to the Central Bank and two of which were submitted to the joint committee. It is important to note that while these papers and the final report represent a collective view of the implementation group, they are without prejudice to the individual views of the organisations represented on it.

The final report is a considered document reflecting a balance of different views amongst the stakeholders involved. As to the implementation of the CUAC recommendations, while some have been progressed satisfactorily or are being recommended for implementation, others have not, as there were cases where the members of the implementation group did not agree with a CUAC recommendation or felt it was of lower priority. As the final report outlines, the main progress has been on the following four issues. First, in terms of lending, the implementation group's scoping paper was fully considered by the Central Bank in the current consultation paper on the lending framework for credit unions, "CP 125". The group hopes that some matters proposed in the paper which were not taken on board will be reconsidered during the consultation. Second, the Minister for Finance has agreed, subject to Cabinet approval, to bring forward proposals to increase the interest rate cap from 1% to 2% in line with the recommendation of the implementation group. Such a cap merely provides further flexibility to credit union boards and is not intended to be a target or to express any desire for them to raise rates. Third, in terms of business model development, a range of collaborative ventures have been progressing towards implementation, many more than when CUAC initially prepared its report in mid-2016. Fourth, the consultation process for regulations has improved, though further refinements can be made over time.

On the negative side, while Central Bank engagement with the sector has improved both formally and informally since the CUAC report, both the implementation group and CUAC itself are disappointed that a version of the CUAC proposal for service level agreements between the Central Bank and credit unions has not been introduced to date. This is a matter for the Central Bank in its role as the statutory independent regulator of credit unions. Another recommendation which has not been progressed in line with the CUAC recommendation, namely, tiered regulation, deserves further explanation, as it has been a consistent issue for the sector since the Commission on Credit Unions, as I am sure members are aware. While proportionality and avoiding a regulatory framework which is one-size-fits-all is supported by all members of the implementation group, after careful assessment, the group decided to propose a different approach than what was recommended in the CUAC report. Developments in the sector such as tiering in investment and lending regulations in recent times and refinements in the supervisory approach, led to the implementation group concluding that a form of this approach should continue, with tiering introduced within Central Bank regulations rather than through a formal tiered regulatory structure that would divide the sector in two. Such a recommendation was accompanied by a number of principles, which include not restricting any credit union from services, or limits, they can currently provide; automatic inclusion in a higher tier for credit unions of a certain size and risk profile, and clarity in the approval process. This is a pragmatic change in approach, which may better serve to meet the needs of evolving credit union business model demands and reflects a different environment to that encountered when CUAC prepared its report. This recommendation is of course dependent on sufficient tiering being incorporated into all new regulations and a clear and transparent approval process where relevant. The implementation group agreed that failing this, tiered regulation should be revisited. The change in approach reflected in this report does not conflict with the sector's call for proportionate regulation and supervision, details of which are set out in the Credit Union Act 1997.

As members may have noticed, appendix 2 of the final report is a cross-reference to their own report on the review of the credit union sector. This is intended to identify those aspects which were addressed by the implementation group and those aspects which were outside of the scope due to the tight terms of reference I mentioned at the start of this statement. The final report also sets out the many positive developments in train with a 2019 roadmap, which points to the material regulatory changes that are either bedding in or due to come into effect over the short term and the imminent expansion of services and products for a large cohort of credit unions. As this section points out, 2019 could be an important year for the credit union movement with up to 50 of the larger credit unions, encompassing greater than 50% of sector assets, moving forward with current accounts and debit cards, as well as the sector-wide potential expansion of the provision of mortgages and the further roll-out of agrilending. Notwithstanding this, there are emerging issues and challenges facing the sector, which are summarised in the penultimate section of the final report and which may be subject to additional work by stakeholders individually or collectively.

The final report is not an end point but rather a staging post, with much done and more to do. As demonstrated by the 2019 roadmap, this year promises to be a busy one for the sector and all stakeholders involved. There will be new regulations from the Central Bank following its review of the lending framework and new proposed legislation in respect of the interest rate cap, subject to Cabinet approval and the Oireachtas process. I thank members for their attention.

Photo of Rose Conway WalshRose Conway Walsh (Sinn Fein)
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I thank Mr. Corr for his presentation. How would he describe the relationship between the Central Bank and the credit union sector?

Mr. Brian Corr:

I have been involved with the credit union sector for the past two years and was tangentially involved a little bit before that. Colleagues on either side of me will go into the detail but my view is that the relationship is an improving one. There has been a lot of energy and engagement on the part of the Central Bank in recent times and it has facilitated the Department of Finance, CUAC and the implementation group with access to information and a detailed understanding of why things are happening. We will not always necessarily agree but the relationship is pretty positive and collaborative. The detail of how credit unions interact with the Central Bank on a day-to-day basis is best left to the representative bodies to discuss. We would not have sight of that.

Photo of Rose Conway WalshRose Conway Walsh (Sinn Fein)
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We are in a situation in which the credit unions have assets of more than €17 billion. Those assets are of no use to anyone if they are just sitting there. They can be used in several ways as identified in all the reports, in particular for housing and microloan provision. These involve two major societal problems, the first being homelessness and the right to own a home and the second being the protection of citizens from scurrilous moneylenders who charge hundreds of percent in interest. The credit unions could play a major role there. We might look at the microloan situation for the moment as it could be good to do so for someone who does not have a good credit record, often through no personal fault.

Perhaps they got into trouble during the downturn or lost their jobs, but they do not have the credit record they would need to borrow from other financial institutions. They can borrow under the credit union system through connecting the repayments to their social welfare payments. Why are such a low number of credit unions operating this microcredit system? For instance, only two credit unions in Mayo are offering these loans. Will the representatives speak to that point? There was a reference in one of the reports to these loans being a loss leader. Will the representatives talk about the interest rates and about what would need to be done to make the scheme viable for all credit unions?

Mr. Brian Corr:

I will touch on a little bit of the scheme. The personal microcredit It Makes Sense scheme is run by the Department of Employment Affairs and Social Protection. It only applies to people who get social welfare payments. It is operated with An Post, so there is a reasonable relationship there. It only applies to those borrowers. There are other low-income borrowers to whom credit unions would lend in the normal course of business. When the Department and the credit unions are involved one might ask why more credit unions are not running the scheme. There is a whole variety of reasons which include interest rates, potential charges related to the process, and the administrative costs for what are very small loans. These loans are for a few hundred euro for a very short period of time. They are paid back quite quickly. The amount of money involved is very small. There are quite a few issues, which my colleagues may touch on.

In the report we recommended, as a group, that the interest rate cap be increased from 1% per month to 2% per month. This was not wholly tied to the cohort of borrowers who are using the personal microcredit scheme. That interest rate cap applies to all credit union lending. We recommended that it be increased for all lending. One of the main reasons for this recommendation is to give boards the flexibility to price slightly higher if they want to. It will be for boards to decide whether they want to do so. That would go some way towards meeting the higher costs of some of that small lending, but it might not go the full way towards it. This is only one of the reasons credit unions might not get involved in that scheme. Perhaps Mr. Farrell would like to touch on some of the reasons he has seen in dealing with his members on the ground.

Mr. Ed Farrell:

That is a good synopsis of the situation. Half of the credit unions are already in the scheme. I am fairly sure that covers more than half the population of the country. Many of the credit unions in more urban areas are in the scheme. We are hoping to get more credit unions in. Mr. Corr has explained the rationale for increasing the interest rate cap, which would help credit unions defray some of the costs. The scheme will never be run to make money, but directors of credit unions are duty-bound not to lose too much on a product line and not to subsidise it too much. An Post charge 25 cent per transaction to administer the scheme. It is very good that we were able to arrange deduction from social welfare payments because that makes it almost like a secured loan. It is like paying one's taxes; deduction at source is much safer. It gave comfort to everyone that the level of arrears would be much lower than if there was not deduction at source.

It is a matter of us encouraging more and more credit unions. We have always told Deputies and Senators that they should also encourage people to open up lines in their local credit unions if they have not already done so because we would like to see the whole country covered by this scheme. Independent research from UCC on interest rate caps across Europe, moneylending, and the credit union interest rate cap says that the country must be fully covered before we can expect to make real inroads into moneylending. I expect that more credit unions will come on board but I stress that half of credit unions operate the scheme and that more than half of the country is covered. We launched the scheme three years ago. There are seven or eight groups of stakeholders involved, which include all of us here today, the Department, and An Post. It has worked well having begun from a standing start. There are monthly meetings of those groups, which try to ensure that momentum is maintained now that we have it and that we get more and more families into this scheme and away from much more expensive and less desirable sources.

Photo of Rose Conway WalshRose Conway Walsh (Sinn Fein)
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I encourage Mr. Farrell to do that because if there are only two credit unions operating the scheme in a county the size of Mayo, it is impossible for some people to access it. Many of these people do not have transport to access a credit union. Obviously unions also have to operate within their own localities. More than 300,000 people are currently borrowing from reckless moneylenders and that needs to change. There are two bodies that can address that, leaving aside legislation in the area such as Deputy Pearse Doherty's proposed legislation to cap interest rates in moneylending. The credit union, as the most trusted organisation involved, can bring people into that space, working with the Money Advice & Budgeting Service, MABS, which does a wonderful job. The most successful cases with which I deal are the cases that involve the combination of advice from MABS and supports from the credit unions. People can get out of the financial traps they are in and away from the exploitation of moneylenders using that approach. It is hugely important.

Mr. Tim Molan:

Further to Senator Conway-Walsh's question, it is not simply about what credit unions do and do not do. There is a case for addressing the whole area of moneylending. It does not just involve the area of rates, but the area of practice. For those of us who work with people in many of the communities that are most blighted by this issue, it seems that it is open season on the consumer. There is virtually no effective protection for people. For instance, the consumer protection code is not thought of or operated next, nigh or near moneylending. One of the serious disadvantages and causes of reluctance in credit unions is that the moneylender can swan back in the next week. Some of their mechanisms of persuasion and collection are certainly not for the faint-hearted. We can talk about and address issues such as rates all we want but unless there is a more holistic approach to this whole area from a legislative, consumer, and regulatory point of view, we will still be sitting around here in two or three years' time asking the same questions and wondering why sufficient progress is not being made. The message is that a more holistic approach must be taken.

Photo of Rose Conway WalshRose Conway Walsh (Sinn Fein)
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Absolutely. I recognise that the Bill being proposed by Deputy Pearse Doherty is only to cap rates and that this is only part of the problem. The thing that really worries me is that many of these people are not paying their mortgages because of some of the pressures and practices about which Mr. Molan has talked. They are paying the moneylenders' extortionate rates instead of paying their mortgages, putting their homes at risk.

Mr. Tim Molan:

They are paying them because these people show up on their doorstep week in and week out to collect the money. I have a further point about the An Post charge.

An Post must cover itself financially. However, if, for instance, a person commits to paying €10 per week and 25 cent of that goes towards a charge, that account will go into arrears. Part of the project should be to rehabilitate people's credit status. It is a small amount, but along with the issue of the central credit register and so on this area needs to be addressed.

Mr. Kevin Johnson:

As Mr. Farrell and Mr. Molan have explained, a significant amount of work is under way and we are working collaboratively on it. It is worth noting that many credit unions are doing this and have been doing it for many years. Although only half of credit unions are in the scheme, we are getting lessons from those which have been doing this type of work for many years. Indeed, credit unions were founded to address the bigger problem whereby people could not get access to credit. Dealing with these issues is a core competency of credit unions.

Housing continues to be a very high priority for credit unions. As members are aware, last February the Central Bank amended the investment regulations to allow credit unions to invest in a fund which would lend to tier 3 approved housing bodies. Unfortunately, a month later the status of those bodies changed and all of their sources of funding, irrespective of from where they come, are regarded as on balance sheet for the State. However, our original approach was that credit unions could lend to the likes of co-ops and other providers of housing as well as tier 3 approved housing bodies. It may be necessary to revisit that issue to find ways whereby credit unions can collectively lend for those purposes because the bigger issue here is the ongoing crisis of people being unable to gain access to a home. As we have previously stated at the committee, it is appalling that our essential workers cannot access housing through ownership or rental. Housing is very much a priority for us and we may need to revisit the Credit Union Act to allow credit unions to individually and collectively lend for that purpose.

Photo of Rose Conway WalshRose Conway Walsh (Sinn Fein)
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How far are we from credit unions being able to facilitate mortgages?

Mr. Kevin Johnson:

It is already happening. There are various mechanisms in place. We introduced a mortgage support framework to support credit unions in offering mortgages. More than 20 credit unions now offer them and they have processed approximately €44 million in home loans with an average loan amount of approximately €110,000. It is happening. Although some credit unions are able to offer a wide range of mortgages to their members, others are focussing on niches in the market, such as people who may not be able to access a mortgage because the loan amount sought is considered too small by mainstream banks. Credit unions are more than happy to facilitate and look after their members in such cases.

Photo of Rose Conway WalshRose Conway Walsh (Sinn Fein)
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Such lending needs to be progressed, particularly in light of vulture funds and everything else that is going on in the market.

Mr. Kevin Johnson:

A very important consultation on the lending framework has just closed. It contains some very positive measures. Obviously, we have some concerns with it which we can explore if members so wish. The lending framework will open up more potential. If credit unions can access the higher limits mentioned in it in a transparent way, it would open the potential to provide more people with mortgages.

Mr. Brian Corr:

On the recommendations of CUAC in mid-2016, the consultation on the review of the lending regulations was probably the highest priority item for the implementation group. That consultation is under way. The submission deadline was 9 January and the Central Bank has now received all of the submissions from stakeholders, probably including the committee. In the context of those regulations kicking in, it has been very useful for the sector that the representative bodies present, CUDA and the ILCU, have set up structures which will facilitate their members in doing something which is quite burdensome and complex for individual credit unions. It is a very good example of how credit unions can collaborate and develop services which will enable other smaller credit unions to do things on a far more cost-effective basis. That has been very useful.

Mr. Tim Molan:

On mortgage lending, as Mr. Johnson pointed out, collective lending is of great importance but there is difficulty in that regard. It will be easier for the larger credit unions in terms of individual lending but there remains a significant need to address areas such as social housing throughout the country and effectively that can be addressed only on a collective basis. There are now significant difficulties in that area which must be addressed if we are to advance that agenda. That requires closer scrutiny by the committee.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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I welcome the delegation and compliment it on publishing a final report. On liquidity and how individual credit unions can survive a cash shortage, I note the proposal that they could follow the Canadian model whereby there would be centralised liquidity for those credit unions. I ask the witnesses to provide some background into their thinking in that regard. How do individual credit unions experiencing liquidity difficulties currently cope? The report states there is an ad hoc approach to the issue. Is it the case that some of the credit unions are able to access cash at some point?

Mr. Brian Corr:

That issue was not in the terms of reference of the group and relates more to our work on future challenges. The issue of liquidity was not raised in the CUAC report so we did not make any recommendations in that regard. The background is that credit unions currently have a lot of cash and investments which can be quickly accessed, such as Government bonds and deposit accounts, so liquidity is not a particularly significant issue for credit unions currently. They are essentially over-liquid and that is one of the problems as they have been putting money into low-yielding investments. However, if credit unions become more involved in complex products and longer-term mortgage products which are not as liquid as their current investments, we may need to consider how credit unions would maintain liquidity. Very few credit unions have a significant number of loans outstanding relative to assets, so it is not currently an issue.

Under legislation, a credit union can borrow a small amount of money from another credit union and a credit union can lend a small amount of money to another credit union. That is allowed in law but I suspect one of my colleagues here will say that the percentages are too low. They are not needed at the moment so therefore have not been looked at urgently although there is that facility.

Many credit unions, in order to ensure their liquidity, make sure they have available facilities from banks but they get charged for that. There is a cost to making sure that liquidity is in place.

That is the background from my perspective as chair of the group. This is a particular issue for Mr. Johnson.

Mr. Kevin Johnson:

Mr. Corr is referring to me when he mentions those limits. At the moment, as Mr. Corr has said, there is certainly not an issue of liquidity. The average liquidity level is 37% across all credit unions. We are trying to future proof all the time and make sure mechanisms are in place. Other jurisdictions, such as Canada, have central liquidity mechanisms and that is a formal structure whereby credit unions can access liquidity should there be a short-term demand. Our concern would be that inter-credit union lending and borrowing limits are very low so it does not provide a back-up line of credit. A number of credit unions are having to put those in place with banks and are paying for that privilege. It is good, prudent management to have such a facility even if the credit unions are not using them. It is good that the Senator has highlighted that because that is something we certainly would like to see in place. It will require some sort of mechanism or indeed a revision of those limits.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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At the moment every credit union has a facility with some bank or other institution and they are paying for it even though they might not be using it. Is that the case?

Mr. Kevin Johnson:

To be clear, not all credit unions would have, or need, that facility. Some of the bigger ones have that in place as good, prudent management.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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How would a centralised liquidity operation work? Would all the credit unions with surplus cash would pay in, or would it be organised by the Central Bank, or who would be the centralised liquidity authority?

Mr. Kevin Johnson:

A mechanism was looked at, back in 2009, and heads of a Bill were drawn up whereby the facility would be managed by the Central Bank. There are different ways it can be done. The essential thing, as has been mentioned, is to try to provide more credit facilities to people. If, for some reason, there was a short-term demand, some mechanism must be present in the background to support short-term liquidity requirements. It is certainly not an issue at the moment; it is quite the opposite as there is an abundance of liquidity. As I said, we are trying to future proof it and that is why it was noted in the report.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Interest rates were never lower. Why would credit unions be looking to change the legislation that restricts them to a 1% interest rate in order to be able to charge 2% a month? That is a 100% increase at a time when interest rates are historically low.

Mr. Brian Corr:

The credit union advocacy committee, CUAC, recommended the increase in interest rates from 1% to 2% in mid-2016. There are a few reasons for it, the first of which is flexibility. It gives a little bit more flexibility to credit union boards to decide on their rates. It certainly is not saying each credit union should increase rates or that each credit union should target doubling their rates. The credit union representatives here today will be able to give the committee some experience of what interest rates credit unions are charging on the ground.

Credit unions are the only part of the financial sector at the moment which is capped in the interest rates they can charge. Even increasing it from 1% to 2% per month means that credit unions will still be the only part of the financial system capped in charging interest rates to borrowers. Their competitors in unsecured lending do not have any equivalent cap.

One reason to increase interest rates might be that the cost of giving out small loans, which are sometimes riskier and the administrative burden for that small loan, which will be paid back very quickly, does not generate much interest, particularly if the cap is at 1%.

As we discussed with Senator Conway-Walsh, one consideration is potentially assisting in bridging the gap in the moneylender space as well, so credit unions, with a little bit more flexibility, might be able to assist in the moneylending space.

It also gives flexibility to do other products. We expect a decent proportion of credit unions to roll out current accounts and debit cards this year. If they introduce a credit card as part of that offering to their members, they would, at the moment, be capped at 1% per month whereas a competitor credit card would be higher than the figure of 12% per annum. Credit unions are effectively being restricted from providing some services which they might want to provide in the future.

The 2016 paper from CUAC offered some reasons not to increase the rate which came from a credit union survey. It said this was not an issue for credit unions and they did not want to charge more than 8% interest on a personal, unsecured loan. The 1% per month limit did not matter to the credit unions so why change it? Some people came back and said that the credit union ethos is to charge lower rates. They can still do that while the flexibility is given to them to change the rate. Credit unions can still charge fair rates to their customers even if the cap is changed.

Some credit unions said that the cap protects members from excessive charges. While that is true, it might also restrict some potential members from accessing credit, so that needs to be balanced.

Mr. Farrell or Mr. Johnson might want to comment further.

Mr. Ed Farrell:

The result of the survey that CUAC carried out was that slightly less than half of members of credit unions said they would like this flexibility, while slightly more than half of assets said they would like it. It is coming through them that the Minister is comfortable to bring it forward on the basis that it gives flexibility to some credit unions which are losing substantial amounts of money on this small piece of their business. It gives them the flexibility to not be subsidising it on the micro-credit loans or maybe to come into that and try and get more credit unions to formally come on board with that lending project. It is not that credit unions are looking for an increase, per se. They were asked if they would like it as an option and the results are not conclusive, they are half and half. They will be offered it and will not be made go there. They can still charge 1% interest, or less, if they wish or they can charge a little more if they wish. This is certainly only a conversation about a small piece of their lending, given the levels of interest rates. Who knows where they are going to go with debit and credit cards, as Mr. Corr said.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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The main two areas this might impact are the credit and debit cards that might be rolled out and on small loans that are paid back quickly. There needs to be flexibility to increase the interest rate there to cover the cost of a small loan? Those small loans that are paid back quickly could be more expensive. Is that what the witnesses are saying?

Mr. Ed Farrell:

Yes. Those small loans are expensive to administer. There is a deduction of 25 cent per transaction straightaway in An Post. It is a good facility that they have the deduction at source. Those loans are very expensive to administer because they are, on average, only for €500. There are a lot of transactions and a lot of work and, at 12% interest per annum, they would not break even. Their competitors are charging up to 200% or 300% interest per annum.

We are not going anywhere near there. Even if we were to go to the full 2%, it would be 24% against 200% or 300%. Credit unions would see it as a way of recouping more costs.

With regard to debit and credit cards, who knows where rates will go in the longer term. Even in the short term it is probably unlikely we will see an overdraft rate of more than 12%. Rates were never as low. At some stage they will increase, although every year it seems it will happen the following year. The people who answered the survey fall within a very small context. We are all trying to encourage more credit unions to offer formally the microcredit scheme although, as Mr. Johnson said, many credit unions offer it without saying it. We are giving more encouragement that this line of business would lose less money than it has heretofore. It will never make much money but we try to ensure each credit union breaks even without one overly subsidising another. It is not for mainstream lending and, even if it were, who would borrow a car loan at 20%? It would not be considered because it is not where rates are. We have to be competitive with our rates and most credit unions charge not much more than half of 12% on loans of between €5,000 and €8,000.

Mr. Kevin Johnson:

To add to this, it is great the Senator has raised the issue. There has been an unfortunate alignment of CUAC's recommendation on increasing the cap and microcredit loans. This link is not in the report. It was not done for this purpose alone. As Mr. Corr mentioned, the reason the recommendation was made and we as a group supported it was because it would put the boards of the credit unions in control. If we go back to the Credit Union Act that sets out the objectives of the credit union, section 6(2)(b) states one of them is to charge a fair and reasonable rate. The context is that we could open more credit facilities to more people if we recoup some of the administration costs. Obviously, there is the issue of the wider prudential management of the credit union whereby, as Mr. Farrell mentioned, we could have interest rates shocks such as we saw in the 1990s. It is to provide flexibility for the boards to have control over it. We have the existing cap and, as Mr. Corr said, we are the only lenders to have such a thing. It is not a target and, at present, the average rate is only two thirds of the limit. It does not suggest rates will increase. This is why it is great to have an opportunity to clarify this. It is just to provide flexibility to the board of each credit union so it could manage a situation as it thought fit.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Many dealerships operate personal contract plans, PCPs, and the credit unions have an operation whereby they charge a percentage. In some places, it seems there are problems with PCPs or it can be envisaged that there could be problems down the road, such as that a car may not realise how much is owed on it at the finish. How do the credit unions compare to the programmes put in place by dealerships? Some of the dealerships charge 0% interest, others charge 3% or 4% and in other cases 1.5% is charged while credit unions charge 7% or 8%. Is there competition between dealerships and credit unions? Do credit unions also facilitate dealerships?

Mr. Brian Corr:

I will comment on PCPs from the perspective of the Department of Finance and the representative bodies can speak about their experiences. There have been two reports because a report on PCPs by the Competition and Consumer Protection Commission was followed by the Minister for Finance commissioning a review of the PCP market. This review was completed in November and set out a number of recommendations. Another division in the Department of Finance is liaising with the Central Bank, the Office of the Attorney General, the Competition and Consumer Protection Commission and other relevant bodies to implement the conclusions of the report. This is the backdrop to the regulatory work that is ongoing on PCPs.

Mr. Tim Molan:

Comparing PCPs with personal lending is not comparing like with like, in that if someone gets a loan from the credit union to pay for his or her car the car belongs to that person. The person gets the value there and then. A PCP is a completely different type of arrangement and there is a fundamental area that needs to be addressed in this. One needs to go back to consumer protection because there is an actual conflict of interest. We provide financial services and we are carefully and rigorously regulated in the interests of the consumer. Someone going to a forecourt will be sold a car. We do not sell cars and it is not our area. However, that person will also be sold credit at the forecourt. The regulation of the provision of credit needs to be looked at because one must lend responsibly. There is further work to be done on this.

The differences between credit union rates for car loans and PCPs must be taken into account, with regard to what somebody owns, when he or she acquires an asset, the deposit that must be paid and the restrictions in respect of getting full value as he or she must drive the exact amount that was stated in the PCP in the first place because going above or below will mean getting much less value for the investment. At the end of the day, it is not the person's property under a PCP. In these particular cases, a serious amount of consumer protection work must be undertaken. If we look at some credit union headline rates at present, the 12% cap is a very distant memory in terms of the value to be had.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Is the Competition and Consumer Protection Commission turning a blind eye to some of this?

Mr. Kevin Johnson:

The Central Bank published a report on PCPs and I hope it will take them more into its regulatory framework. It is not just about PCPs. There is also very easy access to in-store credit, which is another area of concern. We genuinely do not have a level playing field. Much of this comes back to ensuring there is appropriate regulation for all lenders to protect consumers. Similar to what we spoke about earlier, we must ensure the message is getting out to the general public so that they understand. It is very difficult when it is made so easy for some of these businesses to provide credit while in the credit union there are certain processes people must follow.

Obviously, it is all done under the auspices of protecting the consumer and making sure the consumer has the relevant information, but we do not have a level playing field. We would ask the regulators to broaden their reach and look at all the providers of credit. We would like to see the PCPs that have started going further to include all providers of credit. Then people can start to see like for like and see the true value that they can get from their credit union.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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I hope I will be forgiven for saying there is a lot of déjà vu around the credit unions. We had the credit union sector in before the committee many times. As someone who looks at things on a practical level, I would like to have seen a lot more progress. I am a major believer in the credit union movement. I know virtually all the witnesses. They have a vital role to play. There is a significant amount of confusion among the general public around lending limits and what credit unions can and cannot do. The position must be more streamlined.

I have looked at the recommendations of the witnesses and I wish to make a few points under some headings, namely, the structure of the credit union movement, the role, the lending products offered, the lending limits, interest rates and regulation. Did the witnesses not consider in any way the expansion of the credit union movement to provide a public banking model? We were in Germany recently and I spoke to people about it. The delegation I was with was investigating the Sparkasse model. Much of what Sparkassen do is good but I do not believe the overall model would work in Ireland. However, there are significant elements of what they do that I like. I like the fact it is a public banking model. I also like the fact they provide competition to the pillar banks. I further like the fact they are local, charge a low interest rate and that they are transparent. The credit union movement, which at this stage is the only financial institution other than the post office, that has individual credit unions in virtually every parish in the country. Credit unions could remain individual, as Sparkassen are in Germany but they would be able to offer a range of products. I direct my question to Mr. Corr. Is there a reason it was not considered to use the credit union movement as a conduit to provide a public banking model in this country?

Mr. Brian Corr:

I will answer the first part of Senator O'Donnell's comment first. In relation to progress within the credit union movement, one of the things we tried to do in the final report was to bring out some of the collaborative efforts which are under way. To be honest, there is an awful lot more happening than has been the case previously.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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To cut to the chase, some credit unions provide mortgages, but they should be in the market providing competition for small mortgages. I accept the credit union movement went through great difficulty in terms of restructuring, yet when one looks at the metrics, on page 14 of the report, loans have gone up by a very small amount. The loan-to-asset ratio is 27%. There is no reason it should not be in excess of 40%. The arrears appear to be at a reasonable level. Why have loans gone up by such a small amount? Why is there not more lending by the credit union movement? Over the years we have continually heard the credit union movement tell us that the restrictions on lending are too severe. Why have those changes not been made? We have 264 credit unions now and we had 343 in 2015 and no doubt the number was previously much higher than that originally. The number in 2013 was 400. This cuts both ways. I would like to see the credit union movement proactively looking to put a public banking model in place.

Mr. Brian Corr:

To simply answer Senator O'Donnell's question about why local public banking was not dealt with in this report, it was not part of the terms of reference. However, a report was issued by the Department of Finance last year on local public banking. Terms of reference were drawn up after the report on doing an independent evaluation of how local public banking could be delivered. The main recommendation from the original report was that the State would not invest but that local public banking is a good thing and should be advanced. As part of the terms of reference for the independent evaluation, credit unions were referenced as one of the delivery mechanisms for local public banking. I agree with most of the reasons and rationale stated by Senator O'Donnell for why that would be the case.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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It would require no State investment.

Mr. Brian Corr:

Absolutely.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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We spent three or four days intensively investigating the Sparkasse model in Germany. It does not make sense to set up such a system. We already have a viable network. By doing that, it would give a framework that would enable all those other areas to come in. Why has the increase in lending been so low and why is the loan-to-asset ratio by credit unions on the low side? What is the cause of that?

Mr. Brian Corr:

I just want to make one further comment about local public banking. If one looks at what local public banking and Sparkasse do, as the committee has seen in Germany, if a decent proportion of credit unions bring in current accounts and debit cards this year, what will be the major gap that is left that credit unions are not providing? It will be small SME lending on a bigger scale.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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And mortgages in a more structured way.

Mr. Brian Corr:

Mortgages are under way. Processes have been set up and I consider it to be in the implementation phase at the moment. The provision of funding to SMEs is the last remaining area which would be required to effectively deliver that local public bank. I see that as being achievable. It needs skills and investment. Credit unions individually cannot do it.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Then there is the Canadian model and that will require co-operation within the credit union movement in terms of expertise. A back office needs to be set up. There have to be Chinese walls because credit unions themselves are entitled to confidentiality in terms of dealing with their own individual customers. I know I am slightly diverting but are the credit unions losing money on the micro-finance project that is in place at the moment given the way it is structured? Could Mr. Corr explain the situation?

Mr. Brian Corr:

There was also a question on lending growth.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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They are all interlinked.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will take Mr. Johnson, Mr. Molan and then Mr. Farrell.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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The base of my question is why lending growth has been so low. Are the credit unions losing money on SME micro finance? What is causing that? That leads into the restrictions on lending. Could the witnesses give their overall perspective on mortgages, current accounts and debit cards? There is a glorious opportunity for the credit union movement to fill the gap, while retaining the individual identity of the credit unions. It will require no State investment and it will operate at a local level and provide necessary competition to the pillar banks where there is a degree of arrogance creeping in again. Could the witnesses deal with those issues? I accept I am being very general but I want to know what is happening.

Mr. Kevin Johnson:

There is a huge amount in that question which seems simple. In trying to stay at that high level there are probably two or three areas that really capture the essence of what the Senator is talking about. It can be broken down to public access to services and lending. While lending has grown, the loan to asset ratio has not improved.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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It has actually gone down.

Mr. Kevin Johnson:

It has improved slightly. It has risen from 27% to 28%. That said, however, it is a reflection of customers' level of trust. They are putting an increasing amount of savings into the credit union.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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That would not account for it. Savings have gone up by €1.85 million since 2015, but that would not account for everything.

Mr. Kevin Johnson:

Not everything. What I am trying to say is we are trying to cater for everybody's savings and credit needs. On the credit side, in his opening statement Mr. Corr referred to the three papers the group had submitted to the Central Bank. The high priority was lending. It led to the issue of a consultation paper from the Central Bank which takes on some of the recommendations. It is great to see the basis of the limits moving away from a percentage of the loan book to a percentage of the assets, for instance. That gives hope. There is potential in that regard.

In the context of being able to provide a broader public banking-style model, we have some concerns which we have raised. We will be very happy to send the committee the submission we made and the concerns we raised. I refer to when one starts to put caps on unsecured loan terms and restrict the ability to loan for buy-to-lets or second homes. On the point the Senator made about small businesses, the definition is now going to cover owner-managed properties only. It is also proposed to bring SME lending in with home loan lending and have one limit in that regard, which is difficult to understand. I hope the Central Bank, in its consideration of the submissions made, will review some of these matters. That is the purpose of the consultation process.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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As matters stand, what is restricting the credit unions in growing lending? Are they making money on micro-finance?

Mr. Kevin Johnson:

On personal micro-finance, no money is being made.

Mr. Kevin Johnson:

Because they are short-term loans. On a loan of €500 over one year, the credit union makes roughly €35.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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What rate of interest is charged? Is it 12%?

Mr. Kevin Johnson:

It would be charging at that rate, but not all charges are at that rate.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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What rate of interest must be charged on a loan to cover overheads and make a profit? We are talking about raising the limits from 12% to 24% if one goes from 1% to 2%. The question I am asking is-----

Mr. Kevin Johnson:

Just to be very clear, we are talking about giving the boards flexibility, not about raising interest rates.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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I know that. If a rate of 12% is being charged by the credit union, as at present, how is it losing money?

Mr. Kevin Johnson:

Because the cost of administering the loan is more than €35.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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On average, what percentage does the credit union-----

Mr. Kevin Johnson:

It is-----

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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No. This is basic stuff. It is all very well saying there is a loss, but there has to be a reason. I want to know the rate of interest a credit union needs to charge to cover its overheads. The question one then has to ask is whether the credit union movement's cost base is too high. I have to ask the questions. I am here a long time and credit union representatives have been appearing before us since approximately 2007. We were discussing the same issues 12 years ago. I acknowledge restructuring is taking place, but I need to understand what can be done with the credit union movement in terms of its structure because I passionately believe in what it does. What rate of interest should the movement be charging on micro-finance to make a return?

Mr. Kevin Johnson:

With due respect, the start of the Senator's question and narrowing it down are not really the issue. I will address the first part which concerns what needs to be done. There are two major aspects. One concerns the lending in which one is allowed to engage and whether it sets out a roadmap to see credit unions evolve to the public banking-type model. We are concerned that the proposed limits do not do that.

The second aspect concerns access. If there is to be a public model, all of the public need to be able to access all of the services. That is a challenge for us. How it works is enshrined in legislation, but we have to find mechanisms that will allow credit unions either to introduce business to one another or to share the risk. I refer to loan participation and other such initiatives. Loan participation is the type of thing one will see in North America, for example. A smaller credit union may put only 10% of the risk on its balance sheet, while another may carry the rest. These are the types of practice we have to consider.

The credit union has been very successful in managing its own local business, but now it is a matter of determining how to introduce a wider range of services, inherent in which is a wider range of risks. How does one introduce services without jeopardising the credit unions? It is a matter of finding mechanisms by which they can share the management and handling of the risks on their balance sheets. What the Senator mentioned about shared services still does not address the matter. It helps with the efficiency of delivering the service, but it does not address the management of the risk because it still has to reside on someone's balance sheet. That is the arrangement as structured.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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With due respect, I have a different interpretation of public banking. Mine is that a small credit union does not necessarily have to provide all services. A bigger credit union up the road could do so.

Mr. Kevin Johnson:

That is exactly my point.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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The point I am trying to make is that-----

Mr. Kevin Johnson:

In that case, we have to go back-----

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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The small credit union does not have to take on the big loan; it can share the risk with the bigger one.

Mr. Kevin Johnson:

That is what I am trying to say. There has to be a mechanism to permit the smaller credit union to introduce its members to the other credit union that can manage the risk. The current structure does not facilitate this. We are actually making the same point.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Mr. Farrell represents a large number of credit unions. Will he tell me what is restricting growth in lending under the current rules?

Mr. Ed Farrell:

It goes back to some of the points made. As we see it, the factors include the lack of a level playing pitch and the PCPs. The entities that are not subject to the same regulations or consumer protections are able to drive out loans or credit. We have a far different regime which is not helping the interest rate cycle. In recent years, during the recession, people were paying down their debts, not clearing them. Subject to Brexit, the country is now doing well and our loans are up. Our savings are up by more because all of the local branches of the banks have closed and people are taking out their money. They are thinking they are supporting us by lodging the money, but really it is a headache. The credit unions are providing a social service by minding the people's money, but they are not making a return. As every one has said, we are increasing the capability of credit unions, be it through current accounts in the mortgage space or the SME space. As Mr. Corr said, as the mortgage space is complex enough, we have our own back offices which are helping credit unions to do more on mortgages. We have to convince the Central Bank to widen the limits, with a view to dealing with more. We have shown that credit unions can and will offer mortgages. It is the same with SME lending.

We are probably at cross bats. When we say micro-credit, we are talking about the €500 social welfare loan. It is in that regard that we are losing money in offering a rate of 12%. Competitors are charging rates of 200% and 300%. When the Senator talks about micro-credit, he is probably talking about small SMEs, to which credit unions are loaning at rates of 6%, 7% and 8%. That is enough once they can underwrite the loans and understand the set of accounts and projections the businessman brings in. For consumer protection purposes, the credit unions have to do a business plan with the tradesman, be it a carpenter or a plumber.

That is almost an oxymoron. The tradesman would not call it a business plan but that is what has to be done and there are consumer protections in place, as is only right and proper. Credit unions are providing these loans at interest rates of 6% and 7% but again this is done on an individual basis because each credit union is individual in law and in regulation.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Are the credit unions losing money on micro-credit because people are defaulting on loans?

Mr. Ed Farrell:

As Mr. Johnson said, even if one assumes a €500 loan will be paid off, the €35 interest charged for the year will not cover the administration fees. Of the €4.5 billion in credit union loans, those types of loans probably account for only a couple of hundred million euro. However, that is not what we are majoring on in the report. That is only a small element of the report.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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To return to mortgages, how much can credit unions lend in terms of home loans? What are their limits?

Mr. Ed Farrell:

Credit unions can lend a maximum of 15% of their loans over a ten year period. If the total balance sheet is €4 billion, €500 million or €600 million can be loaned for more than ten years.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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For how long can credit unions give mortgages?

Mr. Ed Farrell:

They can be up to 25 years in duration. That is not necessarily the issue.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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What amount can the credit unions give in a mortgage?

Mr. Ed Farrell:

There is no financial upper limit. That is not an issue. Credit unions can give €100,000 or €200,000.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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What level of growth has been achieved in that area?

Mr. Ed Farrell:

It has gone from practically nothing to a few hundred million euro in total.

Mr. Kevin Johnson:

The figure is €170 million.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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That is the figure for all the credit unions.

Mr. Kevin Johnson:

Yes.

Mr. Ed Farrell:

That has occurred since the recession. Ten years ago before the recession, credit unions did not offer mortgages, which is one of the reasons we did not need any bailouts. Any mortgages we have given have been since the recession. We have gone from zero to a couple of hundred million euro in mortgages and that figure will increase. However, this is still done on an individual credit union basis and depends on the appetite of the relevant board and so on. It is not centralised, which means we are helping on a back office basis. The mortgage of a certain credit union in Cork or Limerick will be on its balance sheet and is not centralised. We promoted a centralised model but the proposal did not go anywhere.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Are Mr. Farrell and the Irish League of Credit Unions open to a public banking model? What is Mr. Molan's overall view?

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will conclude on that point.

Mr. Ed Farrell:

Our view is that the credit unions in Ireland are not dissimilar to public banks. There are 3 million people in the Republic and 5 million people on the island. The population of Germany is ten or 15 times that number. It is a bit like the example of England in that one has to divide every balance sheet by ten or 15 if one wants to compare like with like. If the 50 credit unions that are expected to offer current accounts by the end of the year do so and another 50 or 100 credit unions are doing more mortgages, we will be getting there. However, it will still be on an individual basis. There is no buy-in from the regulator or the Government for doing this on a centralised basis. We submitted a paper in 2015 on a centralised system to centralise the risk and the expertise and help credit unions do more of this type of lending but the proposal did not travel. Combined, the 250 credit unions doing this on an individual basis give the total figure. More is being done and that will continue, albeit from a late start.

Mr. Tim Molan:

I do not wish to repeat the points made already. To address some of Senator Kieran O'Donnell's concerns, one of the key areas is the creation of secondary markets. These are key and practical and they operate in the USA and Canada. Within the very restricted terms of reference the committee was given, one of the practical advances we are proposing is to enable credit unions to recommend business to other credit unions. That still does not get away from the issue raised by Senator Conway-Walsh, namely, the need to have effective and collective lending mechanisms. Such mechanisms are particularly worthwhile. I echo Mr. Johnson's earlier point on the levels of restrictions proposed in consultation paper No. 125, including restrictions on lending to people who have no property. This is an area that merits careful consideration.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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It is good to see all of the witnesses. From the presentation, I get the sense that the position is improving but not terribly quickly. I have been interested in this issue for a long time.

I will put questions to Mr. Johnson first. He might recall the recent discussion about how mortgage loans could be provided to people who would traditionally be family customers of the credit unions. The credit unions would be well placed to do some of that business. The Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy, indicated he had created a statutory vehicle that would enable credit unions to offer mortgage lending. I submitted a number of parliamentary questions on this issue and my understanding was that nothing the Department of Housing, Planning and Local Government did entirely met the requirements of the Central Bank or the Department of Finance. I appreciate that some mortgage lending has taken place, as the witnesses noted, but in the context of the people who need housing, we might collectively agree that the amount is small to minute. Considering that credit unions have approximately €14 billion available for potential loans, is Mr. Johnson disappointed with the rate of mortgage lending? Could it be higher? What would be a realistic target and what is the problem with the Central Bank requirements?

The replies to parliamentary questions on this issue go around in circles. The Minister and the Department are very anxious to point out that loans are available and they point to the recent take-up of some lending as evidence of this. However, one gets the sense that the Central Bank and Department of Finance are extremely cautious and conservative about the prospect of a significant, rapid expansion in demand in lending to young people in their 20s and 30s who could get a mortgage that would be cheaper than the rent they are paying. Many of them are probably working in the public service, including in the Department of Finance and the Central Bank. They would be queueing up through the various Civil Service credit unions for a mortgage. Will Mr. Johnson indicate what the current position is in this regard?

Mr. Kevin Johnson:

I will separate the questions because they raise two distinct issues, namely, social housing and the provision of mortgages directly to people. We have been advocating for six years that the credit unions should support social housing. This support would not be to the occupier but to the provider of the social housing, primarily the approved housing bodies, AHBs. Our preference would be for credit unions to individually or collectively lend for those purposes. That would have necessitated an enhancement to the Credit Union Act 1997 and in the absence of that, the Central Bank, to its credit, reviewed the investment regulations and enhanced them to allow for a facility where credit unions could invest into a regulated fund that in turn would lend on to tier 3 approved housing bodies. There is no active vehicle for that. All of the work has been done to see what would be required but the reclassification of the funding for the AHBs has meant demand for such projects is lacking. This is where the anomaly arises for us.

If a fund were to be activated, it would incur significant costs. If one is not going to get the projects because all the funding ends up on the State balance sheet - the Housing Finance Agency is already providing funds - there is not necessarily a motivation for the approved housing bodies to diversify their source of funding.

Our view is that this is all adding to the frustration. It still does not put houses out there or provide for social and affordable housing. We have explored many different mechanisms and, unfortunately, we are still talking six years later and still looking at balance sheets that have funds available for such necessary causes as social and affordable housing. We are persisting with this and we are not letting up. We are open to any opportunities that may arise to facilitate or work with it. In fairness, we have worked with the Department of Housing, Planning and Local Government and the AHBs. However, it may come back to the point that we may be better off having the facility to lend directly and broadening it beyond tier 3. It would also perhaps remove the necessity to have projects of certain sizes to make it economically viable. That is one aspect of the issue.

The other issue the Deputy raised has more to do with providing mortgages directly to the borrower, that is, the occupiers or owners of the properties. As we said, there are now facilities in place to support credit unions in doing this. The Central Bank's proposals for the revision of the basis of the lending limits will certainly help. Moving from a percentage of a loan book to a percentage of assets is a very welcome move. We have reservations about how credit unions can access the higher threshold of 15% of their assets. The only reason we have reservations is that the position is not transparent and we are not clear what it is. It is to be hoped this will be clarified in the feedback statements at the end of the consultation period.

I do not know if any of the other witnesses want to add to my comments.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Will Mr. Farrell first indicate what the position is in this regard for the Irish League of Credit Unions?

Mr. Ed Farrell:

The same lending rules apply to every credit union. We are pleased that the consultation, the review of the rules for long-term lending, is out there. The closing date was early in the new year. We are not necessarily happy with every suggestion, and I think we have all made submissions to the Central Bank. I understand approximately 50 submissions were made. There is light at the end of tunnel in that there will be more facilities or headroom for individual credit unions to do more in the area of mortgages. This will mean providing loans to people in reasonable jobs who are buying houses.

On social housing, as Mr. Johnson outlined, we have half of the equation. The rules were changed by the Central Bank to allow credit union involvement with some slight restrictions, but the concept is there via the fund into tier 3. It was a pilot, and if it worked well, tier 3 would be broadened, as would the opportunities. The disappointing element is that the vehicle does not seem to be in place. It has been hard enough even to get to the point of figuring out whether the vehicle is in place. We were told earlier last year that it would be by September of 2018. Then the vehicle changed we are not sure now if that vehicle is in place, even one with a different status such that we could perhaps complement it or bolt on a regulated piece. This has been frustrating because it has been hard to figure out where the social housing structure is in development. As I said, we thought we were there a year ago but we are not there now.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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To follow up on that, as the witnesses know - and this relates to the second type of lending - there is a loan scheme in place for individuals on incomes of up to €50,000 and couples on incomes of up to €75,000. The limits are low enough. People are applying to county councils under the scheme and the approval process is very slow. The first approvals have trickled through and people are starting to get these loans. Are the credit unions involved to any degree in this kind of lending? I refer specifically to affordable housing where someone buys a new or second-hand house, often far outside the capital, for perhaps €300,000. If they have got a deposit together, they will seek to borrow €240,000 or €260,000 or a somewhat lower figure in rural areas. The credit unions could have a role in this regard and should be able to make a loan offer to such people. Are they restricted in this regard? The approved housing bodies have better offerings available than they would have if they went through the credit unions, if the witnesses do not mind me saying so.

Mr. Ed Farrell:

Any individual who is earning an income and is a member of a local credit union is entitled to approach the credit union and see what its mortgage offering is. The same rules apply. The same macro-prudential rules, which means a multiple of 3.5 times earnings applies and first-time buyers can borrow up to 80% or 90% of the cost of the property. At the same time, the average mortgage we are seeing is approximately €100,000. We have not seen mortgages of €240,000 or €250,000 coming through yet. Credit unions only have a certain amount of space so they will probably do more of the smaller loans. Doing fewer of the bigger ones mitigates risk as well. In theory, however, there is no barrier there.

Mr. Kevin Johnson:

On that point, it has been very encouraging to see that credit unions have not dived into the high risk end of the market. Again, similar to what Mr. Farrell has just said, the average loan we are seeing is approximately €110,000 and the average loan-to-value is about 56%. Part of what one sees is facilitation of some of the good schemes, such as the tenant purchase schemes. As the credit union builds up confidence and competence in doing this, it can start serving mortgages. We have seen some of what the Deputy has mentioned but not on a wide scale.

To respond to the Deputy's point about the AHBs and credit unions supporting them, I would respectfully disagree. There is a great opportunity for the credit unions. The reason I say that is that we view this as an "also" rather than "instead of". It should be an opportunity for the AHBs to be even more ambitious in providing more units because, as the Deputy well knows, there is such a scarcity of housing. This type of funding is very much in keeping with the ethos of the credit unions. It is a perfect fit.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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To assist the committee, will Mr. Johnson identify steps that would make that easier. Furthermore, regarding groups that have come together in a modern approved housing body, for example, the Ó Cualann Cohousing Alliance, are there steps the committee could help to facilitate that would make that easier and perhaps persuade the Departments of Housing, Planning and Local Government and Finance that this might be something positive?

Mr. Kevin Johnson:

The AHBs have some really ambitious plans and objectives. We could work with them to help address this whole reclassification issue. The concern we all have is that if all their funding is treated as on balance sheet, they will now find themselves competing with every other infrastructural project the State is considering. That can only mean that overall it could impose an unnecessary and unwanted limit on what they can do. We would love to work more closely with the AHBs to see how we could help with reclassification to get them off balance sheet.

Mr. Brian Corr:

Credit unions can invest in tier 3 approved housing bodies. It is within the gift of the Central Bank to review whether it is only tier 3 approved housing bodies that credit unions can invest it. In terms of lending to approved housing bodies or other providers of finance, it is much more a legislative issue tied to a common bond. Currently, a credit union can only lend to a member who is broadly within its common bond. There is a legislative issue was well as a regulatory issue in terms of expanding some of it.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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In Mr. Corr's view, which is the relevant Department to progress this legislation? Is it the Department of Housing, Planning and Local Government because it appears to be indicating that it already has this on the books or is it the Department of Finance, or amendments to the powers of the Central Bank?

Mr. Brian Corr:

Any change in regard to the common bond would require amendment of the Credit Union Act and that would fall to the Department of Finance.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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On the housing issue, what proportion of the €14 billion in savings within the credit union movement could be invested in mortgages of ten, 15 or 20 years or loaned to approved housing bodies? Is there a target set by the group as to what it might like to realise, if the legislative structure was right, that could be done within the next, say, three years?

Mr. Brian Corr:

No. Under the investment into approved housing bodies there is capacity in the regulations for around €700 million. I will have to come back to the Deputy on what is in the new consultation in regard to mortgages. I am told by my colleague that the current version of the consultation paper allows for about €800 million in mortgage capacity.

I would like to comment on one other aspect of the implementation group's report. When we made recommendations to the Central Bank in regard to long-term lending, we recommended that it review the 25-year limit on mortgages. Under the regulations, there is a 25-year limit in respect of credit union mortgages. As stated by Mr. Johnson and Mr. Farrell, credit unions are currently doing much lower loan to value lending and much shorter maturity lending. Notwithstanding this, we felt that reviewing the 25-year limit was appropriate but the Central Bank did not do it. We thought it was appropriate because no other provider in the market is tied to the 25 years. In the statistics for the first time buyer lending, a good proportion are beyond 25 years. In terms of the lending to, say, civil servants who wanted to get a 26-year loan, they could not go to their credit union for it. I appreciate the credit unions are focused much more at a different niche of mortgage lending for now but in terms of future proofing it was something that as a group, we thought that was worth recommending.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I have one other question which Mr. Corr has in part already commented on, which is helpful. As Minister, I was involved in the development of the It Makes Sense loan, which is very popular. It was piloted in Finglas Credit Union. The demand for it has been good but relatively few credit unions are providing it. I accept that as credit unions are small scale structures administrative costs and handling charges are probably very high. Would there be scope for, say, the Department of Employment Affairs and Social Protection to pay a fee in respect of each loan generated? This is a vital scheme which helps people, perhaps, following job losses or other financial difficulties, to get back on their feet and also those who have never had any type of structured borrowing and do not fit with the ethos of the credit union. I would be anxious to see this developed.

There are areas in my own constituency where this loan is being made available through credit unions. People are aware of it and it is working well. This is a model which, during my time working in development, I was involved in helping to develop in places like Ethiopia. It does work. I would welcome a response on my proposal regarding the Department meeting a relatively small cost regarding these loans. As I recall it, there was a four and a half year discussion on this with the Department of Finance before we got a successful outcome. The issue was that this was going to be time consuming and the people involved might need a lot of support and encouragement to become regulars. The Money, Advice and Budgeting Service, MABS, was often the introducer to the local credit union where the service was available and it was helping people to resolve debt issues.

In comparison with a commercial bank, what are the credit unions charges for a credit union account holder where the Department of Employment Affairs and Social Protection is in effect sponsoring a small micro loan? Would, say, a €30 charge on each loan be of assistance in that regard? This would be a relatively small payment that could generate an expansion of the scheme to most credit unions in the country if it became viable. Is that realistic?

Mr. Brian Corr:

Mr. Farrell, Mr. Johnson and I, along with colleagues in the Department of Employment Affairs and Social Protection, the consumer section of the Department of the Department of Finance and the Central Bank, sit on a group, chaired by MABS, and dealing with personal micro credit, PMC. We are examining all of the potential reasons there might be slower take up by credit unions and what options we can advance within our own respective remits which would help in that regard. This has been going on for a while and there are some interesting ideas coming out of that process. We are examining all of the reasons the scheme is not being taken up and what we can do to make uptake better.

Mr. Tim Molan:

I will try to answer Deputy Burton's question more specifically. Earlier, I raised the point about the charge of 25 cent by An Post. It amounts to €13 over 12 months.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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They would not take up the scheme without that.

Mr. Tim Molan:

Somebody has to pay that. It has to be paid by the individual. There are other charges, such as for electronic funds transfers. That service is not provided free of charge. There are a lot of other charges before one comes to the question of the €35 return. There are practical things that could be examined.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I appreciate that this is a small area in terms of the totality of the credit unions' operations but socially it is important in terms of helping people move out of, very often, debt ridden situations, the alternative being the commercial moneylenders.

If the association wants to come back to us with a summary of some of the possibilities and recommendations, I would be very open to some recognition being given of that. I cannot see that the Department of Employment Affairs and Social Protection would object; it might not like paying any money to anybody. In fairness to the credit unions, it never arose. A conversation had been going on for up to five years before we got the go-ahead. It then proved as successful, thanks to the credit unions that participated, and was transforming in terms of the lives of people who were able to get into the scheme successfully. I congratulate the credit unions that have taken part on doing that.

Mr. Tim Molan:

On that point, this is as much about self-enablement and development of people. It is not just about forking out money. It is also about education and such issues. There are credit unions actively involved, and this is where the real costs of this arise. To be serious about it, we have to see it as more than just the handing over of money. There is a piece of work to be done in that regard and a bit of assistance along the way from the Department might make a difference.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank the Deputy and Mr. Molan. I refer to Mr. Corr's opening statement. He said he submitted a final report to the Central Bank and that three papers were completed by the implementation group on lending, engagement and tiered regulation to the Central Bank.

Mr. Brian Corr:

Yes.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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When were those documents submitted?

Mr. Brian Corr:

They were submitted roughly the same time the committee would have got them. The one on lending and engagement went in late 2017, so they were effectively the first tranche of work. The tiered regulation paper was finished at the same time as the final report. We sent it separately to the Central Bank but we did not send it separately to the committee because it was in the final report anyway.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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So it was 2017.

Mr. Brian Corr:

Yes, the end of 2017.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Again, in his opening remarks, and I do not know why this happened, as Mr. Corr was speaking he left out part of his speaking note.

Mr. Brian Corr:

I was trying to speed it up; it was too long.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thought it was an important part because it points out that the document does not bind the Department of Finance, the Central Bank or any other members of the implementation group in advance of any public consultation carried out by the Central Bank in accordance with its statutory mandate or any legislative process commenced by Government.

Mr. Brian Corr:

Yes.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Corr is acknowledging in that that it is simply the group's opinion and they could take it or leave it.

Mr. Brian Corr:

Collectively, as a group, so-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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They could take it or leave it. It is a committee.

Mr. Brian Corr:

Yes.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Another section of his speaking notes which Mr. Corr did not read out, states: "[...] and we must remember that the Credit Union Act 1997, as revised, prescribes in many cases that the Central Bank ensure that its regulations "are effective and proportionate having regard to the nature, scale and complexity of credit unions, or the category or categories of credit unions, to which the regulations will apply"". These are important pieces of information and I will tell Mr. Corr the reason shortly.

The other part Mr. Corr left out was when he referred to "[...] sector-wide potential expansion of the provision of mortgages, and the further roll out of agri-lending", but he also left out, "and other SME lending initiatives". The point I am making is that they are all important pieces of information because they indicate that Mr. Corr is part of a committee and they do not have to bother listening to its members if they do not want to.

As we are discussing the credit unions, I am with Senator Kieran O'Donnell. It is the same story over and over again. All of the interested parties at national level outside the credit unions - the Central Bank and the Department of Finance - and I am not being critical of Mr. Corr in a personal way, are dragging their feet on any opportunities the credit unions might have to get out there and do what they want to do. If they were a normal business I do not know what they would do with the regulations that are heaped upon them, and the suggested improvements seem to be put on the back burner as far as the Central Bank is concerned. The reason I say that, if Mr. Corr will bear with me, is because of the status of Credit Union Advisory Committee, CUAC, recommendations. Are all of those current? When was that report written?

Mr. Brian Corr:

At the end of the year.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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As we go through this I have to continue to remind myself that there is the CUAC implementation group, which is another layer of bureaucracy, and then Mr. Corr's group assists in the implementation and advises the Minister. That is what it was set up to do, and of course the Central Bank.

Mr. Brian Corr:

Yes.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Recommendation No. 1 states: "Detailed scoping paper submitted to the Central Bank [...] for consideration". Mr. Corr has done all his work. He has done his recommendations. This committee did recommendations, so the Central Bank now has to think about it.

Recommendation No. 2 on the lending limits states: "Detailed scoping paper submitted to the Central Bank in November 2017...". With regard to the steps required it states: "Requires formal consultation by Central Bank, which commenced on 24 October 2018." We have more consultation, chat and so on.

We have the same thing in recommendation 3(a) which states: "Detailed scoping paper submitted to the Central Bank in November 2017", and it has not been introduced. Recommendation 3(b) states: "Remains a matter for consideration by the Central Bank [...]". Recommendation No. 4 states: "Remains a matter for consideration by the Central Bank [...]".

Recommendation No. 6 is on business model development. That has been done because that is the credit union developing itself, with no reliance on the Central Bank or the Department of Finance. That will go ahead; that is grand.

Recommendation No. 7(a) states: "Minister to consider [it]". Recommendation No. 7(b) states: "Minister to consider [if it is necessary]". Any action that was to be taken by the credit unions has been taken but actions that require the intervention of the Central Bank or the Department of Finance will take forever. I ask Mr. Corr to comment on all of that against the backdrop that digital banking has now become extremely popular. N26 and Revolut are participants now in the Irish market and regulated. They are steaming ahead and we are in the dark ages in terms of the credit unions of which I as a member am extremely proud. We are being unfair to the credit union movement in the context of what it could do and wants to do, and the Central Bank and the Department of Finance are dragging their heels. Mr. Corr might comment on that.

Mr. Brian Corr:

On the recommendations, collectively as a group we felt the most important recommendation was in respect of lending. The full review of the lending limits is under way; the consultation has started. The Central Bank took significant account of the scoping paper on that which we issued to it as a group in late 2017. A fair bit of that got incorporated into the consultation, although not everything that the group recommended. In terms of that consultation, each representative body represented here today and other stakeholders - all the individual credit unions - will submit, and many of them have already submitted, submissions to the Central Bank on that consultation. They will raise different issues to those we would have raised collectively as an implementation group.

The group cannot bind individual credit unions or individual representative bodies to one form of progress.

On tiered regulation, which is probably the second most important aspect of the CUAC recommendations, the two-tier tiering that was proposed by the advisory committee was not agreed to collectively as a group. We put forward a tiered regulation paper to the Central Bank and, in a sense, we were saying it should not be the two-tier regulatory framework and should be something different, which is tiering in the regulations, and for it to be revisited if the Central Bank does not deliver that. However, the Central Bank is delivering a portion of that at the moment.

We called out the third recommendation, which the Central Bank did not progress. I said in my opening statement that the group and the advisory committee were disappointed that it did not bring in a form of service level agreement between the credit unions and the Central Bank, which was the original recommendation. That is definitely called out.

In regard to recommendation 3(b) on consultation and engagement, which is tied to regulatory impact analysis in consultation papers, the group felt there was satisfactory progress by the Central Bank. While there was definitely room for improvement, there was satisfactory improvement.

The next item concerns governance, where no action was specifically required of the implementation group, although we reviewed the issues. On restructuring, the Department of Finance has committed to doing a review of restructuring cases and mergers after a significant period of, say, several years for those to be embedded, which will mean a review in 2020 or 2021. That is the action being taken in that regard. With regard to the interest rate ceiling, as the committee knows this is a legislative chain so it has to go through the legislative process. I cannot pre-empt the views of Cabinet in regard to approval for heads of a Bill but that is progressing and, assuming it is all approved, it will come to the Oireachtas.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Can we hear from the credit union movement? What I am hearing, and what we have heard all along in this regard, is one body blaming another or spreading the blame, as it were, for poor delivery on the recommendations either by this committee or by CUAC. As Senator Kieran O'Donnell asked, in the face of all of the business model changes that are taking place in banking, in particular digital banking, where are the credit unions going to be when that completely runs them over? Mr. Corr has answered for the Department of Finance and has given us a view on the Central Bank and some of the issues. What has the credit union movement to say about that? Its members are getting frustrated as well.

Mr. Ed Farrell:

If we step back to the Chairman's opening observation, in the summer of 2015 the then Minister proposed to take 95% of the rule-setting away from the Minister, the Oireachtas and the Department and move it to the Central Bank. We fought that at the time, unsuccessfully, and these reviews came out of that. Since January 2016 some 90% to 95% of all the rules around credit unions are set by the Central Bank and policed by the Central Bank. That is why most of what is in these reports are recommendations or opinions, given it is the ultimate discretion of the regulator to act upon, not to act upon, to act upon quickly or not to act upon quickly.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Corr, in his remarks, said the credit union movement could not agree on certain things.

Mr. Ed Farrell:

I think that was on tiered regulation, when it came back from an earlier commission. Back in 2012 there was talk-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is it a fact you cannot agree? Is that it?

Mr. Ed Farrell:

What was agreed to in the end was a different version of tiered regulation - it was the tiering within each one. It was a good-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Therefore, you have agreed to it.

Mr. Ed Farrell:

Yes. It was a different tiering eight years later because time had moved on. I do not think Mr. Corr was saying that disagreement led to delay.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I am not trying to catch anyone out. I just want to establish where all of this is at. The committee has gone over the arguments repeatedly. I believe we gave this fair time out of our interest for credit unions and we wanted to see some progress. I know Mr. Corr said some progress had been made. However, the report in front of us refers repeatedly to further consideration by the Central Bank. When in the name of God is it going to make up its mind? Will the credit unions be out of business? Will digital banking have taken over by the time they get to the point of actually opening up the doors fully for business? Who is going to answer that question?

Mr. Kevin Johnson:

We all share the frustration at the lack of pace. The work the group did, particularly on the high priority area of lending, has resulted in the consultation paper from the Central Bank. While we did move away from the CUAC recommendation of a two-tier system to having the tiering captured in each of the regulations, we were very much at one in our concern on the restriction of our activities. Some principles were set out such as, for example, that no credit union should be restricted from services or limits they currently provide. However, the consultation paper that was issued on lending actually does row back and restrict some of the activities we currently provide, so we do have concerns. Similarly, we do not see reflected the proposal for the automatic inclusion in a higher tier for credit unions of a certain size and risk profile. As Mr. Corr said, the recommendations from this group on the tiered regulations, to be fair to the Central Bank, came in after it had published its consultation paper on lending. If we see the feedback statement and the proposed regulations on lending reflecting the very positive move regarding the asset bases and reflecting the principles of tiering that are recommended, then we will have made significant progress.

To address the Chairman's comments on the digital side, this is something we have got on with ourselves and quite a bit of work has been done from the perspective of realising that perhaps we were not reaching out to a segment of members by not using these channels. We now have a situation where a number of credit unions have in excess of 20% of all their lending coming through digital channels. We are making good progress, just to reassure the committee.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is the first I have heard of it. I go back to my original point. I am tired of reading reports that essentially say the same thing at the end, and it goes on for another year. I want to be helpful to the credit unions. Can the credit union representatives give us in writing a note on where they are with the things they consider to be essential for the credit union movement? If it is a hold-up on the credit union side and they cannot find agreement, tell us that. On the other side, if it is a hold-up with the Central Bank or the Department of Finance, tell us that. Senator Kieran O'Donnell has obviously done his homework in regard to this report and the questions he was asking, and his expression of frustration is felt by every member of the committee.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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It is genuine.

Mr. Kevin Johnson:

It is shared.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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We want the credit union representatives to give us a report on where they believe all of this is at - not from the Department of Finance, not from the Central Bank, but from the credit union representatives. They should tell us where they are at, what they want and who is holding it up, and be truthful.

If they do not, we will be here next year and they may lose their audience in that time. Like Senators Conway-Walsh and O'Donnell, we want to help but all I see here are various obstacles and reports. I am not one for that. I believe that if a business has to make a decision overnight and someone is holding up that decision process, the business should tell us who it is so we can ask that person. While Ms Byrne was part of the witnesses' group, she is not here today because of the issue of the independence of the Central Bank. I accept that it is independent, but if a person is part of a group, he or she is part of a group. I intend, with the approval of members, to have a further engagement with the Central Bank on this issue. I would like to have that comprehensive document before the members in order that we can clearly understand it. Senator Kieran O'Donnell asked a question about public banking. The credit unions are the nearest thing to public banking that I can see but they are not quite there. There seems to be an intention to stall that process. Maybe it is to protect the banks or maybe there is a vested interest somewhere along the line. Why can other countries do it if we cannot, when we have a perfect model here to do it? The question of why was asked. The answer is contained in the witnesses' report. It states how the Government would “thoroughly investigate the German Sparkassen model for the development of local public banks that operate within well-defined regions". The report also states "The results of the investigation into local public banking indicate that, given the current demand for and supply of credit, there is not a compelling business case for the State to establish a new local public banking system". It is clear that the State has no interest and that some other players will have to step up to the plate here. Everyone is looking to the credit unions, the post office and so on. In light of the Government saying that it has no interest in it, will the witnesses tell the committee where they will now go with this model of banking? It seems that for every step they take, there is an obstacle in their way to prevent them from becoming anything like a public banking system.

Mr. Tim Molan:

I thank the Chairman for his invitation. We will certainly take him up on that. There are areas that need to be addressed. There also has to be a realisation that we are independent businesses. We have a different business model, in that we are owned by our members. The level playing field was referred to earlier. There is a less than level playing field here. We play against the hill in this regard, as the way in which regulations apply to other financial institutions, non-financial institutions and credit unions is different. There are practical elements of the Credit Union Act about which we will revert to the committee. Not only do the bodies here share the committee's frustration but members share it too. The Chairman mentioned digital banks such as N26, Revolut and so on. If one wants to sign up for that type of service, one can do it online. Many credit unions have that technical capability but the local anti-money laundering, AML, regulations and such seem to be very different when applied to credit unions compared with N26.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Johnson just told us that they are available.

Mr. Tim Molan:

They are available.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Molan seems to be telling us that they are not really available.

Mr. Tim Molan:

The technology is available but there is a difference in the number of hoops that one has to jump through if one signs up for N26 or for a certain credit union.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Has Mr. Molan signed up to similar services to those of N26 and Revolut?

Mr. Tim Molan:

Have I signed up personally?

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Not Mr. Molan. Is it the intent of the credit union to sign up to that type of digital banking? Mr. Johnson seemed to indicate that. Sorry for putting Mr. Molan on the spot but he gave that impression.

Mr. Tim Molan:

The technology is there and is being implemented and rolled out into credit unions as we speak.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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As part of Mr. Molan's note to the committee, he might include some commentary on that so that we can clearly understand where we are.

Mr. Kevin Johnson:

To clarify, I spoke specifically about how in the case of a number of credit unions, more than 20% of their loans are handled via digital channels. The Chairman gave examples of different services. They are not loans. We are not necessarily talking about like for like-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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We are talking about the services.

Mr. Kevin Johnson:

Yes. We just launched a customer relationship management, CRM, platform, which a group of credit unions is sharing. That will allow them to plug in further digital enhancements to make things like online applications, member onboarding and such very seamless.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Will Mr. Johnson provide us the information in a note?

Mr. Kevin Johnson:

Of course.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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My last puzzle relates to the money that the credit unions have to invest. I have been advocating spending the credit unions' €7 billion on social housing, as has every other Member, and nothing has come out of it. Another figure was mentioned today of €14 billion. We now know why the credit unions cannot invest directly in recognised housing agencies and why there is no investment in that vehicle we were talking about in the context of a bigger investment at a national level. Where is the €14 billion and where is the €7 billion?

Mr. Kevin Johnson:

One is investments.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is the €14 billion in investments?

Mr. Kevin Johnson:

The €14 billion is savings that members have in their credit unions.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is the €7 billion invested in Irish banks?

Mr. Kevin Johnson:

Yes, it is part of their investment portfolio.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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The credit unions cannot touch it. There is no national structure-----

Mr. Kevin Johnson:

There is no alternative.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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There is no alternative borrower. It could be used and the Government has not provided the platform for it to be used in an efficient way to deliver social housing.

Mr. Kevin Johnson:

As I mentioned earlier, the investment regulations were amended last February to allow a certain percentage to be put into a fund for social housing purposes. That would be a little over €700 million. That has not come to fruition for other reasons.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Johnson states that the other reasons are that the demand was not there.

Mr. Kevin Johnson:

The tier 3 approved housing bodies are the only ones that we could deal with and their classification changed a month after regulations came in for us.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Is that through EUROSTAT?

Mr. Kevin Johnson:

Yes. All of their funding, irrespective of the source, is now regarded as on balance sheet.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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There is no other way in which the credit unions can engage with the Department to spend more than the €700 million in a different way that would allow them to do it for social housing and such that it would not appear on the balance sheet of the Government.

Mr. Kevin Johnson:

Not the last part, but as to the first part of the Chairman's comment, I believe there are other ways in which we can provide the funding, through direct lending.

We provided the committee with a draft enhancement to the Credit Union Act to facilitate that on a previous occasion. We can provide that in the documents.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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We would appreciate that. Why is the public services card not recognised as a form of identification for people who have not other means to identify themselves?

Mr. Tim Molan:

Our latest information is that the public services card could be used on a voluntary basis by the member if the member volunteered it and if the Act had been commenced. However, the Act was never commenced. I do not know why that is the case, but it is creates a severe disadvantage for many people.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Does Mr. Molan have any idea why the Act was not commenced?

Mr. Tim Molan:

Being honest-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Has the person responsible within the credit union written to the Minister to ask why it has not been commenced?

Mr. Tim Molan:

We keep receiving a standard response, saying that members can volunteer the public services card, if the Act is commenced, but that we cannot ask for it. We have not-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Can we have a chat-----

Mr. Brian Corr:

I will revert to the Chair with a short note.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is this the same short note that Mr. Molan has been talking about?

Mr. Brian Corr:

No. I will confirm the details. It has been discussed in the task force I mentioned in terms of the personal micro-credit loan. I understand it is a piece of legislation which is under the Department of Justice and Equality rather than the Department of Finance or the Department of Employment Affairs and Social Protection, which run the "It makes sense" scheme. I will confirm that for the committee.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Corr should telephone the person in the Department of Justice and Equality to find out the answer. As legislators, we can then raise the issue on the floor of the House. Nothing infuriates me more than this kind of thing. People are really suffering, and want to have membership of a credit union because of their financial circumstances.

Mr. Brian Corr:

I will do that.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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The money being collected in local family resource centres is being collected from a number of different individuals and then is brought to the credit union and lodged. Why is there a question mark over that?

Mr. Brian Corr:

I did not bring a note on that, but-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I am not pinning all these questions on Mr. Corr.

Mr. Brian Corr:

I understand that it is tied to the issue of money laundering. The credit union that takes the deposit has to know where that deposit is coming from, and there is an issue there because it is collectively coming from many different people.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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We are not talking about large sums of money.

Mr. Brian Corr:

I appreciate that, but that is what I understand to be the case.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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We are applying the issue of money laundering to people who attend the family resource centre on a Friday night and give in the few euros they have left over . They are being prohibited from doing that. Nobody is answering. Can somebody tell me whether that is right or wrong?

Mr. Kevin Johnson:

I am not saying that it is prohibited, but-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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"Prohibited" is the word to use; people cannot do this.

Mr. Tim Molan:

Under anti-money laundering legislation, particularly the application of the regulations and the way it affected staff, one has to be able to show the full source of funds. In practical terms one of the outcomes from that is that credit unions are finding it easier not to-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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If I go to my credit union having just collected €50 from ten different people and tell Mr. Molan that the money has come from Mary, Joe and Anne, and tell him to put the money into the specified account, is that not acceptable?

Mr. Tim Molan:

It will vary from credit union to credit union, but when it comes to a regulatory inspection, which does not come from the registrar's side but rather the anti-money laundering side, one has to be able to show that due diligence was carried out.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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If I gave Mr. Molan the names of the ten people I got the money from and asked him to put it in a specified account for that purpose, is that sufficient for the bureaucrats and the regulators?

Mr. Ed Farrell:

The named people would all have to be members, in theory. If the ten people were members in their own right and the credit union had their passport details already-----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Those people are not members at the moment, are they?

Mr. Ed Farrell:

If the account is for the Molan family it is very hard for him to do it right. If the account says "Tim and Anne" and the documentation has already been received from the ten people, it is easier.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Farrell will be able to tell us where that regulation is written down; it would benefit the members of this committee.

Mr. Tim Molan:

This reflects the fact that the practicalities of regulations mean that we are caught between a rock and a hard place.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I understand that, but I just want to get to the bottom of this. Does Mr. Molan believe his sector is over-regulated by the Central Bank?

Mr. Tim Molan:

The word "proportionate" is very important.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Molan might put that word into his report and see if the issue can be explained to the powers that be.

Senator O'Donnell referred to micro-finance. The credit unions were set up for that purpose in the first place. I call it the penny bank. Do the witnesses feel that there is an obligation or a corporate social responsibility to carry some of those accounts? The credit unions might only make €35 a year, but it might keep a person away from the money lenders. Mr. Molan has explained that issue. The credit unions do not mind doing that.

Mr. Kevin Johnson:

Credit unions have always done that.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I want to make that point clear.

Mr. Kevin Johnson:

There should not be any misunderstanding. It is not a matter of making €35. It is simply an effort to minimise cross-subsidisation and recouping some of the costs. Credit unions have always done that.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Molan mentioned the ability to recommend business to another credit union. Are credit unions not allowed to do that?

Mr. Tim Molan:

No.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Why is that?

Mr. Tim Molan:

The problem relates to common bonds. We can recommend business to banks and other financial institutions, but cannot recommend it between credit unions.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Whatever Mr. Molan does he should not do that.

Mr. Tim Molan:

It is an important and practical thing. There is a legitimate space for a credit union with €10 million, €15 million or €20 million in a particularly localised community. I know that there is relativity to asset size and other factors, but there should not be a situation where someone walks into a credit union which has only €15 million in assets and asks for a substantial amount. We might know that a credit union 20 miles away can do it. The market in Canada and the USA has a secondary market, where the €15 million credit union can actually take the application, process it and hand on the actionable part of it to credit union X further along the way.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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It is called public banking.

Mr. Tim Molan:

Those are some of the things we need to address.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Did Mr. Molan say that issue arises as a result of the common bond?

Mr. Tim Molan:

Yes, that is one of the-----

Mr. Kevin Johnson:

The credit unions are owned by the members.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is that a Department of Finance issue? Can that be changed?

Mr. Brian Corr:

It is not for me to say it can be changed. I can talk about what we did collectively as a group. We reviewed this because the advisory committee recommended exactly what Mr. Molan has outlined and it recommended that credit unions should be able to introduce business to other credit unions.

As a collective we did not fully agree. Therefore the recommendation, and I know that the Chairman does not like these, is that further consideration is required.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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No, I do not mind a recommendation if something is going to be done about it.

Mr. Brian Corr:

We just did not get to a firm conclusion.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Why?

Mr. Brian Corr:

I think it was caution over -----

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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No, the Chairman is asking a specific question. This is like extracting teeth. We want to help here but we are being stonewalled. The Chairman asked a very simple question. Mr. Corr is saying there was not agreement as a collective. Let us break it down. The credit unions clearly wanted it to change so who did not want to allow the referral system from one credit union to another? Who said "No"?

Mr. Tim Molan:

The concept of common bond is important.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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I accept that.

Mr. Tim Molan:

It has implications. By their nature credit unions are restricted bodies and operate to a restricted market. The main caution was that if we diluted the concept of common bond in any way it might open some form of restriction.

When one looks back, there are credit unions whose common bond is the island of Ireland. There is potential for movement on the question and to expand the lending base and, more importantly, to expand the service base.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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However, it is still possible to preserve the common bond. Some common bonds overlap. Say I live in an area and go to a local credit union. It does not have the capacity to service that loan and it could make a referral. That is only an extension of the bond.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is the Senator saying that the credit union can do a referral?

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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No, I am speaking about if they were allowed to do a referral.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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Would Mr. Molan agree that a referral would be a case of a credit union muttering under their breath, "We can't do it but yer man------

Mr. Tim Molan:

We want to be able to do the thing openly. Say someone was not living in the larger credit union's area, there could be a difficulty. We do not want to be doing this behind -----

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I must go to a vote.

Mr. Brian Corr:

For some time we have advocated that credit unions be able to refer to each other. Our view is from a consumer perspective that no one should be deprived of the full services of a credit union.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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In our discussions this morning, we must also consider the staff on the front line. Some of them are terrified that they will do something wrong in relation to the regulation. I am not talking about every credit union or my own credit union, but sometimes if members ask a question they might be met with a period of silence where one can almost hear the cogs rolling as the member of staff wonders if this or that regulation applies. It is not right. As a collective, it is up to the credit unions to make it right. Making it right might not be in the capacity of the credit unions themselves but it could be through telling this committee the truth of the matter as to who is holding the process up and what is being held up. They should describe the obstacles.

I agree with Mr. Molan that there are other lenders who do not have any regulation whatever and get away with it. At the other end, there are the banks which get away with everything. I do not know what the credit unions are doing wrong. If the representatives here will tell us exactly what the truth of the matter is, the committee can take it up with the Central Bank or the Department of Finance. However, they need to tell the committee what they want done.

Mr. Kevin Johnson:

That is a good challenge to put to us. We are trying to strike a fair balance. We want to ensure that we are regulated properly and to adhere to those regulations.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I know that is what the credit unions want to do but consider their members. They find it so difficult to understand all this nonsense when all they are trying to do is keep their head over water in terms of getting a loan, paying it back and so on. My own credit union was fined recently. It was horrendous. What the Central Bank did was nonsense and it should be ashamed. It should be encouraging credit unions rather than doing what it did. Mr. Johnson will give us that report.

Mr. Kevin Johnson:

Sure.

Senator Kieran O'Donnell took the Chair.

Photo of Rose Conway WalshRose Conway Walsh (Sinn Fein)
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Since the restricted bond is such a big issue it was surprising that the implementation body did not make any specific suggestions on what needed to be done. It was observed that it was restrictive but no recommendations were made. That is what the Chairman is seeking because it does represent a barrier and fails to put the consumer at the centre of things. It goes against the whole ethos of credit unions.

Mr. Kevin Johnson:

That is correct. For all those reasons we want to see this happen. That said, we are very cognisant of the value of the common bond and what it means. The report mentions that this would be an enhancement to it. The report also says that while this group's work has concluded, the group will continue. These are the types of issue that we would like to see through to fruition.

Photo of Rose Conway WalshRose Conway Walsh (Sinn Fein)
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We see the evolution but it is not fast enough and it is not pertinent enough. There are so many external factors such as Brexit, China, Italy, a trade war in America and the end of quantitative easing. In the context of the cumulative effect of all those factors, we need the credit unions to have as much flexibility as possible in order to adapt to the needs of their consumers who trust them. We need to trust the credit unions. The Chairman's suggestion that we would know specifically what we need to do was very good. We cannot keep having the same conversation over and over again, although we accept things have evolved somewhat. We also need to hear the truth about the relationship with the Central Bank and the Department of Finance. The committee is here to help but we will run out of road in terms of its work, what it needs to focus on and the progress we need to make.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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I would add that when the credit unions send back the report to the committee that as well as addressing the issues, they might also address the solutions, that is the actions that should be taken to enable us to get to the desired point. The committee is here to help.

I meant to ask earlier if any credit unions are in trouble in terms of restructuring at this stage? I am looking to get to a point where the credit union movement, as an entire body, is in good nick. The Charleville credit union is a recent example but are others in trouble and require restructuring, being merged or whatever? It is a hard question but it is important.

Mr. Brian Corr:

Very few credit unions have low reserves currently. The Central Bank published data on this recently. Generally, arrears have been trending lower. Capital levels have been trending higher. Liquidity has been pretty -----

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Are further amalgamations or mergers proposed?

Mr. Brian Corr:

There are. Last week, the Central Bank registrar gave a speech at a conference. We can confirm these figures but in his speech, he said there were 16 mergers last year and that there are 16 in the pipeline for 2019.

Out of a scale of about 260, there are 16 in merger discussions expected in 2019

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Does Mr. Farrell anticipate mergers will continue or that they will conclude?

Mr. Ed Farrell:

The numbers are reducing but I do not see the issue coming to an absolute conclusion. There were 16 mergers last year and there will be 16 more this year. There might be a dozen next year. Certainly, the number of credit unions will be down from 400 to 200. If one checks the American, Canadian or Australian experiences, to which we alluded earlier, there were 26,000 credit unions in the United States but now there are 6,000. If it trends along those lines, I do not see it ending but progressing at a slower rate.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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What would be the critical mass for the credit union movement to be a sustainable model? Would it be 200 or 150?

Mr. Ed Farrell:

Again, they are all individual entities owned by their members. One does not add them together to get sustainable or not. Each of them makes those decisions. As Mr. Corr said, if there is a handful or half a handful of low reserves, they are sustainable. However, for local reasons, the boards and members have agreed to merge with a neighbouring credit union in more than 100 cases in recent years. It was not necessarily because they were not sustainable but maybe to access better services, not least because of the common bond issue.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Has the credit union movement considered putting a proposal to the Department of Finance and the Central Bank on a specific public banking hybrid model? I am not necessarily referring to the Sparkasse model which is the one everyone quotes. I am more interested in the services it provides as distinct from its structure. Credit unions continue to be separate independent entities but have an unrivalled network. Ireland is a small country but we have this fantastic community-based model of credit union throughout the country. In my dealings with credit unions I have been quite amazed by their members’ loyalty.

Mr. Ed Farrell:

The population base of Germany can be divided by a factor of ten or 15. The public banks are owned by the German Government. The public banks here – the credit unions – are owned by their members.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Has the credit union movement considered-----

Mr. Ed Farrell:

We are the model. We do not see any much difference in that the credit unions are the public banks. The difference is ownership.

Mr. Kevin Johnson:

We have discussed this collectively and have attended various committees on public banking. On all the strengths people see in a public banking model, we believe the foundations of this are in the credit union movement.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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I agree with that.

Mr. Kevin Johnson:

It is a case of not trying to create something new but how one gets those services through the credit union system.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Is it the case that the credit unions are looking at evolving the current system to a point where it is providing services?

Mr. Kevin Johnson:

When one considers the past five years, we have focused on strengthening the governance and prudential management of credit unions. Now we are focused on how we take that strength. We have financial and competency strengths. The point now is how we start to deliver more for people and ensuring everyone can access it.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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Would it assist the credit union movement if it put forward a proposal that there is a need for certain changes to ensure enhanced services to fill the public banking gap? These changes could be around the bond, for example. The problem is that this issue has been over and back. What changes does the credit union movement require to enable it to provide a range of modern financial services at a local level?

Mr. Tim Molan:

I get the feeling Senator Kieran O’Donnell is more interested in outcomes than in terminology.

Mr. Tim Molan:

There are ways which could assist us but it will mean legislative changes. For example, the whole use of CUSOs, credit union service organisations, can be harnessed and done in a responsible and regulated way. There are ways in which that has been done successfully in other jurisdictions. We will reflect that in our submissions to the committee.

Photo of Rose Conway WalshRose Conway Walsh (Sinn Fein)
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There are other jurisdictions which have successful models of public banking which sit alongside the credit union movement. The committee will continue to pursue this. While the Government is reluctant to examine it, I hope it will be implemented at some stage.

Mr. Brian Corr:

On local public banking, the report from the Department of Finance came out last year. One of the outcomes of that was a recommendation that there be an independent evaluation of local public banking. My understanding is that the procurement process for the independent evaluator is complete and will be announced in the next few weeks. The terms of reference for that independent evaluation have been agreed. Credit unions are specifically referenced as one of the potential delivery mechanisms for local public banking. It is hoped the successful roll-out of debit cards and current accounts to a good proportion of credit unions this year, the extension of the mortgage lending limits and some further work credit unions are doing behind the scenes on SME lending will get us a fair bit of the way towards where we consider the services of public banking are provided by the credit unions.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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With all due respect, we cannot expect the credit union movement to step into that space while tying its hands behind its back in terms of the services it can provide. That is where the committee steps in. Mr. Molan encapsulates what I am about. I am all about outcomes. I have dealt with the credit union movement both as a member and an accountant. I want it to step into that space. Will a copy of the independent evaluation be provided to the committee on its conclusion?

Mr. Brian Corr:

I am not sure if it is a final report or what the process is. I will confirm what it is and I suspect it will be announced in the next several weeks.

Photo of Kieran O'DonnellKieran O'Donnell (Fine Gael)
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I thank all of the members and witnesses for their attendance. It has been a long day but productive day.

The joint committee adjourned at 1.20 p.m. until 2 p.m. on Tuesday, 5 February 2019