Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:"notes that:

— the Government has a clear policy to support the strategic growth and development of credit unions in Ireland as set out in the Report of the Commission on Credit Unions and its recommendations;

— the safety of members’ savings and the security of the credit union sector as a whole are priorities for this Government; the Government recognises the important role of credit unions as a volunteer co-operative movement in this country and also the importance of getting lending going in the economy;

— this Government has put in place a number of measures to ensure that credit unions can continue to provide vital services to their members and to ensure the stability of the sector into the future;

— this Government established the Commission on Credit Unions; the commission reviewed the future of the credit union movement and made recommendations in relation to the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect members’ savings and financial stability;

— in particular, this Government has accepted fully the report of the Commission on Credit Unions and its recommendations; the report of the Commission on Credit Unions made a number of recommendations regarding the strengthening of the regulatory framework for credit unions; the Commission on Credit Unions also recommended that regulation making powers be delegated to the Central Bank of Ireland, CBI;

— the commission participants agreed to the recommendations; the membership of the commission included members of the credit union representative bodies and other stakeholders;

— over 60 recommendations from the report of the Commission on Credit Unions have been implemented in the Credit Union and Co-operation with Overseas Regulators Act 2012 - the 2012 Act;

— it was agreed at that time that it would be neither practical nor feasible to commence the 2012 Act in its entirety in one fell swoop; following on from that, an implementation timetable for the 2012 Act was devised in consultation with stakeholders, including credit union representative bodies;

— commencement of all sections of the 2012 Act has been aligned with the credit union financial year and the introduction of the underpinning CBI regulations, with a view to implementation of the 2012 Act in a coherent and cohesive manner; this has provided credit unions with the time necessary to ensure that the required processes and procedures are in place prior to implementation of each tranche;

— the Registrar of Credit Unions at the CBI is the independent regulator for credit unions and the setting of regulations in relation to the credit union sector, including those set out in the CBI consultation on regulations for credit unions on commencement of the remaining sections of the 2012 Act, CP88, are a matter for the registrar;

— the Registrar of Credit Unions has completed a full consultation process in relation to CP88;

— as part of the consultation process the Minister for Finance proposed that in the interests of clarity and fairness, credit unions are provided with details of the process of applying for a retention of savings above the limit amount;

— through the setting of regulations, ongoing supervision of the sector and consultation with stakeholders, the Registrar of Credit Unions acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members;

— it is the Minister for Finance’s intention to commence the remaining sections of the 2012 Act on 31 December, 2015 in line with the introduction of the regulations by the Registrar of Credit Unions; these sections of the 2012 Act, when commenced, will replace, amend or supplement existing sections of the Credit Union Act 1997;

— the Minister for Finance has been informed by the Registry of Credit Unions that all credit unions have been contacted giving further information on its application criteria for the retention of savings in excess of €100,000; the Registry of Credit Unions intends to engage with the representative bodies and to invite comments from them prior to finalisation of the application process; where a credit union has demonstrated that it meets the criteria, it will be in a position to retain members’ savings in excess of €100,000 held at the commencement of the regulations;

— the CBI has also informed the Minister for Finance that it is committed to undertaking a review of the continued appropriateness of the savings limit, once the impact of the restructuring process can be assessed;

— over 99% of credit union members will not be impacted by the €100,000 cap on member savings;

— the Minister for Finance recognises the concerns of the credit union movement in relation to the savings limit of €100,000;

— the setting of the savings limit of €100,000 and other matters contained in CP88 are a matter for the Registrar of Credit Unions;

— the Minister for Finance has met with the credit union representative bodies in November 2015 and the perceived impact of the new regulations was discussed and further follow-up meetings between the Department of Finance and the representative bodies will take place this week;

— at the meeting with the movement, the Minister for Finance has asked the representative to revert with their specific concerns and has committed to communicate these concerns with the Registrar of Credit Unions;

— the need for credit unions to grow income has been recognised as a requirement for sector viability; while developing new products and services is a necessary element of this, the CBI has highlighted the importance of credit unions ensuring that they are in a position to grow their income from their traditional lending business; the CBI has informed the Minister for Finance that since 2010 it has received less than ten applications for approval of additional services under sections 48 to 52 of the Credit Union Act 1997; these applications have all been received in recent months and are currently at a various stages of the approval process;

— the CBI has informed the Minister for Finance that it has invited a number of interested parties in the credit union sector to participate in focused dialogue in November 2015 with a view to gaining a better understanding of how credit unions want to develop their business model and to identify changes that may be required to the regulatory framework to facilitate prudent development;

— credit unions are not prohibited from providing mortgages to members; mortgages are subject to the maturity limits contained in section 35(2) of the Credit Union Act 1997; the CBI issued a feedback statement on CP88 and the regulations in July; the regulations which are due to commence on 31 December 2015 contain a specific section on lending, under these lending regulations credit unions can continue to provide mortgages;

— the Government established the Credit Union Restructuring Board, ReBo; to date, ReBo has assisted with 36 mergers involving a total of 74 credit unions; in total, 189 credit unions are engaged with ReBo at varying stages of the restructuring process;

— a review of ReBo was conducted this year; the Minister for Finance announced 31 March 2016 as the final date for acceptance of any further restructuring proposals; this will enable ReBo continue to engage with the sector and complete the performance of its functions within its time-bound mandate;

— the current Credit Union Advisory Committee, CUAC, was established in September 2014 for a period of three years to advise the Minister for Finance regarding the improvement of the management of credit unions, the protection of the interests of members and any other matters the Minister may seek the advice of the committee on;

— CUAC has met with all credit union representative bodies and other stakeholders since it was established; a recent meeting was held between the CUAC and the representative bodies and the perceived impact of the new regulations was discussed;

and

— Department of Finance officials have engaged with the Department of the Environment, Community and Local Government regarding credit unions involvement in social housing initiatives; a meeting is scheduled between the two Departments to discuss credit unions involvement in social housing initiatives.”

I welcome the debate. I have much to say to Deputy Calleary and I am sure he will not consider my words to be merely soothing. I and every Deputy in the House knows the importance of the credit union movement and my family has relied on the credit union movement on many occasions. My words are not meant to be soothing and this debate should not be reduced to any sort of partisanship. I hope this debate and the ongoing engagement that the Government and all parties are having with the credit union movement can be about the best outcome possible and ensuring that the credit union movement can continue to play its very vital role in providing access to credit and other important services in local communities throughout the country. Credit unions are an integral part of communities across the country and, as Deputies have correctly stated, they provide a unique range of services to their members. The Government is fully committed to supporting the credit union sector and has put in place a number of measures to ensure that credit unions can continue to provide these vital services to members and to ensure the stability of the sector into the future.

Some of these measures include the establishment of the Commission on Credit Unions, the publication of the Credit Union and Co-operation with Overseas Regulators Act 2012, the establishment of the Credit Union Restructuring Board, ReBo, and the establishment of the current credit union advisory committee in September 2014. Only this week we have seen the sort of initiative that Deputy Calleary rightly seeks, a personal micro-credit initiative in collaborations with the credit unions, An Post and the Department of Social Protection. This is to help the very people we speak about, who need access to loans, so as to keep them out of the arms of moneylenders. It is a good scheme and I am sure it will be welcomed by all Members on this side of the House.

The safety of members' savings and the security of the credit union sector as a whole are priorities for this Government and the Minister for Finance. I know they are priorities for everybody in the Gallery, credit union directors, volunteers, staff and members. The Minister has on a number of occasions highlighted the Government's recognition of the important role of credit unions as a volunteer co-operative movement in this country and also the importance of its role in getting lending going in the economy. I reiterate that acknowledgement and recognition this evening.

Credit Unions provide a unique and trusted service to their members. The Government has a clear policy to support the strategic growth and development of credit unions in Ireland as set out in the Commission on Credit Unions report and recommendations. This Government established the Commission on Credit Unions in May 2011 to make recommendations on the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect members' savings and financial stability. The commission report was agreed and co-authored by key stakeholders, including credit union representatives. The commission worked intensively over a nine-month period to address and deliver on ambitious terms of reference. The process was a participative one, with wide representation from the credit union movement. The agreed commission report sets out the blueprint for the future viability of credit unions in Ireland, and its constituent elements are interrelated and mutually reinforcing.

Deputies are aware that the commission published its final report in March 2012. The Government fully accepted all the recommendations in the Commission on Credit Unions report and over 60 of its recommendations have been implemented in the Credit Union and Co-operation with Overseas Regulators Act 2012. The legislation contains measures which will reform and strengthen credit unions and deals with four broad areas, namely, prudential regulation; governance; restructuring, including the establishment of the Credit Union Restructuring Board, ReBo; and stabilisation.

The Credit Union and Co-operation with Overseas Regulators Act 2012 provides the statutory basis for the restructuring of credit unions and placed the Credit Union Restructuring Board on a statutory footing from 1 January 2013. ReBo is currently in the process of overseeing and facilitating restructuring on a voluntary, incentivised and time-bound basis and is working towards the timetable set out in the Commission on Credit Unions report, with a view to completing the process in 2016. To date, 74 credit unions have been assisted in ReBo-approved mergers. In total, 189 credit unions are engaged with ReBo at varying stages of the restructuring process, or over half of all credit unions in the country. In October 2015, the Minister announced 31 March 2016 as the final date for acceptance of any further restructuring proposals by ReBo. This will enable ReBo to continue to engage with the sector and complete the performance of its functions within its time-bound mandate. ReBo is available to support any credit union requiring assistance with the application process and such credit unions are encouraged to make contact with ReBo as soon as possible.

With regard to the new regulations for credit unions, let it be clear from the outset that the Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions. Within her independent regulatory discretion, the registrar acts to support the prudential soundness of individual credit unions, maintain sector stability and protect the savings of credit union members. The report of the Commission on Credit Unions made a number of recommendations regarding the strengthening of the regulatory framework for credit unions. The Commission on Credit Unions also recommended that regulation-making powers be delegated to the Central Bank, and therefore it is a matter for the registrar to make regulations and set limits. The Government has no role in setting regulations relating to a strengthened regulatory framework for credit unions in Ireland.

The registrar has completed a full consultation process relating to CP88. A public consultation process was launched in November 2014. Separately, as part of the consultation with the Minister for Finance, he proposed that in the interests of clarity and fairness, credit unions are provided with details of the process of applying for a retention of savings above the limit amount. Before discussing some of the specific issues that have been raised relating to the new regulations, it is important to understand the context of the commencement of the legislation. The Credit Union and Co-operation with Overseas Regulators Act 2012 was signed into law by the President in December 2012. It was agreed at that time that it would be neither practical nor feasible to commence the 2012 Act in its entirety in one fell swoop. Commencement of all sections of the 2012 Act has been aligned with the credit union financial year and the introduction of the underpinning Central Bank regulations, with a view to implementation of the 2012 Act in a coherent and cohesive manner. This has provided credit unions with the time necessary to ensure that the required processes and procedures are in place prior to implementation of each tranche. Currently, it is the Minister for Finance's intention to commence the remaining sections of the 2012 Act on 31 December 2015 in line with the introduction of the regulations by the Registrar of Credit Unions. These sections of the 2012 Act, when commenced, will replace, amend or supplement existing sections of the 1997 Act.

As stated previously, the setting of savings limits is a matter for the Registrar of Credit Unions, the independent regulator. In her feedback following the public consultation on CP88, the registrar stated:

I am aware that during the consultation process the proposal for a maximum individual member's savings limit of €100,000 has drawn a large degree of comment. Having considered the feedback received, the Central Bank is of the view that the limit of €100,000 is appropriate at this time given the stage of development of the sector and the Central Bank's mandate to ensure the protection of members' funds.

As outlined in the Central Bank's feedback on CP88, as part of the consultation process the Minister for Finance proposed that in the interests of clarity and fairness, credit unions are provided with details of the process of applying for a retention of savings above the limit amount of €100,000. The Minister for Finance has been informed by the Registry of Credit Unions that all credit unions have been contacted, giving further information on its application criteria for the retention of savings in excess of €100,000.

The Registry of Credit Unions intends to engage with the representative bodies and to invite comments from them prior to finalisation of the application process. When the application process is finalised, the registry will provide an application form and explanatory notes in order to assist credit unions. It is anticipated that application forms will be available during December 2015. It is envisaged that applications will be accepted in the first quarter of 2016 and that applicant credit unions will be informed by the end of the second quarter of 2016 on the outcome of the process, which is well within the 12-month transitional period. Where a credit union has demonstrated that it meets the criteria, it will be in a position to retain members' savings in excess of €100,000 held at the commencement of the regulations. The Minister for Finance has welcomed the steps that have been taken to provide clarity for credit unions on the criteria for the retention of savings over €100,000 and also welcomes the Central Bank's proposed engagement with the representative bodies to seek their comments on the application process.

The Central Bank has also informed the Minister for Finance that it is committed to undertaking a review of the continued appropriateness of the savings limit, once the impact of the restructuring process can be assessed. It is envisaged that this review will commence within three years of the introduction of the regulations. Department of Finance officials have asked the Central Bank to consider accelerating this review and this is under active consideration by the Central Bank. The Central Bank has agreed to provide regular updates to the Department of Finance on developments in this matter. The Central Bank has informed the Minister for Finance that over 99% of credit union members will not be impacted by the €100,000 cap on member savings. The Minister for Finance and the Government recognise the concerns of the credit union movement in relation to the savings limit of €100,000. However, it must be reiterated that the setting of the savings limit of €100,000 is a matter for the registrar.

The Minister for Finance has met with the credit union representative bodies in November 2015 and the perceived impact of the new regulations was discussed. Further follow-up meetings between the Department of Finance and the representative bodies will take place this week and our counter-motion recognises the fact that these further meetings are due to take place. I welcome this ongoing engagement between the credit union representative bodies and the Department of Finance. At the meeting with the representatives, the Minister for Finance asked the representatives to revert with their specific concerns and has committed to communicating these concerns to the registrar.

The need for credit unions to grow income has been recognised as a requirement for sector viability. At the meeting between the Minister for Finance and the representative bodies, the Minister invited the representative bodies to share any business model development ideas they may have in order to grow income and assist sector viability. I will get to some of them in a moment. The Central Bank has informed the Minister for Finance that it has now contacted all credit unions inviting them to attend information seminars that are currently being held around the country and will conclude at the end of this month. These seminars will provide credit unions with the opportunity to engage with the Central Bank on the new regulations and to discuss development of the credit union business model, including any changes to the regulatory framework that might be required to facilitate such developments.

Separately, the Central Bank has informed the Minister for Finance that following on from the areas identified in feedback received from CP88 and through other engagements with sector stakeholders it is proposed that meetings will be held to focus on the following areas: the services credit unions wish to develop in the areas of card services and payment accounts and credit unions’ aims regarding longer term lending, including further developments on the provision of mortgages to members, which I know is an issue that has been raised by a number of the representative bodies. To commence this dialogue process, an initial meeting with a number of credit union stakeholders, including the representative bodies and a number of credit unions, was held in mid-November by the Central Bank.

The Central Bank has informed the Minister for Finance that since 2010 it has received less than ten applications for approval of additional services under sections 48 to 52 of the Credit Union Act 1997, although I accept the point Deputy McGrath made on this earlier. These applications have all been received in recent months and are currently at various stages of the approval process. Following on from the meeting between the Minister for Finance and the representative bodies earlier this month, the Minister looks forward to receiving proposals that will support and grow income and maintain viability while protecting members’ savings.

Currently credit unions are not prohibited from providing mortgages to members. Mortgages are subject to the maturity limits contained in section 35(2) of the 1997 Act which sets out the percentage of a credit union’s loan book that can be outstanding for periods exceeding both five and ten years, as well as limits on the maximum outstanding liability to an individual member. The Central Bank issued a feedback statement on CP88 and the regulations in July. The regulations, which are due to commence on 31 December 2015, contain a specific section on lending. Under these lending regulations credit unions can continue to provide mortgages. Existing maturity limits that are currently contained in section 35 of the 1997 Act are included in the lending regulations. A maximum maturity limit of 25 years is also introduced in the regulations. The lending regulations also include a large exposure limit on the maximum exposure a credit union may have to a borrower or a group of borrowers who are connected.

The Central Bank considers that credit unions must have appropriate systems, controls and expertise to undertake mortgage lending and is of the view that scale is an important factor in determining whether a credit union can put these in place and offer mortgages as a viable business line. The Government recognises the important role of credit unions as a volunteer co-operative movement in this country and welcomes any initiatives that might enhance the business model while simultaneously ensuring the protection of members' savings.

I am pleased that the financing of social housing is being seriously considered by the credit union sector and I thank the sector for that. Various options are being explored. This is an important issue, which has been highlighted by a number of representative bodies. The Department of Finance has received a number of such proposals. While the Department of the Environment, Community and Local Government is the Department primarily responsible for the formulation and implementation of policy and for the preparation of legislation in relation to housing, Department of Finance officials are working closely with them. A meeting is currently scheduled for officials in both Departments to examine how credit unions can assist in the area of social housing. I look forward to the outcome of these meetings and welcome the proposals that have been put forward.

Section 44 of the Credit Union Act 1997 provides that a credit union may establish a special fund to be used by the credit union for social, cultural or charitable purposes by a resolution passed by a majority of its members present and voting at a general meeting. Where individual credit unions intend to establish such a fund, the Central Bank would expect the credit union to take account of the need to ensure the protection of the funds of its members.

Commencement of the remaining sections of the Credit Union and Co-operation with Overseas Regulators Act 2012 (2012 Act) will replace, amend or supplement existing sections of the 1997 Act. It will, in effect, remove some of the requirements, including limits, that currently exist in certain sections and will provide regulation-making powers to the Central Bank. The power to make regulations in relation to investments in projects of a public nature is specifically referenced in legislation and, therefore, such investments could be facilitated by future regulations, where appropriate, when there are specific proposals put forward by the credit union sector.

The Credit Union Advisory Committee, CUAC, was established on 22 September 2014 for a period of three years to advise the Minister for Finance regarding the improvement of the management of credit unions, the protection of the interests of members and any other matters that the Minister may seek the advice of the committee on. The committee is chaired by Professor Donal McKillop, the former chairman of the Commission on Credit Unions. The CUAC has met with a number of credit union stakeholders including the ILCU, CUDA, CUMA, NSF, Central Bank, ReBo and individual credit unions. On 19 October 2015, the CUAC met with a number of the representative bodies and the perceived impact of CP88 was discussed. The CUAC will continue to be available to meet with credit union stakeholders and advise the Minister for Finance on any other matters the Minister may seek the advice of the committee on.

The Government recognises the important role of credit unions. We want to work with the sector and with all Members in this House in respect of the important role they have, the unique part they play in communities and the role they can play in getting lending going in the economy. The Minister for Finance is always open to considering new proposals in respect of credit unions, particularly those that would see the development of the credit union business model and an increase in income for the sector. All proposals to date have been at an early stage and we await further details as the projects progress and based on the discussions the Minister very recently had with the representative bodies. Credit unions have gone through a period of considerable change since the commission report and the movement has risen to the challenges that has posed. This Government has worked closely with key stakeholders in the credit union movement to reach agreement on the report and recommendations of the Commission on Credit Unions. This Government will continue its ongoing engagement with the movement to ensure the safety of members' savings, to support credit unions to broaden the range of services to members and to safeguard the credit union sector as a whole into the future.

We want strong, vibrant credit unions offering a safe and secure place for members' savings but also being positioned to offer their members a wide range of services including loans and debit card facilities. The credit union movement has emerged stronger than ever before. Many credit unions are now in a position once again to offer dividend payments and interest rebates to their members this year and this is to be welcomed. The regulatory framework has been much enhanced. While I am fully aware of the obligations that the enhanced regulations have on the day-to-day operation of every credit union in the country, I also know that every Member in this House, and every member or director of a credit union recognises their importance not only in protecting members' savings, but also in strengthening the movement, which is at the heart of the new regulatory regime. I look forward to continued engagement this week with the representative bodies and the Department of Finance and I look forward to supporting the continued growth of the sector.

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