Wednesday, 13 March 2019
Credit Union Restructuring Board (Dissolution) Bill 2019: Second Stage (Resumed)
The role of Credit Union Restructuring Board, or ReBo, was to plan for the restructuring of the credit union sector, engage with and assist credit unions in the preparation of restructuring plans, consider and decide on restructuring plans submitted to it by, or on behalf of, credit unions, oversee the implementation of restructuring plans including the provision of post-restructuring support and oversee the operational functions of ReBo. Following on from ReBo's role in the restructuring process, the Commission on Credit Unions recommended that any restructuring proposals must have the endorsement of the ReBo board before being submitted to the Central Bank for regulatory approval, funding requirements should be determined based on credit union assessments and funding should be provided from one of three sources in the following order: excess capital from within participating credit unions, the sector itself, or Exchequer funding on a recoupable basis.
ReBo approached its restructuring work in a methodical manner and, in accordance with the recommendations set out by the commission on credit unions, in June 2015 it stated in its interim report to the Minister that while the initial perception of credit unions was that only small credit unions would transfer to larger neighbouring credit unions, during ReBo's lifetime this perception changed and a paradigm shift occurred whereby credit unions were more willing to engage with the process and were approaching restructuring as a strategic advantage rather than solely as a financial necessity. This change in mindset saw credit unions seeking to restructure so as to grow their business and expand their product offerings.
The final date for restructuring was initially 31 December 2015 but, following the interim section 43 review of ReBo's work in October 2015, the Minister for Finance announced that credit unions wishing to enter a restructuring programme under ReBo would be required to have a high level business case with ReBo and to have received an approval letter from it by 31 March 2016. After that date, no further restructure proposals would be accepted by ReBo. By March 2017, ReBo completed the performance of its functions in accordance with recommendations of the commission on credit unions and in accordance with the 2012 Act. While 210 credit unions were involved in 117 potential restructuring projects, at the end of its operational life ReBo had facilitated and overseen the full restructuring of 156 credit unions in 24 countries under 82 projects with assets of almost €6 billion. This equates to approximately 38% of total credit union assets at that time. Some of the uncompleted projects were handed to the Central Bank for further consideration. In addition to these projects, new restructuring projects have continued to be commenced directly with the Central Bank, demonstrating the restructuring of the credit union sector is continuing post ReBo.
The Government provided €250 million in the credit union fund that was established specifically for credit union restructuring under section 57 of the 2012 Act. However, the Minister was entitled to be reimbursed from the credit union fund from any contribution made from the fund to credit unions for the purposes of restructuring. Such reimbursement would be financed from the recruitment of restructuring support by credit unions that had received such support. Half of ReBo's administration costs were met from the credit union fund and half were met by way of a ReBo levy on the credit union sector. Under the 2012 Act, ReBo could, with the Minister's consent, make regulations prescribing the levy to be paid to it by credit unions and when such a levy would fall due to be paid. In 2014, 2015, 2016 and 2017, ReBo made regulations requiring credit unions to make a contribution towards ReBo's operating costs.
To its great credit, and to the credit of the sector itself, of the €250 million provided to the credit union fund all but approximately €11.6 million was returned to the Exchequer in late 2018. The lower than anticipated spend on restructuring was essentially due to the fact the majority of credit unions participating in restructuring projects financed those projects from within their own resources, as was recommended by the commission. Where there was a shortfall, financial assistance was provided in certain cases by the Irish League of Credit Unions using its savings protection scheme. Combined, this resulted in a much lower cost to the Exchequer than anticipated by the commission. This is a great achievement by ReBo and it is highly commendable that the sector itself provided funding for credit unions to undergo and complete restructuring projects from within its own resources.
As I have already mentioned, some of ReBo's uncompleted projects were handed to the Central Bank for further consideration. In addition to these projects, new restructuring projects have commenced directly with the Central Bank, demonstrating the restructuring of the credit union sector is continuing post ReBo.
When ReBo ceased to accept new applications for assistance, the registry of credit unions at the Central Bank issued a circular and explanatory note to all credit unions advising interested credit unions to engage directly with it to facilitate further voluntary restructuring. The registrar of credit unions also updated the credit union handbook to include information on the restructuring process. While restructuring has continued post ReBo, the pace has slowed somewhat with a total of 34 transferring engagements confirmed, with 19 in 2017 and 15 in 2018. I am informed 16 transfers of engagement are under way and that a number of credit unions that commenced transfer of engagement discussions during the lifetime of ReBo but did not complete a transfer engagement at that time have indicated that a transfer of engagement remains a strategic option under further future consideration.
Restructuring was achieved under ReBo in such a way that the significant funding that it was envisaged would be required for restructuring at the time was largely not needed. It was also commendable that the credit union movement itself provided financial support from within its own resources and minimised the call on Exchequer funding. Completing 82 projects involving 156 credit unions in 24 counties was a huge achievement for ReBo, and even more so when accomplished in such a tight timeframe.
Following the resignation of the board on 31 July 2017, a caretaker board comprising two officials from the Department of Finance, an existing director and the Central Bank nominated non-voting director has been appointed to meet the requirements of the 2012 Act. The caretaker board must remain in place until ReBo is dissolved under the Bill. I look forward to a constructive debate on the Bill, which provides for the dissolution of ReBo to transfer certain functions from the credit union restructuring board to the Minister for Finance to amend the Credit Union and Co-operation with Overseas Regulators Act 2012 and to provide for consequential amendments of other enactments. I commend the Bill to the House.