Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

As the Deputy is aware, credit unions are regulated and supervised by the registrar of credit unions at the Central Bank which is the independent regulator for credit unions. Within his independent regulatory discretion, the registrar acts to support the prudential soundness of individual credit unions to maintain sector stability and protect the savings of credit union members. Section 32D of the Central Bank Act 1942, as amended, provides that the Central Bank of Ireland may, with the approval of the Minister for Finance, make regulations prescribing an annual industry funding levy to be paid by regulated financial service providers to the Central Bank of Ireland. The industry funding levy is not specific to credit unions and there is no requirement under the regulations for the Minister for Finance to consult the Credit Union Advisory Committee, CUAC.

Since 2004 the amount of the industry funding levy payable by each credit union has been capped at a rate of 0.01% of total assets. Consultation paper 95, Joint Public Consultation Paper - Department of Finance and the Central Bank of Ireland - Funding the Cost of Financial Regulation, CP95, was published in 2015 and set out proposals to move from partial industry funding of financial regulation towards full industry funding, noting the proposal set out in an earlier consultation process conducted by the Central Bank - CP61, Consultation on Impact Based Levies and Other Levy Related Matters - to move credit unions to fund 50% of the cost of regulating the credit union sector. Importantly, the Central Bank's feedback statement on the consultation process for CP61 noted the feedback received from the credit union representative bodies.

In its Funding Strategy and 2018 Guide to the Industry Funding Levy the Central Bank set out its intention to increase the proportion of financial regulation costs for industry to increase the overall recovery rate and address funding gaps in specific areas of the Central Bank's regulatory activities, with a view to achieving full industry funding in the medium term. In terms of credit unions, the Central Bank set out an initial target of 50% to be implemented on a phased basis by 2021 to 2022. The Minister for Finance, having taken into consideration the unique and important role credit unions played, recommended to the Central Bank that credit unions be provided with a specific exemption from the 100% target. It is the only part of the financial services sector to have such an exemption. Instead credit unions will be set a target of 50% by 2021 to 2022. It is projected that it will be recovered from credit unions on a phased basis, with recovery rates to increase to 20% of the costs of regulating the credit union sector for the 2019 levy cycle, 35% for 2020 and 50% for 2021. Credit union recovery rates from 2022 onwards will be subject to review and a public consultation process to guide strategy once 50% recovery rates have been achieved. The Central Bank has advised that the increase in the proportion of funding to be provided by the credit union sector relates to the estimated cost of regulating the sector. In contrast, the main Irish banks have been subject to 100% of financial regulatory costs since 2012.

The Deputy may be interested to note that the Department of Finance, in collaboration with the Central Bank, has now issued a public consultation paper on potential changes to the credit institutions resolution fund levy which is expected to reduce materially from 2020. The consultation paper is available on the website of the Department of Finance and open to all persons. The deadline for the receipt of submissions is Friday, 9 August. Once the deadline for submissions has passed, the Department, in collaboration with the Central Bank, will consider the feedback received as part of the consultation process prior to finalising changes to the resolution funding regime for credit unions. Following on from this, a statutory instrument will be published in October detailing the 2020 resolution fund levy for credit unions.

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