Thursday, 25 October 2018
Ceisteanna Eile - Other Questions
Credit Union Regulation
6. To ask the Minister for Finance to outline the work his Department has carried out in conjunction with the Department of Housing, Planning and Local Government with regard to the establishment of a special purpose vehicle for credit unions to invest funds in social housing projects; and if he will make a statement on the matter. [43969/18]
Will the Minister for Finance outline what work the Department is doing, and has carried out in conjunction with the Department of Housing, Planning and Local Government, with regard to the establishment of a special purpose vehicle for credit unions to invest funds in social housing projects? Will the Minister explain why nothing has yet been loaned by any credit union for housing? They have the funds and the desire to lend but they believe the Department of Finance is not helping.
A Programme for a Partnership Government recognises the potential role credit unions can play in dealing with our great housing difficulties. To that end, officials from my Department and the Department of Housing, Planning and Local Government have met with the credit union representative bodies on several occasions to examine how credit unions can assist in the area of social housing.
Following this engagement, the Central Bank undertook a review of the investment framework for credit unions in 2017. The outcome of the review led to the introduction of revised investment regulations, which allow credit unions to invest in tier 3 approved housing bodies through a regulated entity. As such, since 1 March of this year credit unions have been permitted to provide funding for social housing via a special purpose vehicle. This may facilitate a combined sector investment in tier 3 approved housing bodies of close to €700 million. Let us put this figure in context. As of the end of 2017 total lending from the Housing Finance Agency to approved housing bodies was about €356 million.
In supporting credit unions in the provision of funding for social housing my role and the role of the Central Bank has been to ensure there are no undue regulatory barriers. The Central Bank has now fulfilled its role and I have fulfilled my role in this regard. I look forward to seeing the credit union and social housing sectors progressing and developing any specific funding mechanisms for investing in tier 3 housing bodies. In particular, in line with the commitments in Rebuilding Ireland, the Department of Housing, Planning and Local Government has now established an innovation fund to support the development by AHBs of innovative financial models.
I thank the Minister for his response. Every side of the House is keen to see credit unions being able to make an appropriate level of investment in a structured regulated entity like a SPV to be in a position to provide funds for housing. From my contacts I understand that the Housing Finance Agency will be providing funding for approved housing bodies and that the SPV for credit unions is now on the back-burner. In practice, it may have been abandoned by the Government.
The Central Bank is often criticised for being slow-moving but it has moved to provide the regulatory framework. When we heard this some time ago we were all rather optimistic that the difficulty was on its way to being solved. However, the Department of Finance is sitting on its hands and is not really facilitating the process.
That is wrong. I am pleased to inform the Deputy that one of the credit union representative bodies has now completed all the preparatory work for establishing a SPV. There were several things that I needed to do and that the Central Bank needed to do. They are now done. Those responsible within the credit union movement have a level of commitment to being involved in this. It is now up to them to work with approved housing bodies to put in place a framework that works for them to meet this need.
It is most welcome that the preparatory work has now been done by one body. I understand that the particular body in question is now awaiting the build-up of a project pipeline to ensure it has the minimum level of projects that it would require to justify the cost of establishing a SPV.
Everything that I have been called on to do and everything my Department and the Central Bank have been called on to do has been done. All the various credit unions involved now need to go through the type of work that must be done to look at the level of risk and the project pipeline that would justify their investment. I know that work in now under way.
I am rather disappointed to hear the Minister's lacklustre response. The credit unions have on deposit somewhere between €13 billion and €14 billion at any time. Many of the members would be really happy if, as the Minister himself referenced, a relatively small proportion of funds, something like €700 million, could be invested for starter projects.
The Minister referenced that the Credit Union Development Association, CUDA, has advanced the work but does he not understand that in his reply, as with previous replies on housing, he and the Department of Finance are not prepared to assist the credit unions in getting the initiative under way? He said that he wants the credit unions to do all of the work when, in fact, much of the expertise in the structure of the project should be provided by the Department of Finance. The Minister is standing back from that; perhaps he is cold on the idea.
I struggle to see how meeting all of the requirements that I was called on to meet can justify being called lacklustre. The Central Bank and I were asked to put in place a framework under which credit unions and the credit union movement could then decide whether they wanted to be involved in funding social housing and that is what we have done. The work began in June 2016 when a review was carried out on section 35 of the Credit Union Act 1997, which deals with this area. In November 2016, an implementation group produced a paper examining amendments to lending regulations. I wrote to the Governor of the Central Bank outlining my support for this approach. In March, the Central Bank informed credit unions that a review of credit union limits had commenced, noting that this issue had been dealt with in different fora. That led to the publication of a consultation paper and, as I have said, this framework is in place. The Deputy is correct that it now requires the credit unions themselves to determine what projects they want to be involved in, what level of risk they are willing to bear and what level of return they want. That is work that they need to do themselves for the simple reason that, as the Deputy well knows, it is the money of their members at stake.