Dáil debates

Tuesday, 14 July 2020

Saincheisteanna Tráthúla - Topical Issue Debate

Credit Unions

10:55 pm

Photo of Brendan GriffinBrendan Griffin (Kerry, Fine Gael)
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I thank the Ceann Comhairle and his office for allowing me to raise this very important matter. I also thank the Minister of State for being present for this debate.

I begin by congratulating him on his recent appointment as Minister of State. It is a massive honour for any Deputy to be appointed, both for himself and his family and for his supporters. I wish him the very best of good fortune in the time ahead. I have no doubt he will do an excellent job.

I raise this issue off the back of an informative meeting with members of the Chapter 23 Kerry and West Limerick Credit Union movement in Kerry last week and also off the back of the report by the Irish League of Credit Unions last Friday, 10 July entitled The Movement. It is an insightful and interesting report that makes for interesting reading and also makes reasonable recommendations. I ask the Minister, if he has not already seen that report, please to prioritise and have a look at it. It is very clear and makes eight recommendations, none of which is outlandish. They are all reasonable and by implementing those recommendations we would have stronger communities and a better country overall.

In the context of this discussion, the impact of the credit union movement in Ireland over the last six decades cannot be overstated. When one hears people of the magnitude of John Hume saying his involvement in the credit union movement was one of the things he was most proud of, and when he referred to it as having done so much good for all the people of Ireland, North and South, it really puts into context where the credit union stands in terms of its importance in our communities. It is critically important that it is supported at its time of need.

Among the number of things it has pointed out is that it needs support in terms of first putting together the new credit union Act to create a legislative basis for credit unions to become a stronger community banking force. That is something the new Government needs to look at and I am hopeful it can be achieved.

The reduction in capital reserve requirements from 12% to 8% would give credit unions some breathing space, as they say themselves, and also give them a better opportunity to expand their mortgage and business lending. That would be really important.

They are also seeking to unlock the potential for credit union funds to support construction of social housing through a State-regulated investment vehicle for which they have €900 million, almost €1 billion, available. That money would be put to good use if that measure could be considered and acted upon.

They also want to make credit union finance available through the Strategic Banking Corporation of Ireland, SBCI, to fund the proposed national retrofitting plan. We know almost 500,000 homes are planned for retrofitting by 2030 under that plan. The credit unions want to assist and put their money to good use in that regard as well.

One of the other main points is the suspension of regulatory levies from the Central Bank for 12 months and a review of all levies. To put into context what some credit unions are experiencing with regard to regulatory levies over the last number of years, one of my own local credit unions, Killarney Credit Union, in the year ending September 2014 paid just over €66,000 in regulatory levies. In the year ending September 2019 that figure had risen to €243,000. That is a huge hit for any credit union to take when one considers the great work they do and that credit unions were not to blame for the huge financial mess we have seen in the past. That is salt in the wounds of the credit unions and needs to be looked at. I urge the Minister of State please to consider the points raised and do his best to assist the credit unions in their time of need.

11:05 pm

Photo of Jack ChambersJack Chambers (Dublin West, Fianna Fail)
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I thank Deputy Griffin and appreciate his kind words. I commend him on his time as Minister of State at the Department of Transport, Tourism and Sport. I remember him in one of my own local schools. He really lived up to the title around promoting physical exercise and has left a strong legacy in that Department. I think him for his time and acknowledge his role there in the last number of years.

The Minister for Finance, Deputy Donohue, wishes to inform the Deputy that both he and his officials have engaged extensively with the credit union representative bodies in recent months. Both I and the Minister for Finance are hoping to meet with the credit union representative bodies again next week. As the Deputy will be aware, one of my specific responsibilities as Minister of State relates to the credit union movement and it will bring an additional focus to this area. We must have significant and extensive engagement in the coming weeks so that we take the recommendations of reports the Deputy has referenced, and others, and expand the role of the credit unions across our communities.

The Government recognises the key role credit unions play in the delivery of financial services in local communities, the need for which is heightened at this time. Credit unions account for approximately one third of the consumer credit market and are well positioned to provide credit to support the recovery. However, it is recognised that credit unions have challenges, with a low and falling return on assets arising from the low sector loan-to-asset ratio whereby only 28 per cent of assets are lent out, from low-negative interest rates on over €12 billion of investments, and a high cost to income ratio.

Deputy Griffin mention as well meeting the Kerry and West Limerick Credit Union movement. I am happy to engage directly with the credit union movement in the Deputy's own area over the period. It is important not only to meet the national bodies but actually to engage with the local ones. I am stating at the outset that I am happy to meet with people in the Deputy's own area on this.

The economic outlook arising by virtue of Covid-19, including reduced demand for new lending and rising household savings over the past few months, has exacerbated the challenges the sector was already facing. As a result, it was agreed that the credit union advisory committee would report to the Minister for Finance on challenges and opportunities for the sector, incorporating implications of Covid-19 and any relevant recommendations. This report is actually complete and will be submitted to me and the Minister for Finance shortly. I am hopeful we can take the challenges in the current sector and try to get new opportunities in the context of the stimulus and investment we will see in our economy in the coming period. The credit union movement will have a strong role to play in that.

There are several commitments in the programme for Government which relate to credit unions, including a review of the policy framework, which will be expanded in the coming weeks and months as the new Government beds down, taking into account work already completed such as the credit union advisory committee report noted earlier. We will also take into consideration the views of key stakeholders. Credit unions have a role to play themselves. Credit unions have the ability to improve their loan-to-asset ratio, including through additional consumer lending, mortgage and SME lending, either individually or through collaborative efforts.

Following a public consultation, the Central Bank issued revised lending regulations for credit unions which came into effect this year. Under these regulations, the sector has capacity to lend an additional €1.1 billion for mortgage and SME lending collectively on top of approximately €300 million already lent at the end of 2019. Further additional lending capacity could be available to credit unions which can comply with certain conditions or on approval by the Central Bank.

As part of the Government's Covid-19 supports, a revised credit guarantee scheme, CGS, was announced this morning. This scheme is a Department of Business, Enterprise and Innovation scheme, operated by the SBCI, and is already available for banks, non-banks and, it is important to note, credit unions to participate in, subject to certain conditions. Officials are available to discuss the CGS with banks, non-banks and credit unions. In this regard I have been advised that some credit union stakeholders have held exploratory discussions with the SBCI in recent months. We will also work with credit unions to support the programme for Government with regard to retrofitting. I know from my previous role as climate action spokesperson that they will play an important role to embed their community pillar, as the Deputy has referenced, on that ethos with the entire transition we will see. That is a positive future for the credit unions. I will address some of the other questions the Deputy has in my other contribution.

Photo of Brendan GriffinBrendan Griffin (Kerry, Fine Gael)
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I appreciate the Minister of State's response. From the outset I should have declared, a Chathaoirligh, that I previously, many years ago, was a member on a board of a local credit union, lest there be any accusations of conflicts of interest or anything, but that was long before being in public office. That experience gave me great insight into the work credit unions do to improve their own situations and to progress in life. I am concerned at the moment that credit unions find themselves in a perfect storm. The Minister of State's help, and the support of the Minister for Finance and the Government as a whole, is critical now and perhaps has never been as critical in the history of the credit union movement in Ireland. I welcome very much the Minister of State's commitments to engage further with the credit unions and to have an open-door policy. He will have an open door to some of the best people in the country, some of the real local heroes and unsung heroes of our communities, both at local and national level, as far as the Irish League of Credit Unions is concerned. It is important that the points they put forward are facilitated, where possible.

12 o’clock

It is not always possible to do everything, but as I referred to earlier, there is nothing outlandish in what the credit unions are looking for here. They are looking for a fair crack of the whip but they are trying to fight with both hands, not just one hand, tied behind their backs. That is terribly sad when one considers the enormously positive impact that the credit union movement has had throughout Ireland over the past six decades.

I thank the Minister of State, Deputy Chambers. I acknowledge the inclusion of numerous references to the credit union movement in the programme for Government. The credit unions have a big role to play in numerous aspects of life in the time ahead, but they need a better environment in which to carry out their business and continue their excellent work into the future. I hope Deputy Chambers will take a hands-on approach in making this one of his key issues as a Minister of State in the Department of Finance so that his work will benefit everybody in the country.

11:15 pm

Photo of Jack ChambersJack Chambers (Dublin West, Fianna Fail)
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I thank Deputy Griffin. As the Deputy mentioned, the Government recognises in the programme for Government the role that credit unions play in society as a volunteer co-operative financial institution. The economic outlook, including reduced demand for new lending, rising household savings and continued low return on investments, has exacerbated the challenges the Deputy referenced that existed before Covid-19 and the perfect storm that we need to turn away from.

We committed in the programme for Government to a review of the policy framework. The policy review will take into account work already completed, such as the Credit Union Advisory Committee report which I expect to receive shortly. We will also take into consideration the report published last week by one of the representative bodies, and other views of stakeholders in the sector.

The Deputy will be aware that the current policy framework for credit unions was introduced from 2012 to 2016 and was based on the recommendations of the Commission on Credit Unions. The implementation of these recommendations was the subject of a review by the Credit Union Advisory Committee in 2016. Both I, the Minister for Finance and officials will continue to engage constructively to assist credit unions in delivering new services to their members, including other Government initiatives such as the credit guarantee scheme and initiatives in retrofitting.

It is important to say that there is no legislative or regulatory barrier to the involvement of the credit union sector in the credit guarantee scheme, for example. I encourage credit unions which can involve themselves in that to do so because it will allow them to lend into that structure which will help their balance sheet, which the Deputy referenced. Similarly, there is no regulatory restriction hindering credit unions investing in a National Treasury Management Agency, NTMA, auction or purchasing bonds in the secondary market. However, there is an overarching difficulty in the European context with the way the ECB has flooded the liquidity markets. That has an impact on credit unions and other financial institutions in terms of their balance sheet.

We must support credit unions to increase their lending capacity into communities which will help their balance sheet, and we must support, as I do, their ongoing expansion of services. With the input of Deputy Griffin and others, it is to be hoped we can have a more positive pathway for the sector. That is what we are ambitious about.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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As it is now past midnight, the Dáil stands adjourned until 9.30 a.m. when it will reconvene at the Convention Centre Dublin.

The Dáil adjourned at at 12.03 a.m. until 9.30 a.m. on Wednesday, 15 July 2020.