Tuesday, 21 September 2021
Ceisteanna Eile - Other Questions
Due to changes introduced in recent years, we have a disconnect between the Department of Finance, which has responsibility for credit union policy, and the Central Bank, which is responsible for regulation but has no remit to appreciate the credit union as a volunteer-led, democratic organisation. The programme for the Government commits to reviewing the credit union policy framework. When will this review be complete and when will the much-needed reforms be put in place to support community banking?
I propose to take Questions Nos. 12, 42 and 67 together.
The programme for Government includes a number of commitments relating to the credit union sector that the Government is progressing. The review of the policy framework is at an advanced stage. Since September 2020, the Department has held extensive engagement with credit union representative bodies to seek their feedback. During June and July of this year, I met with ten credit union stakeholders, including representative bodies, collaborative ventures, service providers, the Credit Union Advisory Committee and the Registry of Credit Unions to gather further information to help inform the next steps of the review.
In terms of supporting and enabling the sector to grow and expand, the following are some recent developments in lending and investment regulations, SME lending, access to finance for retrofit, additional services and investment in approved housing bodies. These developments highlight the potential of the sector to fulfil a role in community banking.
The Central Bank has in recent years completed reviews of both the lending and investment frameworks. Following the introduction of the new lending regulations in 2020, credit unions now have a combined capacity to provide up to approximately €1.1 billion in additional SME and mortgage loans, with further lending capacity available to credit unions that can comply with certain conditions or on approval by the Central Bank. As of June 2021, credit unions had a combined mortgage and SME loan book of circa €372 million, an increase of 18% on the previous year.
The revised investment regulations took effect in March 2018. Under these regulations, credit unions are permitted to place their surplus funds that have not been lent to members in a range of investments, including tier 3 approved housing bodies for social and affordable housing. I am particularly pleased to share with the Deputy that in the past week we have announced that two credit union-backed funds have received approval from the Central Bank. Credit unions will be able to invest up to €900 million in these regulated funds, which will subsequently lend to approved housing bodies. This will provide an additional funding channel for approved housing bodies that have a large role to play in the recently announced Housing for All action plan. I want to make it clear that each of the new funds is open to every credit union in Ireland. The fund will then lend to the approved housing bodies. This was only cleared in the past week or so. It took some months for that process to go through the Central Bank because it was a new process but the funds are now there. I emphasise that the funds for which the regulator gave approval last week are in addition to everything that was in the Housing for All policy announced in recent weeks. As I said, this only got regulatory approval in recent days. This is in addition to what was announced in the Housing for All plan.
In regard to SME lending, 19 credit unions, supported by the Irish League of Credit Unions, ILCU, the Credit Union Development Association, CUDA, and Metamo, were approved in early 2021 by the Department of Enterprise, Trade and Employment for participation in the Covid-19 credit guarantee scheme. Further development of SME lending in a controlled manner could also assist credit unions in growing and diversifying their loan book. SME lending has grown 5.6% year on year to the end of June 2021.
The Government significantly increased the funding available to support retrofit in budget 2021. My officials have been engaging with the Departments of Environment, Climate and Communication and of Public Expenditure and Reform and with the Sustainable Energy Authority of Ireland to support increased credit union participation in green retrofit loan schemes. The Deputy may also wish to note that under the additional services regime set out in the 2016 regulations, credit unions can seek approval from the Central Bank to offer additional services such as current accounts and debit cards. Sixty credit unions have been approved to provide the member personal current account service and a further group of credit unions have recently begun distributing insurance products to their members.
Credit unions play an essential role in so many communities. You are guaranteed to meet a staff member and not to be directed to a machine. We cannot underestimate the importance of that in terms of accessibility. Credit unions have also provided flexible services to people and families who would have been refused by other financial organisations. I would not have been able to do my masters had it not been for my local credit union in Skibbereen.
However, current financial regulations fail to appreciate their community function as cooperatives and the importance of the common bond. Instead they must have excessive limits on their services, and therefore their potential.
They are particularly limited on business and mortgage lending. Concentration limits in the 2019 regulatory requirements put artificial and anti-business limits in place on how much credit unions can lend for these purposes. Will the Minister remove these limits? Credit unions should be monitored through supervisory and reporting tools, not by legislative barriers. Will I be able to come back in?
The Minister of State mentioned some of the engagements he has had. I ask to prioritise engaging with the Credit Union CEO Forum and the ILCU.
On this particular issue, it would feel wrong to not mention Donal O'Driscoll, CEO of the Access Credit Union in west County Cork, who passed away last week. He was a kind and thoughtful man who embodied the principles of the credit union movement. His loss is deeply felt by his family and everyone in the community.