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

On behalf of the Minister for Finance, I welcome the committee's report. Along with the 2016 report of the Credit Union Advisory Committee, CUAC, and its forerunner, the 2012 report of the Commission on Credit Unions, it makes an important contribution to the debate on credit union reform. The committee's report was the subject of a memo to the Government and was debated during Private Members' business on 8 March 2018. Today's debate offers a further opportunity to discuss the report of the committee and reiterate the Government's support for the invaluable role of credit unions in Ireland.

In line with the Government's position, the Minister believes that credit unions have a key role to play in providing access to credit and other important services in local communities. The Government has put in place a number of measures so that credit unions can continue to provide these services to their members and to ensure the stability of the sector into the future. These measures include the establishment of the Commission on Credit Unions in 2011; the publication of the Credit Union and Co-operation with Overseas Regulators Act 2012; the establishment of the Credit Union Restructuring Board, ReBo; the availability of €500 million to support the stability of the credit union movement; the introduction of the stabilisation support scheme; the request to the CUAC to review all recommendations in the commission report; and the establishment of an implementation group to oversee implementation of the CUAC's recommendations.

The CUAC reported to the Minister for Finance in June 2016 on the implementation of the recommendations of the 2012 Commission on Credit Unions report. The CUAC found that a small number of recommendations had not been implemented and made recommendations under seven specific headings, the most relevant relating to long-term lending, consultation and engagement, and tiered regulation. The committee's report makes 27 recommendations, many of which are common to the CUAC report, such as tiered regulation, business model development, and consultation and engagement. Much of what the committee is recommending is already under way in terms of the work of the CUAC, the CUAC report implementation group, the Central Bank and the Department of Finance.

In response to its report and to address a number of additional areas expanded on by the committee, the Minister wrote to it in December 2017 to update it on the work of the implementation group. A further update issued to the committee on 21 April.

Following publication of its report in June 2016, the CUAC continued working on enabling a coherent implementation plan to be devised for the implementation group, tasked with overseeing and monitoring the implementation of each recommendation within the CUAC's report. Each of the representative bodies was invited to nominate one person to the implementation group, which held its inaugural meeting in February 2017 and has met 12 times to date.

Tiered regulation was the subject of consultation by the Central Bank, which proposed a two-tier regulatory model, that being, CP76. As stated in the 2016 CUAC report:

The Central Bank referred to submissions received in response to CP76 and indicated that it was 'unclear what form of tiered regulation the sector actually wanted', adding that the sector also indicated that the 'timing was not appropriate' for the introduction of a tiered approach, given that restructuring was in progress. The Central Bank also noted that there were 'significant burdens on the sector at the time'.

In light of the feedback received, the Central Bank did not propose to introduce a tiered regulatory framework for credit unions at that time. The implementation group continues to consider tiered regulation and hopes to make progress in the next few months. However, a lack of tiered regulation should not restrict business model development nor restrict the Central Bank from delivering proportionate supervision.

A Programme for a Partnership Government recognises the potential role that credit unions can play in housing finance. To that end, the revised regulations for credit unions, which commenced on 1 March, clarify the scope and the manner in which credit unions can support the development of social housing. The regulations, which introduce a practical form of tiering, make provision for investment in tier 3 approved housing bodies, AHBs, by credit unions with greater than €100 million in total assets through a regulated vehicle.

The implementation group has held discussions on business model development and is finalising a paper outlining some of the key areas that are being, and could be, developed further by credit unions and representative bodies without changes to regulations. The CUAC is also focusing on this matter during 2018 and recently met a number of credit unions to discuss their business models and how they expected to grow their businesses.

In addressing the business model agenda, the Central Bank has announced the establishment of a new forum to engage directly with credit union CEOs. The forum will give those progressive credit unions with the capability and desire to undertake business model transformation a mechanism to avail of practical regulatory support when seeking to address their commercial challenges.

On 3 November 2017, the Minister provided the joint committee with two documents prepared by the implementation group and submitted by the latter to the Central Bank. The first document relates to section 35 of the Credit Union Act 1997, as amended, which provides for the making of loans by credit unions. The paper details a range of proposals for consideration in the Central Bank review of section 35 that could provide for a material increase in long-term lending for those credit unions that would have the capability to do so. The Central Bank has commenced a review of credit union lending limits and acknowledged that the matter of the limits has been highlighted in various fora as an area of regulatory review, including through the implementation group. To inform this review, a questionnaire issued to all credit unions on 11 April 2018.

The Central Bank also proposes issuing a formal consultation paper later in the year. This paper sets out key principles for consideration by the Central Bank that may assist in progressing the CUAC recommendation that service-level agreements be introduced. The introduction of such an agreement is a matter for the Central Bank, but the CUAC and the implementation group have strongly recommended its introduction. The Minister wrote to the Central Bank Governor to outline his support for these matters being progressed in early 2018 and his officials also met the Central Bank in February to progress both papers. The Minister has extended the term of the implementation group to the end of this year to allow sufficient time for the completion of the group's current work programme. The progress I have outlined provides a solid platform from which to proceed with future reforms.

The Government recognises the important role of credit unions as a volunteer co-operative movement in Ireland managing €16.9 billion of assets and a loan book of €4.5 billion at December 2017. A Programme for a Partnership Government commits to the development of a strategy for growth and development for the credit union sector. The Government recognises that the sector requires further support to help overcome the significant challenges it faces and has a clear policy to support the strategic growth and development of credit unions. The Minister is committed to the implementation of all the recommendations of the CUAC report in a cohesive manner. He looks forward to continuing to work together with all stakeholders, including the committee, to support credit unions as they progress and develop.