Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank both Senators for raising this issue. The Government recognises the important role credit unions play in society as a volunteer co-operative in the area of financial institutions. In the current environment, credit unions are appropriately focusing on the health and well-being of their volunteers and staff, and on continuing to serve the needs of their members. Credit unions are important at local and national level given the community presences they have across the country.

In accordance with the Credit Union Act 1997, credit unions need the approval of their members at an AGM to pay dividends. In the rules set by members at local level, most credit unions cannot pay a loan interest rebate without having first paid a dividend. I stress these are rules brought in by members in individual credit unions. There is no Government rule to say that this should be the case, but some credit unions have instituted such a rule at local level.

Due to the Covid-19 pandemic, credit unions have not been able to hold physical AGMs as is normal while virtual AGMs were not permitted under the Credit Union Act 1997. It is for this reason that the Government progressed priority legislation, the Finance (Miscellaneous Provisions) Bill 2020, to allow for virtual AGMs, among other matters. When I say virtual AGMs, it all depends on the Covid restrictions. When AGMs come to be held early in the new year there could be a physical meeting combined with a virtual meeting. It could be a blended meeting. It might be somebody on an iPhone or a laptop, or it might be somebody phoning in depending on the mechanisms the individual credit union puts in place. It does not have to be virtually held; it can be partly held by virtual means and partly held by physical means, depending on the Covid restrictions.

The Bill completed all Stages in the Seanad on 30 November 2020 and completed all stages in the Dáil last Friday. The Bill is currently with the President for signing. Once signed by the President and enacted, the legislation will take immediate effect and credit unions will be able to convene an AGM to seek whatever approval may be required from members in respect of paying dividends and a loan interest rebate. In addition to the removal of the legislative barrier to holding an AGM credit union boards will have to determine whether their financial situation warrants a distribution. The Senators will be aware of the financial challenges facing the sector in recent years, which have been exacerbated by the pandemic.

On 4 September, credit unions received a letter from the Central Bank outlining that it expects credit unions to take a prudent approach to their reserve management, given the risk and uncertainty regarding the economic outlook. It expects priority to be given to the maintenance of building up reserves over the payment of any distribution to members. The Central Bank is independent of the Department of Finance, the Minister for Finance and the Government. They are independent regulators and, therefore, I am not in a position to say to the Central Bank precisely what it should do on that matter.

The Central Bank stated that it did not expect that proposed distributions, dividends or loan interest rebate, would feature for the 2020 financial year, which was the end of September. Where a credit union may be considering the potential for a proposed distribution, however, they are expected to contact the Central Bank at an early stage to clearly outline the rationale for proposing this course of action.

Senator Ahearn mentioned the surplus of €3.6 million in Clonmel credit union last year.Not all credit unions actually made a surplus last year. Some credit unions might have made a small surplus but relative to their assets would not be considered substantial. The Clonmel credit union is proposing a dividend of €1.7 million. The Central Bank has issued the letter across the board to all credit unions. If a credit union wants to consider that, it will have to take it up on a case-by-case basis directly with the Central Bank.