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

I thank all the Senators who have contributed to the debate. It is clear that everybody who has spoken has a deep personal knowledge of, interest in and commitment to the credit union movement. We are reflecting this in the programme for Government. For the first time ever, a Minister of State has been given dedicated responsibility for the credit union movement. I have mentioned the number of engagements I have had with the credit union movement. The Department was working and receiving submissions through all of the last year or more. Towards the end of last year, we combined all the submissions received from the League of Credit Unions, the Credit Union Managers Association, the Credit Union Development Association, and the credit union advisory committee, CUAC, which is an advisory committee to the Minister. We tried to get a consensus. We told them all we would come back to them one last time with the document we had prepared. We issued that to each of those organisations in the last couple of days. I have a date set in my diary for collective meeting in the next couple of weeks to see if we can agree the report. If it is agreed, it can go straight on to Cabinet for approval for legislation. I expect we will be there. I do not think there are any major surprises in what went out to the organisations in the past week.

The issue of lending to approved housing bodies has been mentioned by a number of Senators. Three funds have been established in the credit union movement, one through the league and another by a group of credit unions coming together. They established a fund and got Central Bank approval whereby any credit union in Ireland can invest in the fund. Every credit union in Ireland can now invest in the funds that lend to approved housing bodies. That has only happened in the past couple of months. They have three different funds that they can enter. It is open to all credit unions to do that.

On the issue of lending to local authorities, that is possibly the next step. Local authorities will be looking at the interest rates they can get from other State institutions when they are borrowing. That is an issue of commercial activity. Everybody mentioned the issue of retrofit loans which can have a key role here. Most of what the credit unions do is unsecured lending. They are the main provider of unsecured lending. Their mortgage lending is secured lending but 93% of every credit union loan is unsecured, based on the name or goodwill of the person they are dealing with because they know the people. The retrofit loans can come into that area. That is a separate issue.

The trusted brands were mentioned by many Senators and the gap in the mortgage market, which I will come back to, and the issue in respect of the forthcoming legislation. I am pleased that digital currencies and cybersecurity were mentioned. In my role dealing with international financial services I recently met the Department of Further and Higher Education, Research, Innovation and Science and IBEC, which are running apprenticeships in the area of financial services right up to FETAC level 9. They are being launched this year and are well under way. I would like to see many more people going into that area.

Many issues were raised in respect of the limits of the lending which I want to address. While the regulatory reserve stands at 10%, the credit union movement has 16% in reserve across the movement based on recent figures. They are saying there is a limit of 10% but they are voluntarily going 60% over the limit the Central Bank provides. They actually have reserves of 16%. An awful lot of what they have held in reserve need not be held in reserve. They are a long way over the 10% the Central Bank requires. It is important to say that. They are talking about the 10% but in fact they hold 16% or 17%. That does need to be held and the Central Bank has not asked for it to be held. The credit unions can release billions from what they are holding voluntarily in reserve without ever having to go to the Central Bank. It is very important that we should say that.

We all know how strong the credit union movement is and we are here to help it. The biggest issue I see is that it has assets of about €20 billion and loans issued of just over €5 billion. It is only lending 26% of its assets. There is no limit on that. There was a time the figure was over 50%. The Central Bank has not changed that. The credit unions are just not lending enough. They have all this money that they are not lending and they are having to invest in banks at negative interest rates, so they are not making money. Lending money at 6% or 7%, which is the average interest rate in a credit union loan, is far better than keeping it somewhere and getting negative interest. They can do that.

Where the issue of regulatory reserves comes in is in respect of mortgage lending. There are limits imposed by the Central Bank because it is a relatively new area and it wants the credit unions to acquire competence in that area as they go along. There are regulatory reserves.They have combined them so that small credit unions can lend up to 7.5% without going back to the Central Bank. It is very important that I give Members these figures. The current limit that the Central Bank has set means they can lend up to €1.4 billion today, but they are actually only lending €260 million today. Without even talking to the Central Bank, the credit union movement today can lend out more than an extra €1 billion without going near the bank. The bigger credit unions that want to go above that €1.1 billion can apply to the Central Bank and they will be allowed to lend up to €2.24 billion, if they make the application. A handful have done this. The larger credit unions that have applied for a higher percentage of their loan book to be in mortgages have been approved. There is scope for the credit union movement today to lend out an additional €1 billion without talking to anybody. There is a limit in the regulations, but they are nowhere near the limit. Those credit unions that want go above the current minimum limit can get sanction, and some of them have done this. They also can lend up to that figure. This is what I want to see them doing.

Some of the credit unions have come together and it was mentioned by a Senator that this is helping them to collaborate. This is what I want them to do. The strength of the movement is that they are everywhere, but it is also their weakness because they are small and they cannot individually do this. My proposal for legislation will assist their collaborations. Some of the credit unions have not, or will never have, the expertise to be mortgage experts looking into the future risk for a 25- or 30-year mortgage. They need financial expertise that the organisation does not have. There is a shared services company, the Credit Union Service Organisation for Payments, CUSOP, which is a financial organisation that provides the knowledge to operate current accounts. No credit union makes up its own current account and its own card; this is done through CUSOP. That is to help them to collaborate whereby five or six credit unions come together with a brand name for a new current account. In the legislation I am looking to give those organisations statutory recognition in order that it is not just an informal arrangement. This will put them in a stronger position. When members go into their credit union to get a loan, while the expertise for a 25-year mortgage might not be in that particular credit union, the credit union service organisation will be called in to do all of the background work for them and approve a loan or otherwise. Then the credit union will give it out. They need help to do that back-office work. This is what we want to provide in those areas also.

The savings caps have been an issue. Credit unions did not want to take in extra deposits because if they were to invest money in some of the banks with a negative interest rate it would cost them. This was a feature for the past couple of years but it may not be a feature this year, next year or into the future. It was a problem at a particular time. Different credit unions managed this differently. Some credit unions had a limit on new accounts and some credit unions forced some people to take money out of their existing account. The way it happened in individual credit unions was a matter for the local credit union. Some handled it very subtly and some of them were not as subtle in how they went about it. It probably was a feature of how individual credit unions did all that.

The role of volunteers was also mentioned. It would be remiss of me not to talk about the closures of Ulster Bank, KBC and Bank of Ireland branches and the role of the ATMs around the country as they affect credit unions. This will be done through one of these service organisations. The local credit union will not go off to buy an ATM. It will be done through one of the ATM providers, and some of them have stepped up to the mark in towns when bank branches closed and there was no ATM left on the street. That is happening in individual cases at local level.

To conclude, I thank all Members for their contributions. We are almost at the final stages of getting agreement from the credit union movement on the proposals that I hope to bring to Cabinet in the weeks ahead. The date has been set for that meeting and I hope to have legislation published and enacted this calendar year.