Victor Boyhan (Independent)
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I, too, welcome the Minister of State. I thank the Cathaoirleach for selecting my Commencement matter on credit unions. I read with great interest an article on the issue in the Sunday Independent. I am sure the Minister of State had some feedback about it, as I did. People were genuinely encouraged by the article. The substance of the feedback I received from the credit union movement, including the Irish League of Credit Unions, was that it would like the Minister of State to make the regulatory changes to enable credit unions to significantly increase their footprint in the mortgage market. We all know about the issues with KBC, Bank of Ireland and AIB. Indeed, my local AIB branch has closed. Post offices and banks are closing in communities and there is a desire for the credit union movement to grow and expand.

I am a member of my local credit union and I fully support the movement. It is an amazing organisation, rooted in community. Traditionally, it has been served by volunteers, although it is using from that model to a more professional one and all the staff are paid. The credit union movement has done a great service to citizens and to people in communities who have sought to take out small loans. As people have prospered and their wealth has grown, however, they have moved on and the movement is substantially funded and is in a position to increase their contribution to the mortgage market, which the Minister of State has identified. The movement wants him and the Government to honour the commitment in the programme for Government for credit unions to become key providers of community banking, and it has a good case. He indicated credit unions would fill the gap left by the departure of Ulster Bank and KBC from the Irish market and start lending more mortgages. Credit unions are ready, willing and able and have the capacity, funding and professionalism in place to carry out those objectives, so what is the problem? How can we enable the credit union movement to grow and provide a wide range of community banking with a focus on mortgages?

I think I am pushing an open door with the Minister of State, who is committed to this. Clearly, there are issues I might not be aware of, and the new policy framework review that he has mentioned is important. This presents opportunities for the Government to empower credit unions to realise their full potential, fill the gap left by Ulster Bank and KBC and offer a real alternative in our communities, with a focus on mortgages. The commitment the Government agreed to in the programme for Government is important and I would like to see a timeline for the introduction and roll-out of that commitment.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I am very pleased to discuss the issue of credit unions and I thank the Senator for raising it. He has a long-term interest in credit unions. He has raised this matter often in the past and will no doubt continue to do so because they have such a key role in Irish society. I look forward to a longer debate on credit unions taking place in the House on 2 March and I know the Senators present will contribute to that debate.

The Government recognises the importance of credit unions and the programme for Government contains commitments to both reviewing the policy framework within which credit unions operate and enabling the credit union movement to grow. That is precisely what I am doing at the moment and I am almost at the final stages of that process. If I were to summarise what I want credit unions to do, I want them to grow their lending. As the Senator pointed out, they have substantial deposits and investments but it is important they increase their lending too because that is how they will become sustainable. The programme for Government also contains a commitment to supporting credit unions in the expansion of services to encourage community development.

I was appointed Minister of State with specific responsibility for credit unions, and I am the first Minister of State ever to have been given that responsibility. I have carried out extensive stakeholder engagement with a broad range of credit union stakeholders in the past year or so. A summary of the proposals has been shared with all the credit union representative bodies and the final stakeholder engagement session has been scheduled for early March. To give some background, over the course of the past year and beyond, departmental officials carried out extensive negotiations and discussions with all the credit union key stakeholders. I have attended well over 20 meetings with the credit union sector over the past six or eight months. Towards the end of last year, we were almost at the final stages of getting various proposals from the sector as to what it wanted in the legislation and there was substantial agreement on that.

Even so, I gave a commitment that, before I finalised it and brought the decision to the Government, I would return for one final session to sign off with all the representative bodies. I have issued that document to them and they received it over the weekend. There will be a session in early March with all the representative bodies, chaired by me, and I hope that we will thereafter get full sign-off, before it then goes to the Government to lead to legislation. Any legislative proposals arising will go to Cabinet shortly thereafter. The proposals being considered should assist credit unions to invest in collaborative ventures that could be used to expand their mortgage offering.

It is worth noting that, as it stands, credit unions can and do provide mortgages. Fourteen of the 213 credit unions engage in mortgage-lending at various levels. As at the end of September last, credit unions had a mortgage book of €260 million, which has grown 26% year on year, although not all credit unions provide mortgages. Twenty of the credit unions account for 76% of all new house loans advanced, while 50 credit unions account for 98% of all new house loans advanced. Following the review of the lending framework, the Central Bank introduced new lending regulations in January 2020. At a combined mortgage and SME lending rate of 7.5% of assets, this provides capacity to provide up to approximately €1.1 billion of additional mortgage and SME loans, or €1.7 billion in total, and that was finalised only two years ago. Furthermore, additional lending capacity of up to 15% of asserts is available to credit unions, which can apply within certain conditions to the Central Bank for that. Four applications have thus far been approved, while one is in the process of being examined.

Victor Boyhan (Independent)
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I thank the Minister of State, as always, for his precise and informative response, as well as for his agreement to come to the House on 2 March to discuss the issue of credit unions. I thank the Leader and her office for arranging all that.

The key question is how we can get credit unions to lend more, and that is important. There is a mortgage market, but we are seeing the winding-down and withdrawal of banks in communities. The strongest aspect of credit unions is that they are community based. They are embedded in our communities. There is an opportunity now for them to get established, although we will have to see how they perform and can grow.The Minister of State suggested that credit unions lend, but not all credit unions are in a position to do so, as he has acknowledged.

The credit union movement has a role in banking and will assist people in getting mortgages. I acknowledge the significant role that it plays in SME financing as well as in personal financing for people who have been turned away. As the Minister of State knows, the great scandal of banking in this country is that people cannot even meet anyone in their banks or get support from banks. The banks have a short memory. We as a nation bailed them out, but we cannot even get them to open their doors now. People certainly cannot get banks to speak to them other than via phone. I see a role for credit unions in building close financial relationships. I thank the Minister of State for his support in this matter.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I should have made clear in my opening reply that the Central Bank makes decisions on regulatory matters and is independent of the Government and the Department of Finance. That is well established but I wanted to reiterate it.

The regulations developed by the Central Bank, which were updated just two years ago, provide substantial capacity for credit unions, in particular larger ones, to grow their mortgage markets. In the past year, the Central Bank has approved two groups to provide credit union funding to approved housing bodies, AHBs, for the first time ever. Every credit union can invest in the fund for AHBs directly.

The programme for Government refers to community banking. The Irish League of Credit Unions issued a letter over the weekend that most Oireachtas Members will have seen. According to it, the Irish League of Credit Unions was ready and willing to engage with me and my officials constructively on achieving this aim. That meeting has been scheduled for within the next fortnight. I look forward to returning to the House in due course with legislation to improve the environment for credit unions.