Thursday, 11 July 2019
Department of Finance
As the Deputy is aware, credit unions are regulated and supervised by the Registrar of Credit Unions at the Central Bank who is the independent regulator for credit unions. Within his independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability, and to protect the savings of credit union members.
Since 2004 the amount of the Industry Funding Levy payable by each credit union has been capped at a rate of 0.01% of total assets.
Consultation Paper 95 ‘Joint Public Consultation Paper - Department of Finance and the Central Bank of Ireland - Funding the Cost of Financial Regulation’ (CP95) was published in 2015 and set out proposals to move from partial industry funding of financial regulation towards full industry funding, noting the proposal set out in an earlier consultation conducted by the Central Bank (CP61 ‘Consultation on Impact Based Levies and Other Levy Related Matters’) to move credit unions to fund 50% of the cost of regulating the credit union sector.
The Central Bank indicated, in its Funding Strategy and 2018 Guide to the Industry Funding Levy, that it intended to seek my approval to increase the proportion of financial regulation costs to be recovered from credit unions on a phased basis setting out an initial target of 50% to be reached by 2021.
In response to the Central Bank's request I recommended that credit union contributions should not increase beyond the 50% target until:
1. The levy trajectory has reached the planned 50% rate, at which time the impact on the viability of the sector will be better understood; and
2. A public consultation regarding increasing the levy rate for credit unions beyond 50% is undertaken, which would include a regulatory impact assessment of such a change on the sector.
In contrast to this, recovery rates in 2018 for all other industry categories ranged from 65% to 100%, and the Central Bank intends to increase all to 100% funding over the next number of years.
The Deputy might also wish to note that the Department of Finance, in collaboration with the Central Bank, has prepared a public consultation paper on potential changes to the Credit Institutions Resolution Fund Levy, which is expected to reduce materially from 2020. This consultation, which has been published on the Department of Finance website, is open to all persons and I would strongly encourage all stakeholders to submit feedback.
It is also important to note that as Minister for Finance I have reduced the Stabilisation Scheme Levy materially and that since 2017 no further levies have been charged by the Credit Union Restructuring Board (ReBo).