Wednesday, 2 March 2022
Department of Finance
88. To ask the Minister for Finance when he will be making the regulatory changes to enable credit unions to significantly increase their footprint in the mortgage market and honour the commitment in the Programme for Government for credit unions to become a key provider of community banking further to an article (details supplied); and if he will make a statement on the matter. [12030/22]
89. To ask the Minister for Finance the steps he is taking to make the necessary regulatory changes to enable credit unions to significantly increase their footprint in the mortgage market; and if he will make a statement on the matter. [12156/22]
I propose to take Questions Nos. 88 and 89 together.
This Government recognises the importance of credit unions.
The Programme for Government contains commitments to;
- Review the policy framework within which Credit Unions operate.
- Enable and support the Credit Union movement to grow.
- Support Credit Unions in the expansion of services, to encourage community development.
Credit unions can and do provide mortgages, with over half the sector engaging in mortgage lending at some level. As at December 2021 credit unions had a mortgage book of approximately €280 million, which had grown 23% year-on-year.
The level of mortgage lending undertaken by individual credit unions varies. 20 credit unions account for approximately 76 per cent of all new house loans in the sector with 50 credit unions accounting for 98 per cent of the sector total.
Since 1 January 2020, credit unions now have a combined capacity to provide up to €1.1 billion in additional SME and mortgage loans, with further capacity of up to 15% available to credit unions on approval by the Central Bank.
4 credit unions are currently approved for the 15% combined lending limit with 1 additional application to the Central Bank currently in progress. Up to 66 credit unions could apply for this 15% limit and it is the Government’s hope that more will continue to do so.
In regard to fulfilling the commitments in the Programme for Government for credit unions, the Review of Policy Framework is in its final stages with a summary list of proposals having recently been shared with all the credit union representative bodies. A final stakeholder engagement session has been scheduled for early March. Legislative proposals arising will go to Cabinet shortly thereafter. The proposals being considered should assist credit unions to invest in collaborative ventures, which could also be used to expand their mortgage offering.
The Programme for Government includes a number of commitments in relation to the credit union sector. The Review of Policy Framework is in its final stages with a summary list of proposals having recently been shared with all the credit union representative bodies. A final stakeholder engagement session has been scheduled for early March. Legislative proposals arising will go to Cabinet shortly thereafter.
As part of the Review of the Policy Framework, Minister of State Fleming has conducted extensive stakeholder engagement, meeting with the representative bodies, collaborative ventures, service providers, the Credit Union Advisory Committee, the Registrar of Credit Unions and individual credit unions. The information gained from these meetings will help inform the next steps taken by Government.
In terms of supporting the sector to provide essential financial services to local communities, the following are some recent developments which highlight the potential of the sector to grow and fulfil a role in relation to community banking.
Lending and Investment
The Central Bank has in recent years reviewed both the lending and investment frameworks. Since 1 January 2020, credit unions now have a combined capacity to provide up to €1.1 billion in additional SME and mortgage loans, with further capacity available to credit unions who can comply with certain conditions or on approval by the Central Bank. As of September 2021, credit unions had a combined mortgage and SME loan book of circa €387 million, an increase of 19% year-on-year.
Credit unions are permitted to place their surplus funds that have not been lent to members in a range of investments including Tier 3 Approved Housing Bodies (AHBs). I am pleased to share with the Deputy that three credit union backed funds have received approval from the Central Bank. Credit unions will be able to invest up to €900 million in these regulated funds, which will subsequently lend to AHBs.
Nineteen credit unions were approved in early 2021 for participation in the Covid-19 Credit Guarantee Scheme. Further, in November five credit unions were announced as participants in the Brexit Impact Loan Scheme (BILS). The BILS provides low-cost loans of €25,000 to €1.5m to eligible Brexit-impacted businesses.
In total, SME lending has grown 6.9% year on year to end September 2021. Further development of SME lending in a controlled manner could also assist credit unions in growing and diversifying their loan book.
Access to Finance for Retrofit
The Government significantly increased the funding available to support retrofit. My officials have been engaging with stakeholders to support increased credit union participation in retrofit loan schemes.
Other than member savings and lending, in order to provide “additional services”, a credit union must receive approval from the Central Bank.
66 credit unions are approved to provide current accounts.
The Central Bank has prescribed a list of exempt services which may be provided without requiring approval. The Central Bank is undertaking a review of the Exempt Services Schedule to ensure that the services listed reflect the current financial services landscape. The Central Bank has commenced a public consultation seeking views from stakeholders on the proposed changes arising from this review.