Dáil Éireann Debate, Tuesday - 4 July 2017
103. Deputy Micheál Martin asked the Minister for Finance if he will report on the commitments in the programme for Government regarding the credit unions; and if he will make a statement on the matter. [31255/17]
View answerCommitments identified in the Programme for a Partnership Government relating to credit unions and their progress are as follows:
1. The rollout and extension of the Personal Microcredit Scheme, which is providing simple microloans to members and helping to combat the use of moneylenders.
The Personal Microcredit Scheme was commenced on a pilot basis in November 2015, involving 30 credit unions providing individual loans of between €100 and €2,000 with a maximum interest rate of 1% per month. The initiative is being led by the Department of Social Protection in conjunction with the Department of Finance and other interest groups. The It Makes Sense loan is designed to make short-term credit available on a low-cost basis to the people who need it most, and is designed specifically as an alternative to high-cost money-lenders.
As at 17 May 2017 there were 106 credit unions in 219 locations providing loans under the Personal Microcredit Scheme. Involvement in the scheme is voluntary and as such is a matter for individual credit unions themselves
2. Assisting credit unions in making successful applications to retain members' savings in excess of €100,000 (CP88), recognising the independence of the Registrar of Credit Unions.
The Central Bank implemented the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (the Regulations) on 1 January 2016. It set out an individual member savings limit of €100,000. The Regulations also provided that credit unions could apply to the Central Bank to retain individual members’ savings in excess of €100,000, which were held at commencement of the Regulations and that Credit unions with total assets in excess of €100m could apply to the Central Bank for approval to increase individual member savings in excess of €100,000.
The Central Bank consulted with the Department of Finance on the application process and accepted the Department’s observations, making the application process less onerous. Separately, the Registrar met with the representative bodies to obtain their feedback on the application process.
The Central Bank developed application processes to facilitate credit unions in seeking the approvals as outlined above. As provided for in the Regulations, in order for approval to be granted an applicant credit union must demonstrate that the granting of such approval is consistent with the adequate protection of the savings of members and effective and proportionate having regard to the nature, scale and complexity of the credit union. The submission deadline for applications to retain savings in excess of €100,000 was 27 June 2016. The application form to increase savings in excess of €100,000 does not have a submission deadline and will be accepted on an ongoing basis.
Under the process, applications to retain individual members’ savings in excess of €100,000, which were held at commencement of the Regulations, were assessed primarily by reference to objective financial criteria related to the excess reserves and liquid assets held by the credit union. In addition, applicant credit unions were required to outline a rationale for seeking to retain such savings.
At commencement of the Regulations, there were 196 credit unions reporting on the Prudential Return (PR) that they held individual members’ savings in excess of €100,000 and the total amount of such savings held was c.€165 million. Just over one third of these credit unions applied for permission to retain the individual members’ savings in excess of €100,000. The Central Bank informs me that the majority of these applicants met the financial criteria (on reserves and liquidity levels set out in the application process) and have been approved to retain such savings.
For those credit unions not approved to retain individual member savings in excess of €100,000, transitional arrangements set out in the Regulations apply, meaning that all individual member savings in excess of €100,000 held by these credit unions had to be returned to individual members by 1 January 2017.
3. Asking the Central Bank of Ireland to instigate a review of the continued appropriateness of the savings limit within a year of the formation of the new Partnership Government.
The Central Bank committed to a review of the savings limit, three years from commencement of the regulations (1 January 2016). A letter issued to the Registrar of Credit Unions at the Central Bank from the Minister for Finance on 25 November 2016 requesting the Central Bank of Ireland to instigate a review of the continued appropriateness of the savings limit on credit union members.
4. Working with the Registrar of Credit Unions at the Central Bank to gradually lift current lending restrictions as appropriate, including for housing.
In February 2015 the Central Bank commenced a lending restriction review initiative, whereby credit unions that are subject to a lending restriction, but are satisfied that they have made the necessary improvements and have embedded these improvements in robust risk sensitive lending practices, could apply for a review of their lending restriction. The closing date for receipt of applications under this initiative was 30 September 2015. This review has reduced the number of credit unions with lending restrictions. Currently 60 credit unions, approximately 22% of credit unions by number, have a lending restriction compared with 52% of credit unions at the start of the review process. The Central Bank has informed the Department that there is ongoing engagement with credit unions to lift lending restrictions. The Department will continue to monitor the situation.
5. Credit unions' move towards more electronic and online services, including the rollout of debit cards and enhanced online banking services.
We continue to support credit union initiatives to develop services while protecting members’ savings. In certain circumstances, the provision of new services must be approved by the Registrar of Credit Unions at the Central Bank prior to their introduction.
The Central Bank informs me that in October 2016, a number of credit unions were approved for a new service Members Personal Current Account Services (MPCAS) which provides for a current account and a range of services which includes payment instruments such as debit cards. Approval was granted under additional services provisions (sections 48 to 52) within the Credit Union Act 1997 (as amended). There has been strong interest in this service and the Central Bank is currently processing a significant number of applications, which are at different stages of assessment with the majority currently at an advanced stage. Details and applications forms for the MPCAS service are available on the Central Bank website.
The Central Bank has also indicated that it is open to applications for alternative debit card proposals and recommends the MPCAS framework as a template for such alternative proposals.
Separately, an Implementation Group consisting of members from the four main credit union representative bodies, the Central Bank and a CUAC member, chaired by the Department of Finance was established earlier this year to implement all recommendations in CUAC’s 2016 Report. This Implementation Group will review CUAC recommendations relating to business model development in credit unions.
6. Asking the Credit Union Advisory Committee (CUAC) to conduct a review, and report by the end of June 2016, on the implementation of the recommendations outlined in the Report of the Commission on Credit Unions.
In December 2015 the Minister for Finance invited the Credit Union Advisory Committee (CUAC) to carry out a review of the Implementation of the Recommendations set out in the Report of the Commission on Credit Unions. The review was presented to the Minister on 29 June 2016 and is available on the Department’s website. The Review of Implementation of the Recommendations in the Commission on Credit Unions Report made recommendations in a number of areas including: Tiered Regulation; Section 35; Consultation and Engagement; Governance; Restructuring; Business Model Development; and Additional Policy Matters. An Implementation Group has been established to oversee and monitor implementation of all recommendations.
As indicated above, an Implementation Group was established earlier this year to oversee, monitor and ensure implementation of all recommendations and has met five times to date.
