The Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Sean Fleming TD, has welcomed the swift passage of the Credit Union Amendment Bill 2022, allowing it to now progress through the Dáil.
The Minister thanked his colleagues in the Seanad for their very constructive approach to progressing the legislation which, when enacted, will enable credit unions to collaborate more effectively and develop a wider range of products.
The Bill will:
- Support investment in collaboration through the creation of corporate credit unions, as an additional regulated vehicle through which credit unions could collaborate. The Bill will also amend Section 43 to clarify that credit unions can invest in ventures supporting credit unions.
- Improve members’ services by allowing credit unions to refer members to other credit unions and to participate in loans of other credit unions.
- The Bill will also amend Section 38 to allow the Minister for Finance to set a maximum interest rate, currently fixed at 1% per month. This will provide more flexibility for credit unions to price risk in a rising interest rate environment.
- Support enhanced governance through amendments to facilitate a greater focus on strategic planning and to redress the balance of responsibility on the board between directors and management. These provisions include:
- The option of making the manager a member of the board;
- Reduce the minimum number of board meetings to six per annum;
- Reduce the frequency of review of policies; and
- Reduce the number of administrative issues to be mandatorily approved by the board.
Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Seán Fleming TD, said:
“This is a really important piece of legislation, which will help credit unions grow to meet the changing banking landscape in the country.”
“I want to thank my colleagues in the Seanad and all credit unions for their constructive approach to the legislation. It is the first meaningful reform for the credit union sector in ten years and will help them to do more for their members.”
“I look forward to engaging with Members of Dáil Éireann in finalising this legislation, which will strengthen and help the credit union sector.”
ENDS
Notes
Summary of the Credit Union Amendment Bill 2022
The legislative provisions, grouped under the four objectives are set out below. In addition to the amendments required to effect the policy objectives there are additional technical and consequential amendments set out in the Bill.
Objective 1: Recognition of the role of credit unions
Credit unions fulfil an important role in communities across Ireland. This role has been emphasised further by bank branch closures and the impending exit of Ulster Bank and KBC. In recognition of this role the Bill includes an additional object in Section 6 “to promote and provide support to co-operative groups and voluntary associations”. Currently there is no recognition of or reference to the volunteer ethos of credit unions in the Act.
Objective 2: Supporting Investment in Collaboration
There are two legislative provisions categorised under this objective.
The first provision is a clarification and a broadening of the language in Section 43(2)(b) of the Act to make it clear that credit unions can invest in credit union service organisations. Enhanced collaboration is central to the future of the credit union movement. Increased cooperation will allow credit unions to better serve their members by increasing the range of services offered.
The second provision is the proposed introduction of corporate credit unions, a credit union whose members would be other credit unions, as entities through which credit unions can further collaborate. Corporate credit unions could allow an additional regulated structure through which credit unions could collaborate.
Objective 3: Supporting Enhanced Governance
There are a number of amendments under this objective which are intended to facilitate a greater focus on strategic planning and redress the balance of responsibility on the board between directors and management. These provisions include:
- the option of making the manager a member of the board, in line with best practice in corporate governance;
- reducing the minimum number of board meetings to six per annum;
- mandatory review of policies every three years from annually at present and removal of the requirement for the board to review procedures;
- reduction in 5 administrative issues to be mandatorily approved at board level;
- 4 amendments to streamline the work of the Board Oversight Committee; and
- allowing credit unions to seek deemed consent from members to receive annual accounts by electronic means and for the publication on credit union websites.
Objective 4: Improving Member Services
At present it is a lottery as to whether a member can access the fullest range of services. If a member’s local credit union doesn’t provide a current account or mortgage lending they can’t join a credit union that does. Nor can the credit union introduce the member to another credit union, though they can introduce a member to a bank or non-bank. And while the common bond may appear to protect a credit union from competition from other credit unions, it does nothing to prevent competition from banks or non-banks.
The purpose of the amendments under this objective is to increase the flexibility of the common bond and allow for practical improvements to help credit unions increase competitiveness and deliver a greater range of services to more members. These amendments are seen as a step towards ensuring accessibility to services for all members regardless of their common bond.
The legislative provisions under this objective include amendments which will:
- Allow for referral of members from one credit union to another;
- Allow for loan participation amongst credit unions;
- Allow the Minister power to create a list of public bodies which credit unions could consider a member;
- Allow flexibility to ensure legal structures operating in a common bond can be members; and
- Provide for the publication of common bonds, through the provision of a map or description on credit union websites, where relevant, or a description of the common bond in the annual accounts to aid transparency.
A provision has also been included to increase the interest rate cap from 1% to a cap set by the Minister (likely to be 2% per month), a proposal which was previously included in stand-alone legislation – the Credit Union (Interest on Loans) Bill 2019.