Press release
Consultation on Resolution Fund and Stabilisation Fund for Credit Unions launched
Published on
Last updated on
Published on
Last updated on
The Minister for Finance, Jack Chambers T.D., and Minister of State for Financial Services, Credit Unions and Insurance, Neale Richmond T.D., have today launched the consultation on the Resolution and Stabilisation Funds for credit unions.
Neale Richmond T.D, Minister of State for Financial Services, Credit Unions and Insurance said:
“A review of both the Resolution Fund and Stabilisation Fund for Credit Unions is currently underway and a 12-week consultation is now open. These consultations will allow the credit union sector and stakeholders to have their voice heard on the future of these levies.
The feedback received in these consultations will form an important part of the recommendations from these reviews and so it is crucial that all stakeholders partake and share their views.
Stakeholders selected to receive these consultation papers include the Central Bank of Ireland, the Irish League of Credit Unions (ILCU), the Credit Union Development Association (CUDA), the Credit Union Managers Association (CUMA), the National Supervisors Forum (NSF) and a random selection of 20 credit unions.
However, the consultation papers will also be published on the Department of Finance website, so any credit union not selected is also welcome to make a submission. I strongly encourage individual credit unions to participate in these consultations.
The consultation will be open for 12 weeks to allow ample time for stakeholders to develop their responses and I would hope that a broad range of the sector will take the time to input into these reviews”.
ENDS
Notes to Editor
Resolution Fund
The Central Bank and Credit Institutions (Resolution) Act 2011 established a resolution regime for credit institutions and credit unions in Ireland. The Credit Institutions Resolution Fund (Resolution Fund) was established under this legislation to support resolution actions in the State, and is managed and administered by the Central Bank.
The Central Bank have informed that the net assets of the Resolution Fund were €60.5 million as at 31 December 2023 (the 2023 financial statements of the Resolution Fund are yet to be approved by the C&AG). This total excludes the 2024 levy of €2.5 million and any interest earned to date in 2024.
The purpose of the Resolution Fund is to provide a source of funding for the resolution of financial instability in, or an imminent serious threat to the financial stability of, an authorised credit institution, and in particular:
Credit unions are now the only financial institutions contributing to the Resolution Fund as other financial institutions are now covered by the Single Resolution Mechanism which has resulted in Irish Banks paying into the Single Resolution Fund.
The Department of Finance, in collaboration with the Central Bank of Ireland, carried out a review of the levy in 2019, which included a public consultation. Following this review it was decided that the target size of the Resolution Fund should be set at €65 million and that this target should be met by 2025.
The Department of Finance prepares the annual Levy Regulations following consultation with the Central Bank and the Credit Union Advisory Committee. These regulations come into force on 30 September each year and prescribe the rate of contribution or method of calculating the rate of contribution to the Resolution Fund.
Stabilisation Fund
The Stabilisation Fund is financial support provided to a credit union to restore and facilitate maintenance of a credit union’s reserve requirement.
Under section 59(3) of the Credit Union and Co-Operation with Overseas Regulators Act (“the CUCOR Act”) the Minister for Finance is required to make regulations prescribing the rate of contribution or a method of calculating the rate of contribution to the Stabilisation Fund, which is a part of the Credit Union Fund. There is €20.5 million in the Stabilisation Fund as at 20 June 2024. To enable the levy to vary from year-to-year, regulations are made annually prescribing the rate of the levy and the basis on which it will be charged. The CUCOR Act requires that the Minister consult the Central Bank and the Credit Union Advisory Committee before prescribing the annual levy rate each year.
In making the regulations for the Stabilisation Levy, the Minister must have regard to the need:-
1. for the Stabilisation Fund to grow, over time, to a size commensurate to the costs that might be incurred in providing stabilisation support under Part 4 of the Act; and
2. for the rate of contribution by a credit union, or category of credit unions, to be consistent with maintaining the financial viability and sustaining the commercial position of such credit unions