Press release
Minister Seán Fleming speaks at the Credit Union National Supervisors Forum’s AGM 2022
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Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Seán Fleming, spoke at the Credit Union National Supervisors Forum’s AGM in Limerick on Saturday, 11 June.
The National Supervisors Forum supports the Credit Union Supervisory Committees and Board Oversight Committees in carrying out their legal functions and to provide appropriate specialist training.
In his speech, Minister Fleming noted the rapid pace of change in the financial services industry. He highlighted the need for Credit Unions to evolve in the face of new financial technologies.
In particular, the Minister urged further collaboration to deliver a wider range of products and services to seize the opportunity arising from changes in the retail banking market.
The Minister spoke about upcoming legislative proposals to help the Credit Union sector:
“The legislative changes being put forward as part of the Review will be helpful, but they will not solve the financial and business model challenges the sector is facing. The local credit union and the role it can play in the economy and in communities is more important now than ever before.
“If the credit union sector is to grow and become the movement it has the potential to become the National Supervisors Forum and other stakeholders need to continue their work to ensure the development of strong, well-functioning, well supported boards.”
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Good afternoon, I am delighted to have the opportunity to address your summer forum today.
I’d like to thank your Chairperson, Joe Tobin, for the invitation to speak to you today.
Strong, well-functioning credit union boards together with good governance and oversight practices are particularly important in facing the challenges and opportunities in today’s financial climate.
The pace of change in the financial services landscape has become relentless and this can be seen in the rapid growth of FinTech and digital banking.
If you have a Revolut account now you can apply and get approval for a loan in less than 10 minutes.
This rapid change is occurring at a time when the credit union sector is also at a critical juncture in its evolution.
With this in mind the title of your programme today – Supporting credit union BOCs/Supervisors in an ever-evolving regulatory environment – is very apt.
Never before has the demand for credit union services been as great or as needed, given the impending exit of Ulster Bank and KBC and the closure of many bank branches.
Credit unions are dealing with a number of issues, which challenge their traditional business model namely the current low interest rate environment, muted credit demand, and savings growth.
These challenges have enhanced the need for collaboration, growth in lending, and more than ever the need for strong, well supported boards.
The aim of my government is to assist the Credit Union sector to become a strong, resilient and collaborative movement.
Since I started in August 2020, I have prioritised work on the review of the policy framework.
As many of you will be aware, the stakeholder engagement process recently concluded in a meeting with the NSF, the other representative bodies, myself and officials on 10 March.
This meeting was the culmination of a challenging 18-month long process.
I have met with the NSF and the other Representative Bodies, the Registrar of Credit Unions, the Credit Union Advisory Committee, collaborative ventures and many individual credit unions.
In total, I have held over 50 stakeholder meetings with the credit union sector and well over 100 proposals were considered.
I would like to take this opportunity to thank the NSF – particularly Joe Tobin - for its submission and for its continued engagement with and input into the review process.
Work is now underway to bring the proposals before cabinet in the coming weeks.
While there is not a large volume of proposed legislative changes, they are significant and they are intended to:
The 15 core proposals are categorised under 5 objectives.
The first objective of the review is to recognise the Role of Credit unions
The Review contains a proposal which recognises the role of the sector in developing volunteers and acknowledge its role as a large cooperative movement in Ireland.
The second objective is to Support Investment in Collaboration
Collaboration is necessary for the growth of the sector.
Even the largest credit unions do not have the scale to develop opportunities on their own.
In my engagements over the past year, I have seen evidence of collaborations already underway.
71 credit unions are now providing current accounts through collaborative vehicles, an increase of 20 from January 2021.
While there are positive developments, I cannot emphasise enough, to the sector the importance of growing lending.
The current Loan to Asset ratio of 27% is unsustainably low and must be increased significantly if the sector is to grow.
Credit Unions will not be able to take advantage of the opportunity of bank branch closures without collaboration and increasing lending.
The third objective is to Support Governance
The review also puts forward proposals that will assist the Boards of Directors to focus on strategic development.
The development of the proposals under this objective has been greatly assisted by research conducted by the Credit Union Advisory Committee in relation to credit union directors.
This is a great example of data driven research and analysis which greatly informs the policy debate and leads to concrete proposals.
This research and these proposals emphasise the importance of strong, well-functioning credit union boards and the role of the Board Oversight Committee in assisting and facilitating tough strategic decisions.
The Board of Oversight Committees fulfil a unique and important role in supporting and assessing governance and risk management frameworks in credit unions and ensuring governance obligations are met.
The NSF has been pragmatic and helpful in the development of the core proposals and has also been supportive of a number of additional technical amendments.
The purpose of these technical amendments is to facilitate both the board of directors and the Board Oversight Committee to carry out their duties in a more efficient and streamlined manner.
These technical amendments also service to modernise and update certain sections of the Credit Union Act.
The fourth objective is to Improve Members Services
The review takes account of the need and desire to keep improving services to members.
The proposals put forward under this objective consist of practical improvements to the Common Bond which will assist credit unions in providing more products to more members, while protecting the essence of the common bond.
These proposals should help credit unions to improve their competitiveness by increasing the flexibility of some of the rules around the Common Bond.
The fifth objective is Transparency of Regulatory Engagement
There is a need for better coordination within the credit union sector in its engagement with the Central Bodies and also with other state bodies.
The review will seek to include proposals to support regulatory engagement whilst respecting the need for regulatory independence.
The review will not include any specific proposals to change regulations and/or regulatory limits.
The legislative proposals coming out of the Review are subject to the approval of myself, Minister Donohoe and our Cabinet colleagues in the coming weeks.
As well as work on the review, since entering office I have made good progress to help support and deliver meaningful reform and to deliver on government commitments.
I brought through legislation that gives Credit Unions discretion for the first time ever to convene wholly or partly virtual Annual General Meetings (AGMs).
We completed legislation to enable the wind-down of the Credit Union Restructuring Board, which will hopefully occur this year.
We have enacted legislation to bring Buy Now Pay Later and PCP providers under the regulatory framework and legislation to cap the rates moneylenders can provide.
We are undertaking a retail banking review, which will have a different terms of reference but which will complement the policy review undertaken by credit unions.
Lastly, I reviewed the Credit Institution Resolution Fund Levy and the Credit Union Stabilisation Levy. Since 2019 these levies have been reduced by 56% or a €6.7 million per annum saving for Credit Unions.
It is ten years since the enactment of the last piece of significant credit union legislation – the Credit Union Cooperation with Overseas Regulators Act 2012.
In this last decade the credit union sector has seen a lot of change and the role of the Board Oversight Committee has also changed and evolved.
Now is a good time to reflect on the work that has been carried out by Board Oversight Committees in the last ten years.
I believe it is important to take stock of this work and to consider how it can be built on and improved in the future.
While the legislative proposals are a positive step forward, I would, however, caution that legislative amendments can take time to implement.
The legislative changes being put forward as part of the Review will be helpful, but they will not solve the financial and business model challenges the sector is facing.
The local credit union and the role it can play in the economy and in communities is more important now than ever before.
If the credit union sector is to grow and become the movement it has the potential to become the NSF and other stakeholders need to continue their work to ensure the development of strong, well-functioning, well supported boards.
Thank you for your time and for giving me the opportunity to speak to you today.