Press release
Minister Donohoe signs Credit Institutions Resolution Fund Levy regulations into law
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The Minister for Finance and Public Expenditure & Reform, Paschal Donohoe T.D. signed into law the Credit Institutions Resolution Fund Levy regulations on Saturday 28th September 2019.
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. 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. Since the Resolution Levy was introduced in 2012 the contribution to the Resolution Fund was at a rate of 0.0511% of the total assets of the credit union each year up to 2018. It was agreed to carry out a review of the Resolution Fund before the introduction of any further levies. The Department of Finance in collaboration with the Central Bank of Ireland carried out this review, which included a public consultation on the matter.
Following this review it has been decided that the target size of the Resolution Fund should be set at €65 million and that this target should be met by 2025. It was also agreed that the Resolution Fund should be reviewed in 2025 and that the annual levy should be approximately €5 million per annum from 2020 to 2025 to increase the size of the Resolution Fund from €35 million to €65 million, broadly in line with the increased average asset size of credit unions. The adjusted levy rate would be dependent on the movement of the asset size of the sector over the five years and whether any costs of resolution have been incurred by the Resolution Fund.
The levy rate for 2020 will be set out in a Statutory Instrument in October 2019 and will be based on the assets as at end of June 2019. Based on sector assets of c. €18.23 billion, as at end June 2019, the levy rate to raise €5 million would be 0.0274% per cent. The impact of the revised rate will see a 44 per cent reduction in the Resolution Fund levy for 2020 compared to 2019.
The Department of Finance prepares the annual Levy Regulations following consultation with the Central Bank of Ireland 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.
The Credit Institutions Resolution Fund Levy Regulations, along with the first public consultation document and a feedback statement are now available on the Department of Finance website.
In addition, following a review of the Credit Union Stabilisation Scheme in October 2017, it was decided that the Stabilisation Levy for 2018 and beyond be set at 0.017% of total assets. The review concluded that the Stabilisation Levy should continue to build to €30 million over a period of ten years. However, given the continued growth in credit union assets the Minister has now decided to reduce the levy rate from 0.017% to 0.0164% of total assets for the levy period 1 October 2019 to 30 September 2020. The levy will continue to raise circa €3 million per annum and ultimately continue to build the fund to €30 million over a period of ten years. A further review of the stabilisation levy will be carried out next year before the introduction of the 2021 levy. The Minister will implement the Stabilisation Levy Regulations for 2020 later in the year.
In aggregate these measures reduce the cost on the sector by €4 million per annum over the next 6 years while the Resolution Fund is built up to its target level.
In making his decision the Minister noted,
“the important role credit unions play in local communities as a volunteer co-operative movement” and that this government is, “determined to continue to support and strengthen the credit union movement as it grows”.
ENDS