Credit Union Resolution Levy scrapped for 2025 and Phase 3 of the Credit Union (Amendment) Act commenced

The Minister for Finance, Jack Chambers TD, and Minister of State for Credit Unions, Neale Richmond TD, have today (25/09/2024) announced that the levy rate for the Credit Union Institutions Resolution Fund for 2025 has been set at 0% and that Phase 3 of the Credit Union (Amendment) Act will come into effect on Monday 30th September.

The Minister for Finance, Jack Chambers TD, welcomed the commencement saying:

“I am delighted to commence Phase 3 of the Credit Union (Amendment) Act.

The commencement of Phase 3 will have far-reaching positive implications for the credit union sector in the years to come.

This is an important development for the Credit Union movement which has big ambitions to expand its offering. It’s essential that Government supports this in the interest of customers and Credit Union members in our towns and villages across our country.

“We are also today setting the levy rate for the Credit Institutions Resolution Fund at 0% for 2025 which will help keep costs down – a crucial concern for all businesses including Credit Unions.”

“I want to thank Minister Richmond, his predecessors, and all who have contributed to bring this important piece of legislation to this point.”

Minister for Credit Unions Neale Richmond TD said:

“I have been consistently engaging with Credit Unions right across Ireland and the clear message I have received is that they want to do more. Today’s development lets them do just that.

“Credit Unions will soon be able to refer members to another Credit Union to access a particular service. This will allow Credit Unions to serve more people, and will ensure that no matter where you live, you will be able to access the full suite of products offered by our Credit Unions.

“Loan syndication and participation allows Credit Unions to share the risk of certain loans, again supporting their expansion and allowing them to do more to serve their members.

“Credit Unions are at the heart of our communities and provide vital supports for their members. This move is a clear indication that we in Government want Credit Unions to be in a position to do more for their members.

“I want to thank the Credit Union representative bodies, the Central Bank of Ireland, the Credit Union Advisory Committee and the Department of Finance for helping us to reach this point and urge all Credit Unions to take full advantage of these new opportunities.”

Key provisions commenced in Phase 3 include:

Credit unions can engage in loan participation and loan syndication.
Credit Unions can refer members to another Credit Union where they are unable to provide a service.
Boards will be allowed to review plans and policies every 3 years instead of annually. This will allow credit union boards to better manage their own governance and to allow each board to concentrate on strategy and development.

CREDIT INSTITUTIONS RESOLUTION FUND LEVY RATE FOR 2025

Minister Chambers and Minister Richmond have set the levy rate for the Credit Institutions Resolution Fund at 0% for 2025.

The Minister reduced the levy based on a reasonable projection of the fund reaching its target of €65 million in 2025. A comprehensive review of the Resolution Fund is currently ongoing and outcome of this review will inform the future structure and use of the fund.

Minister Chambers commented:

“Given the projections that the Credit Institutions Resolution Fund will reach its target of €65 million in 2025, I am pleased to announce that I have decided to set the levy rate for 2025 at 0%.

Today’s position for the 2025 levy is without prejudice to the outcome of the ongoing review of the fund. Any potential changes to the fund will be based on the findings of this comprehensive review, and there may be a need to increase the target size of the CIRF and adjust the collection of levies in future contribution periods.

I would like to thank the Credit Union Advisory Committee (CUAC) and the Central Bank for their role in providing statutory consultation on this process.”

Minister Neale Richmond said:

“Setting the Resolution Fund Levy at 0% for 2025 is the right thing to do for our Credit Unions.

“This will help to reduce costs for our Credit Unions who provide crucial services to our communities every single day.

“I am proud to represent Credit Unions, to see first-hand their work and how important it is, and to take these steps to support their growth over what will be a very exciting year for the sector.”

-ENDS –

NOTES

Credit Union (Amendment) Act 2023

The Credit Union (Amendment) Act 2023 was signed into law on 13 December 2023.

The Act aims to bring about significant reforms for the credit union sector in Ireland. The Act represents a very significant piece of legislation that will have far-reaching positive implications for the credit union sector in the years to come.

There are a number of options for credit unions to collaborate, share resources, and generate economies of scale. It is expected that this will enable credit unions to compete more effectively in the mortgage and SME lending market.

Key provisions of Phase 3 of the Act include:

Credit unions can engage in loan participation and loan syndication. Loan participation involves one credit union lending to a borrower, and then sharing some of the risk with other credit union(s) under a separate agreement. Loan syndication has a similar commercial outcome but each credit union enters into a loan agreement directly with the borrower.
A provision on referrals. This means that where credit unions are unable to provide a service that a member asks for, they can refer customers to another credit union that provides this service.
A provision allowing the board to review plans and policies every 3 years instead of annually. This will allow credit union boards to better manage their own governance and to allow each board to concentrate on strategy and development.

Thanks to the Act, Credit Unions are now free to choose the option most suited to their members’ needs, including:

increased flexibility around the common bond, opening up opportunities to expand membership and services,
Credit union boards will be empowered to better manage their own governance and to allow each board to focus and concentrate on strategy and development,
In Phase 5, corporate credit unions will be able to be formed, which is potentially transformative for the sector

Credit Institutions 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.

Credit unions are now the only financial institutions contributing to the Resolution Fund as banks and certain investment firms contribute to either the Single Resolution Fund (SRF) or the Bank and Investment Firm Resolution Fund (BIFR), and no longer contribute to the Credit Institutions 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 Minister for Finance has now agreed decided that the Resolution Levy for 2025 be reduced to a 0% levy rate on the basis that the target size of €65 million will be met in 2025 with further income interest earned.

The levy rate for 2025 will be set at 0.0% in the regulations, a reduction in the levy rate from 0.012007% of assets in 2024. The Department of Finance is currently engaged in a comprehensive review of both the Resolution Levy and the Stabilisation Levy.

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.