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Representation

Jul 02 2020

CUDA welcomes first Minister with specific Credit Union responsibility

By News, Representation

Credit Unions hopeful that the Minister can support the ongoing expansion of services to members and local communities

Credit unions have warmly welcomed the appointment of Jack Chambers TD as Minister of State for Financial Services, Credit Unions and Insurance which represents a significant step as it’s the first time that any Minister will have specific responsibility for the development of credit unions. According to CUDA (The Credit Union Development Association), Ireland’s Credit Unions have in excess of 3 million members and are the sole provider of credit for many of these members, accounting for approximately 34% of the consumer lending market.

Commenting on the appointment, Kevin Johnson, CEO of CUDA, said “We welcome the appointment of Minister Chambers and are committed to supporting him in his new role. Credit unions continue to excel at consumer lending, and are in far better shape to support members than was the case during the banking crisis. We have solid financials, with average capital of 16.5%, stronger governance, great digital capabilities and a reputation as Ireland’s most trusted financial services brand. We have an increased range of lending products – consumer loans now complimented with home loans and business loans, and we look forward to working with Minister Chambers to further broaden the financial support that credit unions can offer members and their local communities.

Keeping key credit union services available to members since the onset of Covid-19 has been a key factor in maintaining morale in local communities. Credit Unions have long believed in playing our role in addressing major socio-economic needs and see the provision of financial supports to be part of that duty.

We have written to Minister Chambers setting out how credit unions can support him in achieving aspects of the Programme for Government and contribute to rebuilding the economy, both at local and national level.”

Supporting SME’s under financial pressure

Mr Johnson went on to say, “Credit unions have significant members savings available for lending and their renowned personal touch that is normally applied to consumers can equally be applied to SME’s at their time of need. We hope the Minister will support our efforts to be part of the Credit guarantee scheme and while the scheme only guarantees a proportion of the money lent, we would be prepared to carry the balance of that risk for businesses in our local communities.”

Credit Unions are ready and willing to invest in social, co-operative and affordable housing schemes that could otherwise stall as a result of Covid-19

“Investment in social, co-operative and affordable housing schemes is required for Ireland to solve its housing crisis, and demand for this segment may increase as more people’s incomes suffer. Such lending is well aligned to the credit union purpose. We would support an amendment of the Credit Union Act to allow providers of such properties, such as AHBs, Housing Co-Ops, Local Authorities and others to become credit union members solely for the purpose of borrowing for their constituted objectives.”

Oct 23 2019

Beneficial Ownership Register – 4th EU Money Laundering Directive

By Compliance, Owner Members, Representation

CUDA attended the AML Private Sector Consultative Forum (PSCF) last month and provided an update to your CUs.  The Department of Finance (DOF) and Central Bank were in attendance.  CUDA wish to give you an update in relation to the Beneficial Ownership Register, requirements under the 4th EU Money Laundering Directive and European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016.

CUDA previously communicated with your Credit Union, in February 2017 and provided guidance in relation to the setting up the Beneficial Ownership Register (BOR) at your CU.  There have been significant delays at government level in the setting up of the Beneficial Ownership Register due to delays in implementing legislative provisions etc.  Ireland has been under significant pressure to finalise this element of the 4th AMLD and EU infringements are imminent if Ireland cannot comply ASAP.   Draft regulations on Beneficial Ownership of Corporate Entities) Regulations 2019 have already been circulated to your CU.

While CUs are unlikely to be as significantly impacted as other financial institutions, a number of requirements were set out in the 2017 guidance.  The following is a summary of requirements for CUs.

 

  1. Establish the beneficial owners of the credit union

Establish the beneficial owners of the credit union.  For the purposes of the Regulations, a “beneficial owner” is a person who ultimately owns or controls the relevant entity, in this case the credit union…..   The credit union must, at a minimum, record the information in respect of each director and the chief executive officer/manager of the credit union in the Register as its beneficial owners.   

  1. Obtain the required information and enter it on the Beneficial Ownership Register

 When the credit union has established its beneficial ownership, the requisite information and supporting documentation for the purposes of the Regulations must be obtained from them and entered on to the Register.  As this is most likely to apply to the senior managing officials of the credit union, the following sets out the matters that should be included in respect of them

  • Name
  • Date of Birth
  • Nationality;
  • Residential Address;
  • Statement of the nature and extent of interest held by that beneficial owner (We would suggest that the position held by the person in the credit union could be included here).
  • Date on which that person was entered in the Register as a beneficial owner; and
  • Date on which that person ceases to be a beneficial owner (whenever applicable).
  • PPSN — It is noted in the new draft regulations that a further requirement for PPSN is now also included and hence will need to be captured on the beneficial ownership register.
Oct 23 2019

Credit Unions Reserves – transfers in and out

By Compliance, Owner Members, Representation

In 2017, CUDA sought and obtained a practical interpretation to the restrictive and prescriptive reserve requirements contained in the 2016 Regulations. Despite the Regulations requiring that reserves must be “perpetual in nature”, we obtained CBI confirmation that transfers can be made by a credit union into and out of reserves held in excess of the 10% RR requirement. Please find below June 2017 Info Briefing post on this, and we attach the RCU/CUDA correspondence as circulated following our progress on this topic. Where required, please circulate the attached letter to your auditors.

June 2017 Info Briefing

We have now circulated correspondence between the RCU and CUDA to your credit unions following concerns relating to the perpetual and non-distributive nature of all reserves.           
The concerns centred on the apparent restrictive nature of the 2016 Regulations with respect to reserves (namely, Reg 3(1) (a-c)). Setion 45(1), 1997 Act, as amended, requires a credit union to ensure that the regulatory reserve is unrestricted and non-distributable. Section 45(2) requires that a credit union ensure all reserves remain adequate. However, Regulation 3(1) went a step further by requiring that all reserves are perpetual in nature, unrestricted and non-distributable. The difficulty is that this presents the possibility that credit unions are unable to utilise funds in their reserve accounts for distribution as dividend or otherwise intended.
Whilst it is acceptable that the regulatory reserve is defined as realised financial reserve (i.e. unrestricted and non-distributable), ensuring all reserves (as required under the Regulations) are perpetual and non-distributable was hampering credit unions effectively utilising the funds and ensuring that the accounts are maintained adequately taking into account the nature, scale and complexity of the credit union. 
We sought and obtained direction from the RCU in relation to Regulation 5, which requires a credit union to ensure compliance with Part 2 of the Regulations and Section 45, i.e. how can a credit union maintain the adequateness of the reserve if additional reserves (i.e. the reserve minus the regulatory reserve) cannot be decreased as well as increased in line with credit union requirements? 
The correspondence, now circulated, confirms that:
  • it is for the board of directors of each credit union to decide on the amount of reserves to hold in excess of this minimum requirement having taken prudent account of the scale and complexity of the credit union’s business, its risk profile and prevailing market conditions.
  • transfers can be made by a credit union into and out of reserves held in excess of the 10% minimum RR requirement so long as the credit union has satisfied itself that the total level of reserves held are appropriate taking prudent account of the scale and complexity of the credit union’s business, its risk profile and prevailing market conditions.

Credit Unions should refer to the correspondence for further analysis and if you have any queries, please contact us at the CUDA Offices (elaine.larke@cuda.ie or kevin.johnson@cuda.ie).

Oct 23 2019

Revised Credit Agreement

By Compliance, Owner Members, Representation

As you know we have been working on a revised Credit Agreement. Recently, we concentrated on PPI and considered options in relation to the removal of reference to PPI from the credit agreement.  The preferred option is that separate correspondence will issue in relation to PPI alongside the Credit Agreement. We have also been working closely with NALA with the intent of obtaining the Plain English Mark for the credit agreement going forward.  The revised credit agreement is with the CBI. They are carrying out their internal assessment of the proposed amendments and once they revert to us, our next step will be to talk to the IT Providers. Further updates on the revised Credit Agreement can be found on CUDA connect.

Oct 23 2019

Investment and Participation in CU Owned Outsourced Service Providers

By Owner Members, Representation

Credit unions will be in receipt of a letter from the RCU setting out their expectations when credit unions participate in a CUSO. The letter sets out:

  1. The obligations and considerations when investing/participating in a credit union owned outsourced provider (CUSP)
  2. The outsourcing requirements when obtaining a service from that CUSP or a related service provider

The letter describes a CUSP as an organisation that:

  • is established and owned by credit unions;
  • may include 3rd party alliance partner(s) which may or may not have an equitable interest in the venture;
  • its purpose is to exclusively provide specific services to credit unions and/or credit union members;
  • often operate as commercial outsourced service providers, independent from their owners;
  • may provide services to credit unions other than their owner credit unions.

It provides that the credit union must be able to demonstrate to the CBI that the “investment is directly linked to an authorised activity of the credit union, and, that it is necessary in order to fulfil the credit union’s current and future operating requirements, its strategic plan, long term goals, objectives and risk appetite”.  The Central  Bank provide a broad interpretation of “operating requirements” covering “all activities, functions, and requirements that are necessary and essential for the credit union to fulfil so that it may act within its objects, its licence and permissions from the Central Bank, provides services to its members in a timely and effective manner, and to comply with all applicable legal and regulatory requirements”.

The letter notes that credit unions should have regard to S43(2), Credit Union Act 1997, as amended, and Reg 25, 2016 Regulations. Depending on the investment, notification to the CBI or alternatively authorisation is required – the latter, in cases where the service being offered or provided by the CUSP falls within Section 48 approval. Appendix 1 attached to the letter sets out all of the information required by the CBI when providing notification.

The same outsourcing requirements apply when outsourcing a business activity to a CUSP as with any other third-party service provider.

Whilst not determined by law, that letter provides that “CUSP investments…should fall below 2% of total assets”, and, investment in an individual CUSP should be less than 50% of the 2% limit. Therefore, based on these amounts, a credit union with €150m in total assets, could invest up to €1.5m in any one CUSP.

CUDA has considered the letter in detail. CUDA will be responding to the letter on behalf of CUDA owner member credit unions. We will communicate directly with your credit unions in this regard. If you wish to speak to us in relation to any concerns you may have in relation to the letter, please do not hesitate to contact us (kevin.johnson@cuda.ie / elaine.larke@cuda.ie).

Oct 23 2019

Resolution Levy

By Owner Members, Representation

Following a recent review and consultation on the Credit Institutions Resolution Fund (CIRF), the Department of Finance has agreed to reduce the resolution levy to 0.0274% of total assets. The following table demonstrates the positive impact of the reduction:

 

Asset Size Current Levy New Levy Reduction
       
€         275,000,000  €         140,525  €        75,350  €         65,175
€         200,000,000  €         102,200  €        54,800  €         47,400
€         150,000,000  €           76,650  €        41,100  €         35,550
€         100,000,000  €           51,100  €        27,400  €         23,700
€           50,000,000  €           25,550  €        13,700  €         11,850
€           25,000,000  €           12,775  €          6,850  €           5,925

At the same time, we took the opportunity to consult with the Department in relation to the Stabilisation Fund. The Department has confirmed it intends to complete a full review of this fund, but has in the meantime reduced the levy from 0.017% to 0.0164% of total assets. The following table demonstrates the positive impact of the reduction:

 

Asset Size Current Levy New Levy Reduction
       
€         275,000,000  €         46,750  €         45,100  €         1,650
€         200,000,000  €         34,000  €         32,800  €         1,200
€         150,000,000  €         25,500  €         24,600  €            900
€         100,000,000  €         17,000  €         16,400  €            600
€           50,000,000  €           8,500  €           8,200  €            300
€           25,000,000  €           4,250  €           4,100  €            150

Resolution Levy

Credit Institutions Resolution Fund Levy (Amendment) Regulations 2019 (S.I No. 494, 2019):

  • The Resolution levy has been reduced from 0.0511% to 0.0274% of total assets
  • The new levy is payable by end of February 2020.
  • The new levy is calculated on total assets as of 30th June 2019

Stabilisation Levy

The revised Stabilisation Levy Regulations are not published yet, the following information is from Department of Finance Press Release:

  • The Stabilisation levy has been reduced from 0.017% to 0.0164% of total assets
  • The new levy is payable by the end of February 2020.
  • The new levy is calculated on total assets as of 30th September 2019

The revised Stabilisation Levy Regulations are still in draft form. We will circulate the Regulations once enacted and published.

CUDA is pleased with these results, that came about after much discussions and submissions to the Department of Finance. That said, we will continue to lobby for further transparency in relation to the upper levels set for these funds and the requirements relating to access (esp. the CBI viability test to access the Stabilisation Fund).

Any questions on any of the above topics, please do not hesitate to contact us (kevin.johnson@cuda.ie / elaine.larke@cuda.ie).

Oct 23 2019

Dormant Accounts Fund (Dormant Accounts Acts 2001-2012)

By Owner Members, Representation

We communicated with your credit unions earlier in the month; as you may know, the Department of Rural and Community Development have engaged Deloitte to conduct a study to identify potential additional sources of dormant accounts for possible inclusion in the State-run Dormant Accounts Fund. During our discussions with Deloitte we highlighted many of the unique features of credit unions, including inactive accounts need to facilitate immediate access for say funeral expenses; the impact on dividend lodgements or car draw deductions; the retention of a minimum balance to retain membership status; LP/LS; and the fact that the funds could be for projects outside the credit union’s common bond.

We will continue to communicate with Deloitte and the Dept as required. Our analysis has shown that the return for the Dormant Accounts Fund from individual credit unions will be insignificant for the purposes of raising additional finances for the State-run Fund. CUDA would propose that credit unions remain outside of these requirements.

Oct 23 2019

Credit Union Lending Framework CP125

By Owner Members, Representation

It is expected that the Regulations will be operative in Q1, 2020. We expect to see the following changes since the publication of CP125:

  1. Extended 25-year loan maturity limit
  2. The removal of an inner limit for house loans (i.e. max. 7.5% limit will be permitted)
  3. The introduction of lending limit of 10% of total assets – with the flexibility of allocating 10% solely for house loans
  4. The amendment to the definition of house loans – allowing an optionable approach to renovation loans – personal unsecured or house loan secured, without a requirement for a first legal charge
  5. The amendment of the definition on commercial/business loans – it now mirrors the definition in 2015 SME Regulations (as amended)
  6. Amendment of definition of a secured loan and the decision for further guidance on “security” as opposed to hardcoding this in Regulations.

The next step is ministerial sign off. Once this process is completed, we will have a definitive time line for the commencement of the Regulations

Oct 23 2019

CUDA Meeting with RCU

By Owner Members, Representation

CUDA attended its most recent quarterly meeting with the Registrar of Credit Unions and other members of the RCU team on 8th October.

Draft Agenda for Quarterly CUDA/RCU Meeting

Central Bank of Ireland

8th October 2019

Subject Matter Area Query
Credit Union Regulations CP125

–         Seek update on content and timelines re Regulations
Request for Clarifications Accrued Interest –         Seek update
  AML Launch –         Complaints received from Credit Unions re. launch of the Guidelines on Preventing Money Laundering and Terrorist Financing
  CEO Forum –         Seek update and insight on planned next steps
  Levies –         Discussion on CUDA Submission to DoF on Consultation Paper re Resolution Levy and additional correspondence re Regulatory Levies.

–         Seek transparency from CBI on methodology in reaching proposed funding targets [along with DoF]

–         Seek thoughts on future intent for Stabilisation Fund.  No visibility on the CBI’s viability model.

–         Seek transparency from CBI on methodology in reaching funding applicable to credit unions for Industry Levy
  Dormant Accounts –         Seek CBI on research underway on behalf of Dept of Rural and Community Development
  ICURN –         Seek update on report and findings
Financial Service Sector & Credit Unions An Post –         Actively offering car loans and personal loans.  Discuss regulation of An Post in the financial service sector.
AOB

A full update was provided to the National Council members, and many of the items are expanded on below. If there is any item that you would like further information on, or if there is a matter that you would like included on the agenda for future meetings with the RCU please let us know by contacting either Kevin or Elaine (kevin.johnson@cuda.ie / elaine.larke@cuda.ie).