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Comment from Dr. Kevin Johnson, CEO of the Credit Union Development Association (CUDA), on key changes coming into force today February 21, 2024 as a result of enhancements to the Credit Union Act

By News

Credit unions processed approximately €200m in new mortgage lending in 2023. As a result of the legislative changes which came into force today, we anticipate this volume doubling each year for the next couple of years. We believe the credit union mortgage lending could reach €1bn per annum within 3 to 4 years which could put credit unions in the top 5 mortgage lenders.

For the first time, credit unions can now offer a service or product such as a home loan to a member of another credit union – under a formal arrangement with that other credit union. For householders and aspiring homeowners, this means there will be greater access to fairer mortgages as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide a mortgage themselves. This effectively means that every credit union in the country will be able to offer mortgages.

Credit unions can also refer applications for other products to another credit union – such as current accounts, debit cards, and business loans. Credit unions can now essentially partner with other credit unions to offer their members a wider selection of products.

This new collaboration on lending could generate an additional €2.2bn in lending each year for credit unions.

Credit union members will have more access to digital and automated services as a result of the enhancements to the Credit Union Act. This increased digitalisation will generate cost savings for credit unions in a number of areas. For example, the ability to make credit union annual reports available online will save credit unions an estimated €75m a year in postage and printing costs (see Appendix). All of these cost savings will then be used to deliver even better and lower-cost products to our members.

In addition, increased digitalisation will make it easier for credit unions to sign up new business members, and lend to these businesses– in this regard, we estimate that digitalisation will boost business lending alone by €100m a year.

The changes that come into force today (February 21, 2024) are just the first of a suite of enhancements to the Credit Union Act in the pipeline. Other changes in the pipeline are the establishment of credit unions for credit unions (aka Corporate Credit Unions) and the ability of credit unions to invest in shared services – these will help credit unions provide maximum efficiency for their members by sharing costs and expertise. This in turn will enable credit unions to offer a wider range of lower-cost loans and other products to their members, as well as more favourable returns on savings.

ENDS

 

Appendix

 

 

 

 

Bizfin – CUDA Credit Unions partner with Government in Ukraine Credit Guarantee Scheme

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Credit Unions support local businesses impacted by the economic consequences of the conflict in Ukraine by partnering with the Department of Enterprise, Trade and Employment (DETE) on the Ukraine Credit Guarantee Scheme

 

The Credit Union Development Association [CUDA], launched its Small Business Lending solution for credit unions to offer business loans to SMEs, BizFin, Smart business finance, made simple’ in early 2021.

CUDA announced today that two of its large credit unions, Capital Credit Union and Credit Union Plus, with a combined membership of over 100,000, are now successfully partnering with Government in the low-cost Ukraine Credit Guarantee Scheme through BizFin. CUDA believes that credit unions will succeed in working with micro, small & medium sized businesses, adversely impacted by the conflict in Ukraine who are facing supply chain disruptions and increased input (including energy) costs.

Credit unions believe that SMEs have faced challenging trading conditions for over 3 years, which may have led to a sustained lack of investment, while necessary at the time, could have a detrimental impact on competitiveness.  The expectation is that as the economy gets back on its feet, lending should also grow.  Economic forecasts for the Irish economy remain positive [1]and lending will be required as part of SME’s capital investment strategy to fund expected growth.

The clear benefit for Credit Unions on partnering on a Credit Guarantee Scheme, is they are in receipt of an 80% Guarantee from the SBCI /or the Department of Enterprise, Trade and Employment, enabling them to offer competitively priced loans to their business members.

CUDA acknowledge that credit unions, who were again voted most trusted organisation in 2023 are more involved in their local communities, a consequence of which is more local businesspeople will be willing to sit down and discuss the merit of them participating in this scheme.

Kevin Johnson, CEO of CUDA commented, “

“As the trusted provider of financial services in communities throughout Ireland, we believe that many sole-traders and small business owners will feel more comfortable dealing with credit unions, particularly where they can receive a fast answer to their credit application. Many of these solid businesses are struggling due to high increase in costs, particularly energy costs and are now at a point where they need to review their working capital to ensure they are well positioned for the future.

We have designed the standalone business website, Bizfin.ie, to support this initiative which will be accessible to all business customers of the participating credit unions. They will be able to apply for business loans as well as apply for credit union membership via this site.”

Ends

  

About Ukraine Credit Guarantee Scheme

The Ukraine Credit Guarantee Scheme is offered by the Department of Enterprise, Trade and Employment to provide viable SMEs, including primary producers, impacted by economic challenges arising from the conflict in Ukraine with access to low-cost finance.

The scheme supports economic activity in Ireland, facilitating the provision of working capital and medium-term investment finance to businesses adversely impacted by the conflict in Ukraine who are facing supply chain disruptions and increased input (including energy) costs.

Borrowers will contribute to the cost of the scheme by paying a risk premium on the credit advanced. This premium will be incorporated into the margin on the loan, collected by the on-lender and paid to Government of Ireland.

 Loan Features

  • Loans from €10,000 to a maximum of €1,000,000 / €400,000 for BizFin Credit Unions, per borrower (subject to Loan Amount Criteria, see below for further details)
  • Repayment terms of between 3 months up to 6 years
  • Eligible financial products: term loan facilities.
  • Loan amounts less than €250,000 will be unsecured.
  • Amounts greater than €250,000 may be secured; however, a personal guarantee may only be sought in circumstances where it is required to capture supporting security, or where it is an uncollateralised personal guarantee and is limited to a maximum of 20% of the initial finance agreement amount.
  • Up to 90 days interest and/or capital moratoria are possible under the scheme. These remain at the discretion of the participating on-lender.
  • Loans will be available up to the 31 December 2024 or until the scheme has been fully subscribed.

 Eligibility Criteria

Borrowers must self-declare that:

  • Their costs have increased by a minimum of 10% on their 2020 cost figures due to the impact of the conflict in Ukraine.
  • Finance is being sought specifically as a result of difficulties being experienced due to the conflict in Ukraine and meet the specific criteria as set out in the Loan Purposes section.
  • Finance is being sought for a new loan. Refinancing of existing loans is not

How to apply

Step 1 – Applicants must first register on the SBCI Hub and submit an online Eligibility Application Form to check if they can access the scheme. Once the online form is completed, successful applicants will be issued with an eligibility code.

Step 2 – The applicant must provide this eligibility code to the Credit Union to begin their credit application process.

Please note that the SBCI eligibility code is not a guarantee of credit approval.

 

About BizFin

This Business & Community Lending solution is an initiative that commenced in participating credit unions in 2021. These credit unions have a strong desire to serve other sectors of the credit union   membership, namely micro, small & medium sized enterprises, and community clubs & associations.

Our strategy is to deliver prudent high quality lending growth within our catchment area, by offering secured and unsecured longer-term lending.

This is achieved by having the necessary in-house expertise & staff, coupled with the close collaboration of contributing credit unions.

In BizFin we have developed a uniform & consistent approach, so that every applicant will have the same transparent, professional & personal experience in every participating credit union.

If you would like to know more about a business or community loan, including the Ukraine Credit Guarantee Scheme, visit BizFin.ie.

 

[1] European Commission Economic Forecast for Ireland May 2023[/vc_column_text][/vc_column][/vc_row]

Credit Union Development Association (CUDA) delighted to see publication of the Credit Union (Amendment) Bill 2022

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Over many years credit unions have operated within outdated legislation – legislation not fit for purpose in a modern era. For some time now, CUDA has called on the Government to introduce enhancements to the existing credit union legislation to ensure credit unions can reach their potential on behalf of their members.

Today, the Government has published a new Credit Union (Amendment) Bill. On behalf of its members and the credit union sector at large, CUDA welcomes this development. According to Kevin Johnson, CEO CUDA, “this unique opportunity will enable credit unions to offer and deliver more benefits through enhanced products and services to existing and future credit union members”.

Credit Union legislation was last overhauled 10 years ago by the Credit Union and Co-operation with Overseas Regulators Act 2012.

The published amendments will allow greater collaboration and choice when developing credit products and offerings to consumers such as sharing large community project loans amongst a number of credit union participants (“loan sharing” or “loan participation”), and the ability to offer a full range of services to consumers, irrespective of the fact that a credit union may not have that product themselves e.g. mortgages, by introducing the member to a colleague credit union that does offer the product or service (“loan introduction”).  These are standard practices amongst credit unions in other jurisdictions such as Canada.

CUDA particularly welcomes the changes that recognise the great work of volunteer directors, who provide a professional service pro bono. The changes will allow them to focus more on the overarching governance and strategic direction and policy making of the credit union, while allowing a credit union assign new roles, focusing on implementation and operations, to its professional management team.

There is no doubting the trust members place in their credit union. The relationship is unique. CUDA is pleased that the legislative changes will allow credit unions continue their special relationship with members and the community through environmentally friendly methods – including the introduction of digital enhancements to their existing services and facilitating additional loans to the community. However, CUDA is quick to note that credit unions are very aware of the importance of face-to-face interactions with their members. Something that is greatly diminishing in other areas of the banking.

CUDA commends the great work achieved by all stakeholders, noting that the process started out with interested parties having differing views and priorities. The pandemic brought an additional layer of complications. CUDA says that the published Bill is an example of what can be achieved through meaningful cooperation.  CUDA would like to take the opportunity to express its appreciation for the productive contributions of Minister of State, Séan Fleming TD, Minister for Finance, Pascal Donohoe TD, the team at the Department of Finance led by Brian Corr, the Registrar of Credit Unions, Elaine Byrne, and her team at the Central Bank, and our colleagues in CUMA, ILCU and NSF.

CUDA looks forward to the speedy implementation of the legislation to ensure credit unions can continue to deliver their first-rate service – ensuring the best outcomes for credit union members, their communities and the wider Irish economy.

Credit Union (Amendment) Bill a priority in Government Legislation Programme

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The Government Legislation Programme was published on 14th September and sets out the agenda of new legislation for this Autumn Session 2022. CUDA is delighted to note that the priority legislation for drafting and publication during this session includes the Credit Union (Amendment) Bill. This will give effect to the proposals that have emerged from the Review of Policy Framework of Credit Unions. It is ten years since credit union legislation was amended.

At a time when there is a significant housing challenge, a climate change crisis, a looming pension crisis and large-scale bank branch closures Government cannot solve these alone. CUDA believes that there is a real fit between key elements of Government priorities and the future role of Credit Unions.

Credit unions have the funds and the market reach – our unique ownership model means benefits flow back to Members and Communities. The new proposals will facilitate real collaboration occur between credit unions. Each credit union is a separate legal entity with its own board and management team, and up to now they are not permitted share business. These changes will permit credit unions to collaborate to introduce loans to each other and collectively share loans. They will be able to establish a credit union for credit unions and have greater opportunity to invest in credit union owned service organisations. These changes will help Credit unions make a greater financial, social and environmental contribution as their legislation framework is modernised.

Allowing credit unions to do more business through these changes, this could effectively see their lending double increasing from €5.5bn to over €10bn.

We will also welcome guidance from the Minister of State at the Department of Finance on how credit unions can qualify to become distributors of State Savings products as this would be an opportunity to broaden the savings options that credit unions can offer.

We look forward to continuing contributing to the good work that is ongoing and would ask all members of the Oireachtas to support and enact these overdue changes. To bring all this good work into existence we need the Central Bank to ensure that they implement regulations that will enable the changes to the credit union law that then enables them to get on with delivering real competition and choice for people throughout Ireland.

Just 6% believe banks will retain cash services “indefinitely”

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Majority believe that buck stops with Government and Central Bank for cash-banking in local communities

 Despite the public and political backlash to the recent attempts at branch closures and the withdraw of cash services by AIB, the vast majority of people believe that it’s only a matter of time before local banking services, including cash, are significantly curtailed.

A new survey, commissioned by Credit Union Development Association (CUDA) and undertaken by iReach, reveals that as many as 60% anticipate that cash services in banks will be removed in time, with just 6% believing banks will retain these services indefinitely.

The survey of 1,000 people nationwide also found that over half (56%) believe that the responsibility to retain cash services should be centrally positioned in the hands of the Government and/or the Central Bank.

Kevin Johnson, CEO of CUDA spoke of the findings,

“It seems that many people feel we are on borrowed time in terms of the rollout of digital banking and the withdrawal of face-to-face banking services, with 60% of respondents feeling that AIB’s decision to retain cash services is only temporary.

Just 6% of respondents believe that cash services as they currently exist will survive indefinitely, with a further 15% feeling that while they believe cash services will be retained, we will have to pay a lot more for them.

It is very much a sign of the times we are in, and the shift to digital banking, that one of the fundamental purposes of the banking system as we know it – namely the circulation of cash – is under threat of becoming redundant. There are many sides to the argument – some people will argue that digital is the way forward and a cashless society is the next logical step. Others will maintain that a solely digital-based banking system would only serve a certain sector of society, would skip a large swathe of people who don’t have the requisite skillset to adopt it, and leave the economy over- exposed to a major cyber-attack.”

Recent statistics from Eurostat1 found that there are 275,000 people in Ireland over the age of 65 who are not using the internet.

Mr Johnson commented,

“That’s a hugely significant demographic and sector of our society. Most of these people require access to banking services and expressly, to cash banking services and a walk-in branch. The prospect of national banking service providers orientating their business development in such a way as to potentially disempower over a quarter of a million people requires serious consideration at Government level, and requires policy making that mitigates such negative societal impacts and detriment – particularly for older consumers.”

The CUDA survey also questioned respondents as to who they feel responsibility to ensure that local communities retain access to cash-banking should fall to, with a third believing that it should remain the responsibilities of the banks to retain services.

 

 

 

Mr Johnson continued,

“Here we see that the majority (56%) believe that the buck stops with the Government and the Central Bank to ensure that people have access to cash banking services in their local communities. A further 30% believe that it’s up to the banks to ensure that local communities have such services.

These numbers are even more extreme amongst KBC and Ulster bank customers, with just 17% believing that it’s up to the banks and 72% saying that it’s up to Government and the Central bank to sort this issue.”

Mr Johnson concluded,

“The retention of cash services in local communities is critical and is a national issue that needs forward-looking centralised planning. In this regard, Credit unions would be happy to support the Government in developing a solid solution to ensure that consumers current and future needs are met.”

 

 

1 Eurostat: Individuals’ level of digital skills (until 2019) https://ec.europa.eu/eurostat/databrowser/view/ISOC_SK_DSKL_I/default/table?lang=en

 

ENDS

Note to the Editor

CUDA

CUDA, the Credit Union Development Association, was legally incorporated in 2003. In its early days, it acted as the representative voice for owner member Credit Unions, with legislators and regulators. The organisation has since evolved and in addition to providing a ‘voice’, has become increasingly engaged in providing support facilities in the areas of regulatory compliance, risk management, shared services and competency development.

CUDA is a Credit Union owned network that enables member Credit Unions to engage in beneficial activities which would not have proved possible to do as single stand-alone entities.

It manages the diverse interests of members to the mutual benefit of the network. In acting as a catalyst for the growth and development of Credit Unions, CUDA now makes many of its support services available to all Credit Unions.

 

 

Appendix

  1. AIB recently announced plans to remove cash services from 70 of its branches throughout the country. It has since reversed this decision following backlash from the public and Government.

Do you believe this reversal is:

  • Permanent – they will retain cash services indefinitely 6%
  • Permanent – they will retain cash services indefinitely but will increase their charges for cash transactions 15%
  • Temporary – they will remove cash services in time 60%
  • I don’t know 19%

 

  1. In your opinion, whose responsibility is it to ensure that local communities have access to cash-banking?
  • The banks– they should look after their customers 30%
  • The Government – to ensure that banks or an alternative provides this service 28%
  • The Central Bank – to ensure that banks or an alternative provides this service 28%
  • Nobody – we just have to move with the times 13%

 

 

 

Credit Unions – The Member-Owned Alternative

By News

As I look out the window, I see a spider working diligently weaving a web – busily performing its modus operandi for subsistence. I can’t help drawing the analogy to the headlines dominating the business pages of the media in recent weeks, which highlight how domestic banks will see significant increases in their profits as Central Banks increase interest rates. The source of these profits will be the unwitting consumer, a bit like the unsuspecting prey of the spider. And banks, like the spider, do what’s inherent in their DNA and in the case of banks it’s to maximise profit.

Ireland faces multiple complex and overlapping pressures including economic shock, climate change, housing, wealth inequality and the growing pension challenge. We can add facing into a winter of increased inflation where the cost of living, energy in particular, is soaring. This is a consequence of sanctions having to be imposed following atrocities committed by the Russian army and their inhuman siege of parts of Ukraine.

There is no doubt that people here in Ireland have changing financial requirements arising from trying to cope with the impact of these events. As two banks exit our national market, some consumers are even required to find a new provider. Reducing the level of competition is likely to lead to even less ‘positive’ product and service innovation as witnessed with the intent of a remaining bank to withdraw cash services, and the reversal of that decision is now likely to see increased charges to keep the promise of maintain branches and related services.

One provider that can help people is the credit union. Credit unions are member-owned, not- for-profit financial intermediaries. Their members have the dual role of owners of the credit union and consumers of the products and services it provides. Membership has grown consistently and the credit union brand remains the most trusted in Ireland as they continue to deliver the best consumer experience in Ireland.

Credit Unions have significantly modernised in the past decade – their structure, legal and regulatory status, product offerings, and service delivery methods have advanced considerably. Members can still access the traditional set of personal loans and savings, and now they have current accounts, ‘one stop shop’ retrofit loans, mortgages, revolving credit, debit cards, community loans, agri loans and loans for small businesses. These are accessible face to face, over the phone or via online facilities.

Staff in credit unions are highly trained as well as being renowned for their helpful approach to all members. They live the guiding principle of “Not for profit, not for charity, but for service” which has remained constant since the founding of credit unions.

What does that mean for people, small businesses and communities in Ireland?

  1. First and foremost is ownership. A credit union is owned by its members. In addition to being a non-profit, credit union operations are set up to benefit you as a member.
  2. Second is the focus on the financial well-being of their Credit Unions are not built to sell you products. They are built to help you succeed financially.
  3. Thirdly, is the availability of credit union Credit Unions were built to help you in good times and difficult times. Whether you have the opportunity to improve your lifestyle or unfortunately face an unexpected downturn in circumstances, such as impact of rapid inflation, you can visit, call or deal on-line with your credit union to discuss ways to find the right solution for you.

At CUDA we do believe credit unions present an underexploited opportunity and could play an even more supportive and leading role in addressing many of the challenges faced by Irish people. There is a genuine desire to support local communities by providing access to products, services, guidance, and advice. In turn there needs to be legislation and regulation that is supportive of such development.

As part of the Programme for Government, the Minister of State at the Department of Finance, Sean Fleming TD, and his department have worked with the sector to identify enhancements to the Credit Union Act 1997 [as amended] that will contribute to enabling credit unions tap into this opportunity. It’s a great start, as the promised new legislation will help credit unions further develop by allowing them to work more closely together, in a manner that they can’t legally do today. Under the new proposed legislation, credit unions will be able to introduce business to each other and co-lend to allow them pool expertise and capital. This in turn will enable them to support an even greater number of members through good times and tough times.

The Central Bank, through the Registrar of Credit Unions, is equally crucial for this needed reform, by ensuring that the regulations required to enable the legislative changes are put in place immediately. Last month the Basel Committee on Banking Supervision published their ‘High-level considerations on proportionality’. It is this type of action we need for credit unions in Ireland to guarantee a level playing field exists, in particular that appropriate and proportionate levels are set for liquidity, for capital requirements, and greater flexibility permitted to lend in the various categories – including fostering the ability to lend more to local businesses, farmers, local clubs and community projects.

Such enhancements will increase credit unions confidence and encourage even greater collaboration as they strive to act nationally and deliver locally.

If Ireland is serious about having a competitive banking landscape, one that is underpinned by Government policy that ensures financial services are for everyone in our society and operated in a manner that fosters public and social interests, then it is essential that these changes urgently are implemented.

Critically, credit unions have a much broader remit than banks – credit unions deliver key banking and financial services to people for a social as well an economic purpose. Unlike the spider and the bank who seek to maximise their returns, credit unions exist to optimise benefits for their members.

Contact your local credit union to experience how your needs and expectations can be met.

 

Kevin Johnson

CEO, CUDA

Credit Union bodies welcome engagement with Minister Fleming on proposals contained in Department of Finance Review of Credit Union Policy Framework

By News

The four credit union representative bodies – CUDA, CUMA, ILCU and NSF – met with Minister with responsibility for Credit Unions Seán Fleming and officials from the Department of Finance today, Thursday 10th March. At the meeting the Minister outlined a list of proposals contained in his Review of the Credit Union Policy Framework.

The proposals were summarised under five key objectives;

  • Objective 1: Recognition of Role of Credit Unions
  • Objective 2: Supporting Investment in Collaboration
  • Objective 3: Supporting Governance
  • Objective 4: Improving Member Services
  • Objective 5: Transparency of Regulatory Engagement

Minister Fleming spoke about the importance of credit unions growing their loan books and proposed a number of measures to assist credit unions in this regard. In particular, he proposed bringing forward legislation to enable credit unions to invest more easily in Credit Union Service Organisations (CUSOs). This would allow credit unions to pool their resources in delivering new loan products to their members such as mortgages and small business loans.  They will also be enabled to establish Corporate Credit Unions to facilitate mechanisms such as a central liquidity system.

The Minister also proposed a number of measures to allow credit unions to introduce members to another credit union where the referring credit union was unable to provide a certain loan product or service. He also proposed legislative change to allow credit unions to share a larger loan between them.

In relation to Governance, Minister Fleming recognised the important role volunteers play within credit unions, and has proposed that this be included in legislation. Further proposals would reduce the work load on volunteer Directors and Board Oversight Committees in the future.

Also included in the measures outlined by the Minister were proposals aimed at making regulatory engagement with credit unions more transparent through the establishment of a Service Level Agreement (SLA) between credit unions and the Central Bank.

Responding to the Minister’s proposals, the four representative bodies welcomed the opportunities for lending for credit unions. However, there was general consensus that the proposals do not go far enough in addressing the key area of regulatory engagement. They recommend strengthened formalised structures that would include the four bodies, the Central Bank and the Department of Finance. This key infrastructure would serve to identify existing barriers to lending and prevent future impediments to progress and service to members and communities. The bodies believe that further engagement in this area is needed.

Credit Union Sector Levy Regulations 2021

By News

The Minister of State, Sean Fleming T.D today, 27th September 2021, issued a press release on the Credit Union Levies for 2021. Commenting on this Kevin Johnson, CEO of the Credit Union Development Association, stated:

We note that the Minister has decided to continue with the levies for Resolution and for Stabilisation at the previous years levels.  It is disappointing that the Minister deems it appropriate to continue to charge a levy for stabilisation as no financial assistance has been provided to credit unions under the Stabilisation Scheme to date and no applications for such support have been made by a credit union.

While CUDA continues to support the purpose of a stabilisation fund, we believe the fund has reached an optimum size and therefore the Stabilisation Fund Levy should be set at 0%.