Credit unions go to war over huge hike in regulation costs
CREDIT unions are to mount a political campaign opposing moves that would force them to pay up to 400pc more to fund the Central Bank.
The Central Bank wants credit unions and other financial services companies to pay more of the cost of regulating them.
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But credit unions argue that the increases are so severe it will put them under huge strain.
They say they should not be treated like banks, as they are largely volunteer-led and are not-for-profit institutions.
Credit unions currently pay just 9pc of regulatory costs linked to their operations. The larger the credit union, the more they pay.
But the Central Bank wants this payment to rise to 50pc of regulatory costs by 2022.
This would see the costs of Central Bank regulation for a medium-sized credit union go from €10,000 last year to €51,000 in two years' time - a rise of 400pc.
For a large credit union the payment to the Central Bank would rise from €28,000 last year to around €144,000 a year.
Credit unions already pay three other levies to the State.
And when the levy to pay for the financial services ombudsman and the data protection commissioner are included it means around €24m is paid over every year.
Irish League of Credit Unions chief executive Ed Farrell has written to Finance Minister Paschal Donohoe questioning why he granted approval to the Central Bank for the increase.
Mr Farrell also wrote to members of the league, saying: "We are asking all credit unions to lobby their local politicians, especially Government TDs, to prevent this unfair and totally disproportionate increase being imposed by the Central Bank."
He argued that raising the levy is counter-intuitive.
"It is a tax on social capital. It is a levy on volunteers," he said in a letter to the minister.
In his letter, Mr Farrell said the Central Bank funding levy will cost the 249 credit unions affiliated to the league €7.8m in 2022, a steep hike from €1.5m last year.
This was despite the fact that credit unions deliver positive social impacts to citizens on a not-for-profit basis every day.
Mr Farrell said the charity regulator and the Sports Council have their administrative costs borne by the State and the same principle should apply to credit unions.
League credit unions already pay €7.5m a year to fund the Credit Institutions Resolution Fund levy, another €2.5m as part of the Stabilisation Scheme Levy, and €12.5m a year as part of the Deposit Guarantee Scheme.
This is at a time when the income and surplus levels of credit unions are under severe pressure, the league said.
A spokesperson for Finance Minister Donohoe said at the end of last year the Central Bank flagged to credit unions that the industry funding levy will increase to 50pc of costs between 2020 and 2022.
This proposal underwent a public consultation process.
"The Minister, taking into consideration the unique and important role that credit unions play and having considered the views of the Irish League of Credit Unions, recommended to the Central Bank that credit union contributions should not increase beyond the 50pc already planned until the levy trajectory has reached the planned 50pc rate, and a public consultation regarding increasing the levy rate for credit unions beyond 50pc is undertaken, which would include a regulatory impact assessment of such a change on the sector."
The main banks have been subject to 100pc of financial regulatory costs since 2012, the department said.