The Government has reduced the amount that credit unions will have to pay next year into funds for resolving financial difficulties in individual institutions.
The Minister for Finance said the decision was taken after he had taken into consideration legislative responsibilities, the views of the sector, the Credit Union Advisory Committee, and the Central Bank and in the context of the current environment that credit unions are operating in.
Nine years ago the Central Bank and Credit Institutions (Resolution) Act established a resolution regime for credit institutions and credit unions.
This included resolution and stabilisation funds to help those who get into financial difficulty.
However, credit unions are now the only institutions contributing to it as other financial institutions are now covered by the Single Resolution Mechanism.
Last year a review was conducted by the Department of Finance and Central Bank and it was decided that the Resolution Fund should be grown from €35m to €65m by 2025.
It was also agreed that approximately €5m a year should be paid into it by credit unions each year for the next five.
The levy rate would be adjusted dependent on the movement of the size of the assets in the sector over the years and whether any costs of resolution have been incurred by the Resolution Fund.
Now Paschal Donohoe has agreed that the levy for next year should be kept at around €5m a year, a similar rate to this year.
Last year credit unions collectively paid €12m under the Credit Institution Resolution Levy.
The levy rate for the stabilisation fund is also being reduced.
This will result in a charge of approximately €300,000 for the credit union sector next year.
However, given the uncertainty relating to the Covid-19 pandemic, no decision was taken in relation to the target size of the Stabilisation Fund.
It will be reviewed as required by law next year.
The Credit Union Development Association has welcomed the announcement.
"In particular we appreciate Minister Donohoe's decision to heed our concerns in relation to the Stabilisation Fund," said Kevin Johnson, CUDA.
"While CUDA continues to support the purpose of a stabilisation fund, as it stands, it has yet to be claimed against, as it is both difficult and costly to access."
The Irish League of Credit Unions (ILCU) also welcomed the development, saying it followed extensive lobbying by it over several years.
It said one of the lobbying aims was to highlight the financial impact these levies are having on not for profit credit unions whose sole function is to serve the financial needs of members in their communities.
"In relation to the Credit Union Stabilisation Levy, today's announced reduction by the Minister means credit unions will pay €2.7m less in 2021 than they paid in 2020," said Ed Farrell, ILCU chief executive.
"Instead of having to pay €3m next year, they will only pay €300,000. This is a significant cost saving for credit unions which will go some way to alleviating the impact of the COVID-19 pandemic on credit union balance sheets."