Brian Hayes (Dublin South West, Fine Gael)

I thank Deputy Michael McGrath for raising this matter and also for addressing it in a measured and common sense way, which I believe will reassure the public and those who have savings in credit unions about the sturdiness of those credit unions as a crucial aspect of lending within society. While difficulty has emerged in respect of some credit unions and some poor lending policy by them, it is in probable marked contrast to the worse lending policy of many of the commercial banks in this country.

The Government recognises the important role of credit unions as a volunteer co-operative movement. As the Minister has highlighted continuously, there is a need for restructuring in the credit union sector. We have made it clear that the Government would provide resources to deal with the problems in credit unions if necessary and that the Government will ensure all necessary measures are taken to ensure a stable credit union sector.

I reassure all savers in credit unions that their savings are secure. The Government's deposit guarantee scheme insures savings in all financial institutions, including credit unions, up to €100,000 per saver per financial institution.

The Government believes that credit unions can continue to play an important role in the Irish financial sector and has established a Commission on Credit Unions to bring forward recommendations by the end of March on the future structure of the credit union sector. The Central Bank strategy on credit unions is designed to be ready to take pre-emptive remedial action to maintain member confidence and protect the financial stability of the sector should issues arise. Where a credit union has specific issues the Central Bank will work closely with it taking the necessary and appropriate regulatory actions. In all cases the Central Bank will engage fully with those credit unions to seek an agreed solution where possible. The priority is to protect members of credit unions and their savings, the financial stability of credit unions and the sector overall.

The Commission on Credit Unions' interim report identified 56 credit unions as under capitalised, 27 of which are considered seriously under capitalised. Of course, Central Bank intervention will not be necessary in all of these cases. In many instances a credit union will trade out of its difficulties and in some instances it will move to restructure or join forces with other credit unions.

The Credit Institutions Resolution Fund is now established under the Act. The purpose of the fund is to provide a source of funding for the resolution of financial instability in, or an imminent serious threat to the financial stability of, an authorised credit institution. This Act applies to credit unions as well as other credit institutions such as banks and building societies. The Government has already provided €250 million in funding to the Credit Institutions Resolution Fund to support resolution where necessary.

Resolution payments will only be made following as assessment on a case-by-case basis undertaken by the Central Bank under the Act. The Central Bank is responsible for managing and administering the resolution fund. All authorised credit institutions, including credit unions, will be required to contribute to this fund.

Provision for the resolution of credit unions, where necessary, is included in the EU-IMF programme of support. The Government has already provided €250 million in funding in 2011 to the Credit Institutions Resolution Fund to support resolution where necessary. We have also committed to making available further resources to deal with any resolution or restructuring of credit unions should it be required.

The Deputy also asks about consolidation and restructuring. This issue is currently under consideration by the Commission on Credit Unions and the Government. The Commission is expected to submit its recommendations at the end of March on how restructuring should best be applied in the Irish credit union sector. Legislation to support restructuring of credit unions will be included in a credit union Bill to be published later this year. The Bill will also provide for a strengthened regulatory framework for credit unions.

I would refer Deputies to the comments by the Minister for Finance, Deputy Noonan on credit unions yesterday where he made it clear that if difficulties arise in a particular credit union the Central Bank stands ready to intervene and give all the assistance necessary to keep it going and to ensure that credit union savings and loans are secure.

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