Michael Noonan (Limerick City, Fine Gael)

The Government established the Commission on Credit Unions to review the future of the credit union movement and make recommendations in relation to the most effective regulatory structure for the sector. The commission is to take into account credit unions' not-for-profit mandate, volunteer ethos and community focus, while paying due regard to the need to fully protect depositors' savings and financial stability. The Commission on Credit Unions submitted its interim report to me on schedule at the end of September 2011 and it was published shortly thereafter. The interim report deals with phase one of the commission's work regarding the strengthening of the regulatory framework for credit unions, including more effective governance and regulatory requirements.

In summary, the interim report's recommendations are: the establishment of a credit union stabilisation mechanism; the introduction of a prudential rulebook for credit unions setting out a comprehensive framework of regulatory requirements; changes to credit union requirements on governance, competency, risk management, internal audit, lending, compliance, liquidity and other matters; the commencement of Part III of the Central Bank Reform Act 2010 for credit unions, which will provide the Central Bank with the powers to set out regulations and a code of fitness and probity for the credit union sector; the commencement of credit union contributions under the deposit guarantee scheme; enhanced Central Bank powers to inspect, investigate and gather information from credit unions; the extension of the Central Bank's administrative sanction regime to credit unions; and the application of the provisions of the Central Bank (Supervision and Enforcement) Bill 2011 to credit unions.

The interim report was well received by stakeholders and wider commentators. I have accepted the interim report recommendations and have asked my Department to prepare legislative proposals for inclusion in the credit union Bill to be published by the end of June under the EU-IMF programme. These proposals are to be discussed with the Commission on Credit Unions before being submitted to Government for approval.

Additional information not given on the floor of the House.

There are a number of recommendations which will be given effect in the meantime.

My Department is currently making the necessary arrangements to commence credit union contributions under the deposit guarantee scheme and will be discussing implementation issues and timelines with credit union stakeholders over the next few weeks.

In accordance with the commission's recommendations, I expect to be in a position to commence Part III of the Central Bank Reform Act 2010 shortly, which would apply the Central Bank's fitness and probity regime to credit unions. Once commenced the Central Bank will then have to formulate and consult on draft regulations and a draft code before the fitness and probity regime can come into full effect for credit unions.

The commission recommended that the resolution powers granted to the Central Bank under the Central Bank and Credit Institutions (Resolution) (No. 2) Bill 2011 should be considered for those credit unions that meet the intervention conditions set out in the Act. The Central Bank recently undertook the first such action through the appointment of a special manager to Newbridge Credit Union.

The final report of the Commission on Credit Unions is due to be submitted to me by the end of March and I expect that it will deal with the remaining issues in the commission's terms of reference, including restructuring. I do not propose to bring forward proposals on these issues until I have had the benefit of considering the commission's recommendations.

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