Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Credit unions have an important role to play in providing credit in local communities around the country and I am supportive of safe and responsible lending by them. Acting as the independent regulator, the Registrar of Credit Unions at the Central Bank has applied lending restrictions to some credit unions.  I have been informed that these restrictions are viewed as short-term in the majority of cases and imposed as a means of allowing a credit union to address identified concerns as quickly as possible. Where lending restrictions are imposed, they tend to take the form of a restriction on individual loan size or commercial lending activity and, in some cases, a limit on the total lending permitted each month. At this time fewer than 10% of all credit unions have a restriction in place which limits the total amount of lending within the month, while close to 40% of all credit unions have a restriction on commercial lending activity. Currently, the average loan rate in the sector is just over €6,000 and about a dozen individual credit unions have lending restrictions that limit the amount loaned to less than €10,000. This ensures the vast majority of credit unions can continue to make loans significantly greater than the average loan for the sector. The Registrar of Credit Unions has assured me that restrictions are reviewed on a regular basis. 

Under the Credit Union and Co-operation with Overseas Regulators Act 2012, I introduced the right for credit unions to appeal regulatory decisions, including those related to lending restrictions, to the independent Irish Financial Services Appeals Tribunal.

Section 35(2) of the Credit Union Act 1997 permits a credit union to have up to 30% of its loan book outstanding for more than five years and up to 10% for more than ten years.  Based on the most recent information provided by credit unions for the Registrar of Credit Unions in the December 2013 quarterly prudential returns, average lending over five years as a percentage of gross loans was some 11%, while average lending over ten years as a percentage of gross loans was about 2%. These figures indicate that, in general, credit unions are well within the limits as set down in the 1997 Act.

Additional information not given on the floor of the House

I have been informed by the Registrar of Credit Unions that with regard to the impact of lending restrictions on the ability of credit unions to lend, it should be noted that data available to the registrar show that there is no material difference between the average loan-to-asset ratio of credit unions with and without restrictions. Also, where individual lending restrictions are imposed, the data show that the majority of credit unions are not lending up to the lending restriction amount, with the majority of loans granted being at lower loan levels.

The Registrar of Credit Unions has informed me that lending restrictions are, in most cases, intended to be short-term in nature and kept in place until the credit union has addressed the issues giving rise to the particular concerns advised to it and the registrar has evidence that the weaknesses in governance, systems and controls are properly remediated and solutions have been fully embedded by the credit union. The Registrar of Credit Unions has advised that a credit union that engages proactively in mitigating identified risks will find that the registrar is open to reviewing and, where appropriate, easing lending restrictions.

I am satisfied that the safety of members' savings and the security of the credit union sector as a whole are central to actions taken by the Registrar of Credit Unions.

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