Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I thank the Deputy for raising what I know is a very important issue for the people of Newbridge and for him personally. It is an issue he has raised in the House with the Minister for Finance on a number of occasions.

While the Government is absolutely determined to support a strengthened and growing credit union movement and has highlighted its support for the return of credit union services to Newbridge, the role of the Minister for Finance is to ensure the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions. In line with the Credit Union Act 1997, as amended, the registration of a new credit union and the extension of a common bond of an existing credit union is the responsibility of the Registry of Credit Unions at the Central Bank.

The Minister for Finance was informed by the Central Bank that it sought to address both financial and governance issues at Newbridge Credit Union from 2008 which ultimately led to the appointment of the special manager in January 2012. Following a thorough assessment and in the context of the existing legislation, it was determined that the only viable resolution of the financial difficulties was a transfer to another entity. It is important to understand the practices in Newbridge that operated over many years. Some of these can be illustrated in the following key lending statistics: an individual loan of €3.2 million, which was in excess of the Credit Union Act restriction of a maximum of 1.5% of the total assets; 52% of the loans exceeded five years duration as opposed to the maximum of 20% as set out in the Credit Union Act; the average loan in Newbridge Credit Union was €17,281 as compared with the average credit union loan which was €7,764; and 26 loans of an average value of €550,000 which were seriously distressed. These figures illustrate that Newbridge Credit Union was operating in a very different way from a normal credit union. The structure of some loans was more akin to development loans with so-called bullet repayments as opposed to regular repayments.

All available options were considered by the Central Bank before the decision was taken to transfer all assets and liabilities, excluding the premises of the credit union, to Permanent TSB. In line with the resolution options available, the Central Bank undertook a process which involved the examination of possible credit union combinations. These efforts resulted in an approach being made to a number of credit unions. Ultimately, however, no credit union considered that it was in its best interests or those of its members to complete such a combination even in the context of considerable taxpayer support. The Central Bank also considered proposed solutions put forward by various interested parties but formed the view that none was viable.

The transfer to Permanent TSB was ultimately the only viable solution available with the alternative option being a full-scale immediate liquidation of the credit union with interruptions to members' access to their funds and risks to depositors not covered by the deposit guarantee scheme. This action was taken to protect members' savings within Newbridge Credit Union and to protect confidence and stability across the credit union sector and the wider Irish financial sector. The alternative option to a transfer to Permanent TSB was that full-scale immediate liquidation, which was not in anybody's interests. The transfer to Permanent TSB ensured that members could continue to access deposit and lending services within the local community and also ensured the protection of their savings.

It is acknowledged that there is a demand for the services of a credit union in Newbridge and the Minister for Finance has been informed by the Central Bank that it is open to meeting any party interested in restoring credit union services to the Newbridge area, including the possible extension of the common bond of credit unions in the local area. Any proposal to establish a new credit union or to extend the common bond of an existing credit union is subject to regulatory approval by the Central Bank. As of 31 January 2015, the Central Bank has received a proposal from a local credit union to extend an existing common bond that would allow for the restoration of credit union services to the Newbridge area. This proposal is under consideration by the Central Bank and a final decision will be relayed in due course to the credit union involved.

The funding required for the protection of Newbridge Credit Union members' savings is being provided by the credit institutions resolution fund and it is fully recoupable via a levy over time. The Government has made available €500 million to support the stability of the credit union movement. This amount is divided between two distinct funds, with €250 million in the credit institutions resolution fund for resolution purposes such as in the case of Newbridge and €250 million in the credit union fund which provides funding for voluntary, incentivised and time-bound restructuring under ReBo, the Credit Union Restructuring Board.

The Minister for Finance would like to emphasise the Government's recognition of the important role of credit unions as a volunteer co-operative movement and the distinction between credit unions and other types of financial institutions. The Government's priorities remain the protection of members' savings, the financial stability of credit unions and the sector overall. The Government is determined to support a strengthened and growing credit union movement and would encourage the movement to work with stronger credit unions in order that they can provide a viable option for assisting weaker credit unions. In particular, the Government and the Minister for Finance would like me to highlight their support for the future return of credit union services to Newbridge. As I have already outlined, there is a proposal with the Central Bank that is subject to its ongoing consideration.

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