Pat Breen (Clare, Fine Gael)
Link to this: Individually | In context

Question 6: To ask the Minister for Finance if he has requested a report from the regulator of credit unions on the ability of the sector and of individual unions to manage the problems thrown up by the crisis in financial institutions. [12523/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

As Deputies will recognise, the current serious difficulties in the financial sector and the accompanying economic downturn are affecting all financial institutions, including credit unions. On account of the reduced availability of credit in the banking system, credit unions are now experiencing an increase in demand from their members for loans. There has also been some increase in bad and doubtful debts and, as is the case across the whole of the financial sector, there have been losses on credit union investments. It is not surprising that this combination of trends has led to a situation where credit unions generally have reported a decline in profits for 2008.

However, it is important to note that the Registrar of Credit Unions has highlighted that of the 419 credit unions registered in the Republic, only a handful are experiencing significant difficulties at present. The registrar is continuing to work closely with the boards of these credit unions. Very close oversight, monitoring and controls over these credit unions by the registrar is intended to assist them in addressing current issues and to ensure their long-term stability and sustainability. The registrar reports regularly to the regulatory authority to ensure early identification and response to any significant issues relating to the credit union movement or any individual credit union. In addition, the registrar briefs my Department on these matters on an ongoing basis and my officials keep me fully informed of relevant developments in the credit union sector. I did not, therefore, need to request a specific report from the registrar on the issue raised in the Deputy's question.

The Registrar of Credit Unions is responsible for the regulation and supervision of credit unions using the powers available under the Credit Union Act 1997. This rules-based legislation provides extensive powers of direction to the registrar to ensure the financial soundness and safety of credit unions and to protect credit union savers. The registrar can also issue regulatory direction and prohibition orders to credit unions in regard to a broad range of issues, including investments, raising of funds, loans, assets and liabilities ratios and the composition of their assets and liabilities.

Additional information not provided on the floor of the House.

He has extensive powers of inspection and investigation of credit unions as well as broad supervisory powers, including to appoint, suspend or remove a person as a director of a credit union or to remove auditors. A number of offences are also provided for in the Act.

The extensive powers currently available to the registrar under the Act are important in ensuring that the regulatory system is robust and effective and in particular safeguards members' savings. The rules-based approach to regulation embodied in the Credit Union Act has clearly served the credit union movement well, as is demonstrated by the small minority of credit unions which the registrar is currently monitoring closely in the current environment.

Richard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

Perhaps the Minister will set out the extent to which credit unions hold seriously impaired assets such as bank shares. I understand some have held the securities which the Minister describes as toxic. Perhaps the Minister will give an indication of whether a problems arises in terms of credit unions that hold significantly impaired assets. Also, is he satisfied with the robustness of management standards in credit unions? The Minister indicated that only a few have significant difficulties. Has he received a report on the robustness of the management and protection systems to deal with any incidents in respect of individual credit unions?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

On difficulties in individual credit unions, the registrar briefs my Department on a regular basis on the general position within the credit union movement. The credit union movement is in a relatively strong financial position with solid liquidity and reserves. The registrar has highlighted that of the 419 credit unions registered in the Republic, only a handful are affected by these difficulties. He continues to work closely with the boards of those credit unions that are encountering problems. Close oversight, monitoring and controls over those credit unions by the registrar is intended to assist them to address current issues and to ensure their long-term stability and sustainability.

Joan Burton (Dublin West, Labour)
Link to this: Individually | In context

In the context of savings in the credit union movement, which total approximately €14 billion, has the Minister given any consideration to a proposal by a number of people in the credit unions that credit unions be permitted to hold a national community savings bond via the National Treasury Management Agency? This would offer an alternative and safe savings mechanism for the credit unions as opposed to some of the types of product which, as Deputy Bruton stated, were aggressively sold to credit unions.

Will the Minister agree that credit unions represent a type of back to basics banking service at local level and that the importance of credit unions is significant now that people are experiencing difficulties? The Central Bank has stated that the figure for personal sector lending in Ireland was, at the end of the last quarter of 2008, €172,000 million. The high level of personal debt is causing huge problems for this country. Would the Minister consider a credit union community savings bond with the National Treasury Management Agency on the same lines as the recovery bond proposed by the Irish Congress of Trade Unions? People want to save with the Government in a safe way.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

As regards any bond which the National Treasury Management Agency might enter into with the credit union movement, I am open to any proposals. I am also certain the NTMA would be open to any proposals formulated in that regard. I would examine them with great care because the Government values the enormous contribution which the credit union movement makes in the provision of credit and basic bank facilities throughout Ireland. However, I would point out that it is difficult as Minister to develop a consensus among the credit unions as not all credit unions are affiliated to the league. Also, even within the league there can be diversities of view in regard to particular issues. However, if any credit union expresses an interest in respect of such a bond, I will examine it.

On the Deputy's more general question which I appreciate does not arise directly on this question in regard to the provision of some form of savings bond by the National Treasury Management Agency for general investment, I am again open to the suggestion. However, I point out that the rates at which we obtain funding on world markets might be less than that which would command interest among investors. Also were we to offer such products through the post office or directly from the NTMA, an issue would arise in terms of the extent to which we would be simply transferring deposits from the banking system to the State banking system.

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The credit union movement, which operates in every corner of Ireland, is fantastic. In terms of ensuring they are robust, I refer to a question raised by Deputy Bruton in regard to whether the registrar and Financial Regulator have carried out an investigation of credit union investments? This would provide certainty and security to the movement. Perhaps the Minister would respond on that specific matter.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

Under the legislative framework set out in the legislation, the primary function of credit unions is to offer savings and loans services to their members. Due to significant growth in the credit union movement in recent years there has been a significant amount of resources for investment by credit unions to generate a return for members. Strict legislative control exists under section 43 of the 1997 Act which restricts investments to those trustees are authorised to invest in under the trustee authorised investment legislation.

The registrar has powers to give a regulatory direction to a credit union if he deems it appropriate in the interests of its members to limit investments of a specified class or description. Of course, it is the responsibility of the board of directors of each credit union to ensure that the investment policy is prudent and responsible and conforms to what is permissible under the Credit Union Act. To assist the boards, in October 2006 the registrar issued a detailed guidance note on investments to help safeguard the risk profile of credit union investments and to ensure that members' savings continue to be protected. This is the basis for the monitoring of the investment activities of credit unions by the registrar.

Following the changes in financial market conditions for investments since August 2007, the registrar has initiated a process, including consultation with stakeholders, with a view to revising the existing investment framework.