Martin Heydon (Kildare South, Fine Gael)
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I thank the Ceann Comhairle for selecting this Topical Issue today. This is a very serious topic with a local element affecting the town of Newbridge in my constituency and the very national element of the credit union movement in general and lessons learnt from the past.

I thank the Minister of State for attending today. I remind people what happened in Newbridge Credit Union. In January 2012, the Central Bank appointed a special manager to run Newbridge Credit Union. Effectively, for the following 22 months, that special manager stayed in place in a position where that person could say very little owing to a High Court gagging order. Very little information came out to the members of the credit union. They were kept in the dark and it led to a very significant amount of frustration. People did not know there were problems with their credit union because they were not able to be told. It led to considerable speculation as to what had happened.

When the Central Bank report was published in November 2013, just after the transfer to PTSB, we got examples of some significant lending, which would not be traditional to credit unions, that had caused major problems. However, the Central Bank decision to appoint a special manager could have been handled better. Leaving people in the dark for as long as they were without that key information was very difficult.

Since taking over the assets and liabilities in November 2013, PTSB has acted in the credit union building in Newbridge in the name of Newbridge Credit Union, albeit not in a position to give out new loans, but to continue to run existing loans. That has left Newbridge, the 15th largest town in the country, effectively without credit union services. The issue came to a head in recent weeks with PTSB sending cheques to thousands of members of the former credit union with the final closure of those savings accounts. That was the one cheque in the post most people did not want to get because they did not want to see their credit union close with the loss of those services.

This very large town does not have access to credit union services and businesses do not have the ability to take out those small loans. The big benefit for small businesses in the area was that when the dividend was paid at the end of the year, people had more money in their pockets heading into the Christmas period. There are many people in the town who do not traditionally want to be with banking institutions but like to be members of a credit union. That option is no longer available to them. It is crucial that we ensure the return of those credit union services to the town of Newbridge.

Ultimately, I want to see a credit union operating in Newbridge again. However, as a starting point we need people in Newbridge to have access to credit union services that we do not have at present. There is no common bond area covering Newbridge. The nearby Naas Credit Union has made an application to the Central Bank. I met Central Bank representatives in support of the Naas application. That proposal is still under consideration to the best of my knowledge.

It is absolutely crucial that Newbridge residents get access to a credit union. Down the line I hope that such a facility can open in the town itself. However, as a start, people who want to access those credit union services have to be able to do so. It is just too big an issue. The ordinary members of the former Newbridge Credit Union, who made no mistakes and are not at all at fault for what happened with the credit union, are the real losers at present.

Simon Harris (Wicklow, Fine Gael)
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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.

Martin Heydon (Kildare South, Fine Gael)
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I thank the Minister of State for his response. I have a few questions arising from it. Provision was made for €53.9 million. How much of that money will be needed to solve the problem in Newbridge? I am very mindful that this money is ultimately being paid by other credit unions which are all paying levies into the credit institutions resolution fund so there is no such thing as a victimless crime.

In respect of investigations, what lessons have been learned from a national point of view? How can we be sure that what happened in Newbridge never happens again? What investigations have taken place to discover the cause of what happened and to make sure lessons have been learned from that? Has there been any criminal investigation into what happened? Has there been a review of the role of the Central Bank and the levels of governance that were applied? While I know it was a period of light-touch regulation and it was not the only financial institution to run into difficulties due to that, what review has taken place?

The building is probably one of the finest and most iconic buildings in the town of Newbridge and might in some respects have been part of the problem due to its cost. It is a fine building of which the people of Newbridge feel a very strong sense of ownership. I would like information about the OPW's role in acquiring this building, the future uses of the building and the Intreo services that have been mooted and discussed around the town. We do not have Intreo services in Newbridge and they would be very beneficial for us given that Intreo is a single point of contact for people who need access to supports to get back into employment. This is something we very much need in the Newbridge area. I have also raised with the Minister of State the need for a community use for that building that would support existing and start-up businesses in order that the building could be used for the community to the maximum extent possible.

Simon Harris (Wicklow, Fine Gael)
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The Minister for Finance agreed to the request of the Governor of the Central Bank for the payment of a financial incentive of up to €53.9 million to transfer the assets and liabilities, excluding the premises, of Newbridge Credit Union to Permanent TSB. All the assets and liabilities of the credit union, excluding the premises, were transferred to Permanent TSB pursuant to a High Court order dated 10 November 2013. The financial incentive agreement between the Central Bank and Permanent TSB comprises the following elements: €23 million in cash upfront to fill the hole in the balance sheet; restructuring and integration costs of €4.25 million; €2 million for other transferring liabilities; and a risk share on the transferring loans whereby the State will absorb 50% of the losses where loans perform below their transfer value and 50% of the gains where they perform above the transfer value. If the loans were written off entirely with no recovery, this would have resulted in an additional €24.7 million total cost.

I have been informed by the Central Bank that the position regarding the drawdowns to date and expected further expenditure from the agreement is as follows. Restructuring costs, which are payments to cover the establishment and maintenance of a recovery and underwriting platform for the Newbridge Credit Union loans, are capped at a possible €3 million. To date, €1.3 million has been drawn down. The Central Bank expects to incur a further €200,000 in such costs. Integration costs, which are payments to cover the costs of any redundancies of former Newbridge Credit Union staff, are capped at a possible €1.25 million. To date, nothing has been drawn down but the Central Bank expects to incur the full €1.25 million allocated to integration costs. Transferring liabilities are capped at a possible €2 million. To date, €300,000 has been drawn down. The Central Bank does not expect further drawdowns under this heading. Loss compensation payments are payments to Permanent TSB to cover deterioration in the performance of the Newbridge Credit Union loan book. The Central Bank has a 50-50 profit and loss sharing arrangement over a ten-year period with Permanent TSB in respect of these loans in order that the maximum cost the Central Bank can incur is €24.7 million if all of the loans defaulted. If the loans perform well, the Central Bank may have no liability under this heading or could actually be paid by Permanent TSB. Given the performance on the loan book to date, the Central Bank expects to incur some costs under this heading, although nowhere close to the capped amount.

In respect of offences committed or lessons learned, Section 33AK(3)(a) of the Central Bank Act 1942 requires the Central Bank to report information to other bodies, including An Garda Síochána, if it is suspected that a criminal offence has been committed by a supervised entity or that a supervised entity has contravened a provision of the relevant Act. The Central Bank commissioned a report from the liquidator examining the governance and management practices leading to the appointment of the special manager.

The Central Bank considered the liquidator's report in the context of whether any further action might be required and has concluded that no further regulatory action is required. The report will inform regulatory decisions of the Registrar of Credit Unions concerning those involved in the future.

On the current position regarding ownership of Newbridge Credit Union, as Minister of State with responsibility for the Office of Public Works I can tell the Deputy that the liquidator has signed contracts with the OPW to purchase the former premises of Newbridge Credit Union. This sale is expected to be completed formally within the first quarter of this year. As the Deputy rightly said, the building will provide important Intreo facilities in Newbridge which are about much more than the traditional dole office. Intreo is about getting people back to work. It is an important community facility.

In regard to the Deputy's approaches to the Tánaiste and me about community use of spare capacity within the building, my officials in the OPW and officials in the Department of Social Protection are meeting on that matter. Both Departments are positively disposed to examining ways the community can use any additional capacity once the Intreo services have been established.