Written answers

Wednesday, 8 March 2006

Department of Finance

Financial Services Regulation

9:00 pm

Photo of John DeasyJohn Deasy (Waterford, Fine Gael)
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Question 125: To ask the Minister for Finance if he will reconsider the proposal by the Irish Financial Services Regulatory Authority on the restriction of investment options available to credit unions; his views on whether the proposed investment restrictions will reduce investment yields and returns resulting in lower investment income, result in a declining surplus and a corresponding reduction in dividend rates, put huge pressure on the ability of credit unions to maintain the required level of reserves, reduce funds available for community projects, reduce funds available to fund social finance initiatives; his further views on whether the large majority of credit unions follow responsible investment policies and are being unfairly penalised under the proposals; his further views on whether the small number of individual credit unions that carry out reckless and high risk investment policies can be adequately dealt with under the existing powers available to Irish Financial Services Regulatory Authority; and if he will make a statement on the matter. [9666/06]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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In light of the high proportion of credit union assets now invested, the Registrar of Credit Unions has highlighted that under the current investment rules, credit unions are not precluded from taking on inappropriate levels of risk. The registrar made proposals in November 2005 for a new investment framework to protect and safeguard the risk profile for credit unions and ensure that members' savings continue to be safeguarded.

The current position is that the registrar is consulting with the representative bodies for credit unions with a view to securing an agreed approach to the measures and to the implementation of the proposed new investment framework. The Deputy may wish to note that notwithstanding the continuing discussions regarding certain details of the proposed investment framework, there is a broad consensus that a tightening up of investment rules is required, taking into account the need for credit unions to generate a reasonable return on their investments.

My intention is to submit the registrar's proposals for the new investment framework to the Credit Union Advisory Committee, the statutory advisory body for credit unions under the Credit Union Act 1997, at an early date for its views in order to inform my decision on the next steps required. I understand that an element of the registrar's proposal is to establish minimum investment standards and then authorise credit unions on a case by case basis taking account of their capacity to manage more sophisticated investments.

In addressing these matters, I can assure the Deputy that among my priorities will be the need to ensure that the interests of credit unions are protected and that the regulatory system operates effectively to safeguard the deposits of credit union members. In this respect, it is essential that an investment framework strikes the correct balance in reining-in inappropriate investment activities while at the same time ensuring the continued stability, financial sustainability and development of the credit union movement.

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