Written answers

Tuesday, 26 February 2008

Department of Finance

Financial Services Regulation

9:00 pm

Photo of Catherine ByrneCatherine Byrne (Dublin South Central, Fine Gael)
Link to this: Individually | In context

Question 28: To ask the Tánaiste and Minister for Finance if he is satisfied with the progress being made to find a satisfactory system for deposit protection in credit unions. [7766/08]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

The Irish League of Credit Unions (ILCU) has since 1989, operated a savings protection scheme (SPS) for credit unions. The SPS aims to protect the individual savings of members by ensuring that credit unions are financially and administratively sound and provides for savings protection for each individual credit union member.

It is important to note that under the SPS regime no member of a credit union has experienced any loss of shares and deposits and no credit union has become insolvent. The SPS has only been called upon in a very limited number of cases and it has never been necessary to make savings protection payments to individual credit union members. It is also important to note that sound prudential supervision by the Registrar of Credit Unions under the Credit Union Act, 1997 in ensuring the continuing solvency and liquidity of credit unions safeguards the interests of credit union savers.

Section 46 of the Credit Union Act 1997 provides for approval of savings protection schemes by the Registrar of Credit Unions as the delegate of the Regulatory Authority. Once an approved scheme is in place under the Act it would be incumbent on all credit unions to participate. This highlights the importance of ensuring that an approved savings protection arrangement is consistent with the requirements of the credit union movement as a whole.

In line with changes in the regulatory environment for financial services generally the need for modernisation of the credit union SPS has become evident over time. Proposals for reform of the SPS were the subject of discussions in 2007 between the Registrar and ILCU resulting in the submission of detailed proposals for the reform of SPS in November 2007. I have written to the Chairman of the Financial Regulator confirming my view that an approved savings protection scheme for all credit unions should be in place as soon as possible. In this respect the Chairman of the Financial Regulator has recently advised me that it is the intention of the Financial Regulator to deal with outstanding issues on SPS as quickly as possible. I will be continuing to monitor progress towards this objective in the coming weeks.

Photo of Tommy BroughanTommy Broughan (Dublin North East, Labour)
Link to this: Individually | In context

Question 29: To ask the Tánaiste and Minister for Finance if in view of the decision of the Chancellor of the Exchequer in the UK to increase the level of the deposit protection scheme for deposit holders to £50,000, he will take steps to increase the deposit protection scheme here to a similar amount; and if he will make a statement on the matter. [7714/08]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

The Irish deposit protection scheme complies with harmonised arrangements set out in the EU Deposit Guarantee Schemes Directive 94/19/EC. The Directive currently provides for a level of protection of 90% of the loss incurred by a depositor when a credit institution cannot repay funds, subject to a maximum payment of €20,000. The Exchequer or the CBFSAI do not fund the scheme; it is funded by a levy of 0.2% on bank deposits.

In the wake of the recent turmoil in the global financial markets, the Ecofin Council of 9 October 2007 requested the Commission and the Financial Services Committee (FSC) to consider possible enhancements of the EU deposit guarantee scheme and to report back to the Council by mid-2008. Ireland is participating in this review and the parameters of the Irish deposit guarantee scheme will be reconsidered in the light of the outcome of the current review. In the meantime I consider it would not be appropriate to bring forward any changes to our scheme pending the outcome of that review.

I think it is also well to bear in mind that while a good deposit protection scheme can help to support confidence in the banking system, the best safeguard of the financial system is the existence of and the effective operation of a sound regulatory and supervisory regime. I am glad to say that Ireland has been positively assessed by the IMF in that regard as recently as September 2007.

Comments

No comments

Log in or join to post a public comment.