Joan Burton (Dublin West, Labour)
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Question 93: To ask the Minister for Finance his views on liquidity difficulties in the credit union sector here; if his attention has been drawn to the difficulties in the sector with the payment of dividends; if his further attention has been drawn to cases of anomalous payments of dividends by credit unions in contravention of the Credit Union Act 1997; if he envisages the retention of the savings protection scheme by the Irish League of Credit Unions in the event that the revised Government deposit guarantee scheme, currently under development, covers all credit union deposits; his views on whether it is necessary for the establishment of an emergency fund that a struggling credit union could draw on to cover its liquidity requirements; and if he will make a statement on the matter. [40440/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Registrar of Credit Unions has informed me that taken as a whole the Irish credit union movement has, at the moment, adequate liquidity resources to meet its needs. In addition, no individual credit union currently has a liquidity problem. Because of the ever changing nature of the market, however, the Registrar is monitoring this area closely. On this point, it should be noted that from a regulatory perspective the Registrar is required to consider a range of different scenarios on how things might unfold over the next 12 months, and it was in this context that he requested the Irish League of Credit Unions to consider ways in which it might arrange for liquidity support from among its affiliates in support of any other credit union should any of them encounter liquidity difficulties in the coming months.

In relation to the payment of dividends, the Registrar has indicated that his Office has been working with credit unions to achieve an appropriate balance between the need to reward credit union savers and borrowers and the equally important need to preserve adequate levels of liquidity and reserves in all credit unions. He wrote to all credit unions in October drawing their attention to their obligations under the provisions of the Credit Union Act with regard to the payment of dividends. My Department has been advised that the Registrar is working to ensure compliance by all boards of credit unions with the provisions in respect of the preparation of accounts of credit unions contained in the Credit Union Act. The Registrar has also stressed the responsibility on credit union boards to ensure that the principle of procedure enshrined in the Credit Union Act regarding the preparation of annual accounts is observed.

The action taken by Government in respect of the Deposit Protection Scheme is, of course, complementary to the continuing discussions between the Registrar of Credit Unions and the representative bodies for credit unions regarding broader savings protection arrangements. As the Deputy is aware, the existing Irish League of Credit Unions Savings Protection Scheme (SPS) has played an important role over an extended period of time in helping to support credit unions that have experienced financial difficulties.

Stabilisation mechanisms if properly designed and effectively implemented can, of course, play a very important role in maintaining a credit union experiencing temporary liquidity difficulties as a going concern, pre-empting the risk of failure and the need to activate the deposit guarantee scheme.