Written answers

Tuesday, 6 October 2009

Department of Finance

Banking Sector Regulation

9:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 252: To ask the Minister for Finance the action he will take regarding credit unions with regard to a new approach to financial regulation in view of the request that regulation be developed in the context of revisions of the Credit Union Act 1997 rather than in the context of regulatory failures connected to the property market. [33107/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The Credit Union Act 1997 has served credit unions well providing stability and legal certainty during a period of substantial growth and development of the movement. The need for some modernisation of the legislative and regulatory framework for credit unions has become evident over time and there is consensus among all stakeholders that the current legislative framework needs reform. While some preparatory work has already been done in this regard there is however no clear consensus at this stage on the future shape of the reformed legislative framework for credit unions. I have asked the Chair of the Financial Regulator to initiate a review of credit unions which it is hoped will make an important contribution to identifying the appropriate way forward.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 253: To ask the Minister for Finance if his attention has been drawn to the fact that the restriction on loans of more than five years duration within the credit unions is restricting the ability of unions to restructure loans for persons experiencing financial difficulty; and his proposals to relax this restriction. [33108/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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A core objective of the legislative and regulatory framework for Credit Unions in Ireland is to ensure the safety and soundness of credit unions. This requires prudent lending and investment decisions by Boards of credit unions to safeguard members' savings. The restrictions contained in Section 35 of the Credit Union Act 1997, as amended, are an important asset and liability tool for credit unions as the funding of credit unions is predominantly provided on a short term basis in the form of on-demand savings and consequently the limits on longer term-term lending are necessary.

I am aware that credit unions are seeking to facilitate revised repayment instalments for credit union members currently experiencing difficulty in meeting loan repayments due to unfavourable changes in their financial circumstances but that these endeavours, in certain circumstances, run up against the current Section 35 limits on longer-term lending for some credit unions. Subject to the over-arching considerations that the financial position of a credit union, the security of members' savings and accurate reporting of the financial status of a credit union is maintained, it should be possible to explore all reasonable steps to allow a member, in carefully monitored and controlled circumstances, to re-schedule their repayments to a level which is affordable to them. Of course, each credit union must fully and properly recognise arrears situations where they exist, and where members are in difficulty the process of facilitating them must be transparent to board members and regulators so that a credit union is never in doubt as to its own position.

My Department has, at my request, reactivated the Group, representative of stakeholders, the Regulatory Authority and my Department, which successfully reviewed the Section 35 lending limits in 2006. The mandate for this Group is to find a solution to this issue. My officials have consulted with the relevant stakeholders and have received proposals from them on how we might best proceed. This work is being brought forward with a view to reaching agreement on this issue as soon as possible.

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