Deirdre Clune (Cork South Central, Fine Gael)
Link to this: Individually | In context

Question 80: To ask the Minister for Finance the steps he will take to address the concerns expressed by credit unions and the Credit Union Development Association regarding amendments the Central Bank Reform Bill 2010 will make to section 35 of the Credit Union Act 1997; the concerns the credit unions have expressed regarding the way they will reschedule loans under the new legislation; and if he will make a statement on the matter. [21218/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

I am aware of concerns expressed by credit union bodies, including the Credit Union Development Association, regarding the Section 35 proposals associated with the Central Bank Reform Bill 2010. These concerns are primarily focussed on the provisioning elements of the proposals. However, the proposals overall represent a balanced approach to the need to facilitate members while at the same time ensuring the stability of credit unions.

The Registrar of Credit Unions will take a pragmatic approach to the implementation of the new Section 35 requirements and has set out for the credit union representative groups further clarifications relating to the conditions. These include transitional arrangements for a 15% provisioning requirement to 30 September 2011, trial periods, exceptions with regard to top-up loans and relaxation of the 100% provisioning requirement in respect of rescheduled loans which have missed two or more payments. The new provisions will be implemented in a balanced and proportionate manner and their effect on credit unions will be closely monitored.

Concerns have also been raised in relation to the need for the Registrar of Credit Unions to consult with the representative bodies before introducing requirements. As a matter of general practice, the Registrar consults with the credit union representative bodies before introducing regulations or requirements in relation to any aspect of credit union regulation and I understand that he intends to continue with this approach. However, the independent position of the Registrar of Credit Unions in carrying out the duty of financial regulation is not open to question and the Registrar has the statutory powers and responsibility to introduce, if necessary without consultation, regulatory requirements in the interests of the well-being and stability of the sector. For this good reason, a requirement for the Registrar to consult with the sector is not included in the legislation.

During the second stage reading of the Central Bank Reform Bill 2010, I assured the House that the Registrar of Credit Unions will adopt a balanced and proportionate approach in the application of the loan provisioning requirements which are proposed. The transitional arrangements as proposed by the Registrar will be introduced. These will help ease the position for credit unions in the current financial year and the next financial year ending in September 2011. They will also allow time for credit unions to adjust to the new regime.

I would like to reiterate that there is a balance to be struck between meeting members' needs to reschedule loans and ensuring the stability of the credit union sector overall. It is in the interests of every credit union in the country that the stability of the sector is safeguarded. The proposals being brought forward in connection with the Bill will achieve this fundamental aim.