Jack Wall (Kildare South, Labour)
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Question 27: To ask the Minister for Finance his views on the significant increase in loan arrears in the Irish credit union sector, with payments not having been made on loans for ten weeks or more on 13.5% of outstanding loans; if he is concerned that some 20 credit unions could be in serious financial difficulties; if he intends to bring forward legislation to establish a resolution regime for credit unions; and if he will make a statement on the matter. [25624/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Registrar of Credit Unions is responsible for the regulation and supervision of credit unions under the Credit Union Act 1997. The Registrar's statutory role under the Act relates to the supervision and oversight of the financial position and activities of credit unions on an ongoing basis. The Registrar reports to the Regulatory Authority in order to ensure that there is an early identification and response to any significant issues relating to the credit union movement or any individual credit union.

As the Deputy will recognise, the current economic downturn is adversely affecting the loan books of all financial institutions. Credit unions have withstood the financial crisis better than most financial institutions. The Registrar of Credit Unions has, however, indicated a sharp rise in arrears levels in the sector and a significant increase in the levels of loans being rescheduled as more members come under financial stress. The Registrar is working with individual credit unions to build reserves and provisions to strengthen their balance sheets and thereby protect members' savings. I am advised by the Registrar that there are around 20 credit unions with particularly high levels of arrears which the Registrar is monitoring closely due to regulatory concerns about the impact of high levels of arrears on their solvency positions.

The challenge at this time is for credit unions to be sensible and prudent while continuing to assist their members as far as possible. They should trust that the regulatory requirements and guidelines issued by the Registrar of Credit Unions are for their benefit and they should revert to the Registrar at an early stage should they encounter difficulties. The Registrar has issued requirements, circulars and guidance notes to credit unions in an effort to build a sector with adequate reserves and liquidity, with sensible and prudent credit policies and accounting practices that ensure a true and fair view of the books of the credit union is presented. Many credit unions are operated by non-professionals and volunteers and it is most important that the guidelines issued are followed and that the Registrar is consulted if there are any difficulties in this regard. The Registrar will assist any credit union in working through their difficulties over time.

I am examining options for the introduction of a legislative regime to deal in a systematic way with distressed financial institutions, to ensure the State has in place a range of tools to address problem institutions effectively in the interests of maintaining financial stability, minimising reliance on public moneys and ensuring continuity of key banking activities. In the context of work underway by my Department and the Central Bank in this area the appropriate treatment of Credit Unions is under consideration.