Olivia Mitchell (Dublin South, Fine Gael)
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Question 120: To ask the Minister for Finance if he will avail of the discretion given to member states by the Consumer Credit Directive to apply different regimes to credit unions compared to those applied to banks; and if he will clarify the proposed solvency requirements for credit unions. [27736/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Consumer Credit Directive establishes a harmonised legal framework in the European Union for the provision of consumer credit ranging from €200 up to €75,000. It does not apply to mortgages. It replaces a 1987 Directive (87/102/EEC), which laid down minimum rules for consumer credit arrangements within the EU.

The Directive was transposed into domestic legislation by Statutory Instrument No. 281/2010 on 9 June 2010 and came into operation on 11 June 2010.

I believe that the Directive enhances the strong regulatory regime underpinning consumer protection and, as such, I have decided that credit unions should be subject to its full application.

However, following consultation with representatives of the credit union movement, I am aware that the credit unions will require some time to upgrade their systems and train staff so that they can effect compliance with all the requirements of the Directive. Consequently, I have adopted the discretion allowed for under Article 2.5 applying limited provisions of the Directive to them until 11 December 2011 after which date the full Directive will take effect.

In relation to the second part of the Deputy's question, the Regulatory Reserve Ratio, which imposes solvency requirements on credit unions, has been in place for all credit unions since 30 September 2009. From that date, all credit unions are required to maintain a Regulatory Reserve Ratio of not less than 10 per cent. The Regulatory Reserve Ratio is the amount held in the Total Regulatory Reserve of a credit union expressed as a percentage of the Total Assets of a credit union. The Total Regulatory Reserve comprises of the Statutory Reserve and, where relevant, an amount held in a non-distributable additional regulatory reserve account. A minimum of 8 per cent of total assets must be held in the statutory reserve and the remaining 2 per cent may be held in the statutory reserve or additional regulatory reserve account. The maintenance of adequate levels of reserves is prudent, particularly in the current economic environment, and credit unions are expected to operate with a level of reserves above the minimum regulatory requirement and to comply with the requirements issued by the Registrar of Credit Unions.