Charlie O'Connor (Dublin South West, Fianna Fail)
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Question 157: To ask the Minister for Finance the position regarding his recent dealings with the credit union movement regarding proposals for section 35A and 35B of the Central Bank Reform Bill 2010; and if he will make a statement on the matter. [29873/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I engaged in detailed discussions with the credit union representative bodies, ILCU and CUDA, in relation to the Section 35 issue in meetings with each body on two separate occasions in May and June 2010. I also met members of the Joint Oireachtas Committee on Economic Regulatory Affairs. Having reflected on the views expressed, I introduced at Report Stage of the Central Bank Reform Bill 2010 on 1 July 2010, eight significant measures which amended the section 35 proposals in the Bill as published and imposed an obligation on the Central Bank to establish an advisory group on credit unions. The measures relating to section 35 accord precisely with proposals circulated to the representative bodies on 10 June 2010 and which I put on the record of Dáil Éireann at Committee Stage.

The full eight measures are as follows:

1. The proposed sections 35A and 35B in the Bill as published are deleted.

2. The easing of section 35 lending limits is now linked directly with the necessary balancing provisions in a cohesive framework within section 35.

3. A specific statement is introduced in section 35(2C) meaning that the Central Bank may give notice to credit unions in relation to lending requirements only where it considers it necessary for the adequate protection of members' savings.

4. A further new provision means that in applying requirements in relation to lending by credit unions, the Central Bank must have regard to the lending framework provided for in section 35.

5. Wider powers originally intended for the Central Bank in relation to loans or specified classes or types of loans [under section 35(A)(1) as published] have been dropped.

6. Wider powers to enable the Central Bank to impose requirements other than by making rules [under section 35A(3) as published] have also been dropped.

7. The systems, controls and reporting requirements originally provided for in Section 35(A)(1)(f) are now specifically tied into the lending requirements in the section.

8. The Central Bank must establish an advisory group on the exercise of its powers and functions relating to credit unions.

Taken together, these measures represent a significant package of changes which will establish a lending framework through which the Registrar of Credit Unions can give notice of requirements arising from the relaxation of lending limits provided for in the section 35 in a prudent, balanced and proportionate manner but no more than that. The new advisory group will provide a forum through which the Bank will access the views of credit unions in a more effective and direct way.

Reasonable conditions and generous transitional arrangements will also apply in relation to the new section 35 provisions. For example, the Registrar of Credit Unions wrote to all credit unions on 24 May 2010 indicating that the transitional arrangements will include a 15% provisioning requirement up 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. This should help to ease the position for credit unions in the current financial year and the next financial year ending in September 2011 and allow time for credit unions to adjust to the new regime. Overall, the Registrar will take account of individual circumstances in credit unions in exercising the powers being given to him in the Bill. There is no question of a "one size fits all" approach as is being suggested by the League.

The section 35 amendments passed by Dáil Éireann on 1 July 2010 go a considerable way towards meeting the reasonable concerns of credit unions. At the same time, there is an irreducible minimum level of protection which depositors, credit union members and the general public are entitled to expect. Overall, the measures which have been brought forward provide for this level of protection. I believe that constructive engagement and dialogue with the credit union movement are both necessary and appropriate. Credit unions have a valuable role to play in Ireland and my primary motivation and concern is to put in place conditions in which the movement can be sustained and developed over the coming years. My Department and I are willing and anxious to engage with the credit union representative bodies and to discuss issues of concern including the implementation of the statutory changes provided for in the Central Bank Reform Bill. But it is not possible, of course, to give a veto to any group in relation to its own regulation and I feel sure the Credit Union-related organisations would not expect that.