Dara Murphy (Cork North Central, Fine Gael)
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Question 148: To ask the Minister for Finance if the Central Bank of Ireland has carried out analyses on the impact, on credit unions and credit union members, of the lending restrictions currently imposed on a large number of credit unions; if such information has been shared with the credit unions and other stakeholders; and if he will make a statement on the matter. [27155/11]

Michael Noonan (Limerick City, Fine Gael)
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As Minister for Finance, my role is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.

The Registrar of Credit Unions is responsible for administering the system of regulation and supervision of credit unions provided under the Credit Union Act 1997, with a view to the protection by each credit union of the funds of its members and the maintenance of the financial stability of credit unions generally.

Within his independent regulatory discretion, the Registrar of Credit Unions acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members. It is on this basis that the Registrar has put in place lending restrictions on a number of credit unions as their financial position has deteriorated. Restrictions are imposed on a case-by-case basis and are reviewed regularly. Before setting the level of restriction in each credit union the Registrar carries out an analysis of the credit union business and financial position and the restrictions are designed to allow these credit unions to continue to lend, albeit at a more prudent level, in order to protect the savings of their members.

The Registrar advises me that the restrictions are structured to allow credit unions to lend a higher number of small value loans to the broader membership, thereby reducing concentration risk. He also advises that initial analysis indicates that the credit unions which are restricted continue to have higher levels of arrears than those which are not and this remains a concern. The Registrar closely monitors and interacts with those credit unions where lending restrictions have been imposed.

The restriction on a credit union is determined taking account of its financial data including the level of its lending, average loan size, its arrears trends and bad debt provision levels. Credit unions are able to continue to lend to members within their financial capacity to do so. If a credit union can demonstrate an improved financial position then such restrictions can be reviewed.

The imposition of these restrictions is not considered lightly and the type of lending restrictions imposed takes account of the particular business profile and financial position of each credit union concerned. The type of lending restrictions can include maximum individual loan size and overall maximum monthly lending limits. Where lending limits are specified for individual credit unions, this is communicated directly with the credit union.

Michael Healy-Rae (Kerry South, Independent)
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Question 149: To ask the Minister for Finance, following on from the programme for Government, his views on the commitment towards political reform, in view of the fact that the programme states that it will ensure that the Government is seen to be held to account and that Government is too centralised and unaccountable, and the need for a real shift in power from the State to the citizen, and further in view of the fact that power is being passed, not to the people, but to the Regulator, as per the terms of Statutory Instrument No. 515 of 2010, which was issued and enacted by the Financial Regulator, not by our elected legislators, the Central Bank of Ireland and Credit Institutions Bill, albeit necessary, passes even more power to the Financial Regulator and away from the people. [27187/11]

Michael Noonan (Limerick City, Fine Gael)
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The statutory instrument to which the Deputy refers sets out the rules made by the Registrar of Credit Unions at the Central Bank of Ireland which impose requirements on credit unions to keep a minimum amount of liquid assets to enable them to meet their liabilities as they arise. Among other things, this is to ensure that credit union members can continue to access their savings on demand.

Under section 85 of the Credit Union Act 1997, the Oireachtas expressly delegated to the Central Bank the power to impose such requirements. The Central Bank, in exercise of the powers set out in Section 85 (3) of the Credit Union Act 1997, set out rules in SI No. 515 of 2010 requiring that a credit union must maintain at all times a Liquidity Ratio of at least 20%. Most credit unions hold liquidity significantly in excess of this regulatory minimum level.

In terms of Central Bank accountability, section 32L (3) of the Central Bank Act 1942 (as amended by the Central Bank Reform Act 2010) provides that the Central Bank is accountable to the Oireachtas, through its annual regulatory performance statement, for the activities of the Registrar of Credit Unions.

The Central Bank and Credit Institutions (Resolution)(No. 2) Bill is currently before Dáil Éireann and has been the subject of extensive debate. The Central Bank powers in the Bill are necessary and proportionate given the seriousness of the problem that the Bill seeks to address. Section 107 of the Bill, as amended, provides for a relationship framework to support the legal framework of the Bill by ensuring there is a clear identification of roles and responsibilities and providing guidance as to how and in what circumstances the Minister will use the powers provided to him/her in the Bill. In formulating the relationship framework the Minister will draw on international best practice that may have relevance to the specific circumstances of this situation. The Minister plays a central role in relation to the powers conferred upon the Central Bank by this Bill - for example, one of the intervention conditions is that the Central Bank must have consulted with the Minister. This provision will facilitate the development of a relationship framework or protocol by which the powers and functions of the Central Bank and of the Minister can work in harmony in the public interest.

In the Programme for Government 2011-2016, the Government stated that it recognises the important role of credit unions as a volunteer co-operative movement and the distinction between them and other types of financial institutions. In line with the Government commitment, we established a Commission on Credit Unions to review the future of the credit union movement and make recommendations in relation to the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect depositors savings and financial stability. The Commission has provided me with an interim report which I am currently examining. It will have completed its work by end-March 2011.

The Commission has a broad representation across the credit union sector, academic and management fields and wider interests. Its members have extensive knowledge and expertise and I am confident that the review of credit union legislation which the Commission is carrying out will reflect a wide range of views.