Seán Ó Fearghaíl (Kildare South, Fianna Fail)
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Question 90: To ask the Minister for Finance if he will review a matter (details supplied) regarding credit unions; and if he will make a statement on the matter. [29095/11]

Michael Healy-Rae (Kerry South, Independent)
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Question 113: To ask the Minister for Finance his views on a matter (details supplied) regarding credit unions; and if he will make a statement on the matter. [28619/11]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 90 and 113 together.

The correspondence referred to in the Questions relate to lending restrictions imposed by the Registrar of Credit Unions and amendments to the Central Bank and Credit Institutions (Resolution) (No. 2) Bill 2011. The role of the Minister for Finance is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions. The role of the Registrar of Credit Unions is to administer the system of regulation and supervision of credit unions provided for 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. This is an independent role. It would not be appropriate for the Minister for Finance to comment on whether the placing of lending restrictions is necessary on a case by case basis. Such action would represent interference in the work of the independent financial regulator.

I am aware that the Registrar of Credit Unions has imposed lending restrictions on a significant number of credit unions in recent months. The imposition of lending restrictions is the responsibility of the Registrar, who is the independent regulator for the sector. Within his independent regulatory discretion, the Registrar 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 lending restrictions in place. Restrictions are imposed on a case-by-case basis and are reviewed regularly. The Registrar advises that no new policy is being implemented and that this is part of normal regulation and supervision of the sector.

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.

Any restriction on a credit union is determined by the Registrar 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.

The correspondence also makes reference to recent amendments to the Credit Union Act 1997 which were brought forward at Committee Stage of the Central Bank and Credit Institutions (Resolution) (No. 2) Bill 2011. In the main, the purpose of these amendments is to enhance the Central Bank's existing powers to issue regulatory directions. I have asked my officials to consult with the Credit Union Advisory Committee, the Commission on Credit Unions, the Irish League of Credit Unions, the Credit Union Development Association and the Credit Union Managers' Association. On foot of these consultations, further amendments are proposed for Report Stage of the Bill which will take account of the concerns of credit unions without compromising the ability of the Central Bank to act on financial stability grounds.

Under the Credit Union Act 1997, the Registrar of Credit Unions, as part of the Central Bank, has an independent role in the regulation of credit unions and is required, from time to time, to act to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members. Such actions are within the Registrar's independent statutory mandate and are a necessary part of an effective regulatory regime. While the work of the Commission on Credit Unions is ongoing, and its interim and final reports will inform Government policy, it should not prevent or delay regulatory action where it is needed in the meantime.