Jack Wall (Kildare South, Labour)
Link to this: Individually | In context

Question 101: To ask the Minister for Finance his views on a submission (details supplied); the action, if any, he proposes to take to overcome the problems as outlined in the submission; and if he will make a statement on the matter. [28229/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

The submission supplied by the Deputy refers to concerns raised by a credit union in relation to the manner and extent of the actions of the Registrar of Credit Unions and, in particular, recent actions which are reported by the media to have intensified. While the submission does not directly mention lending restrictions, I expect that this is the recent activity to which the submission refers.

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.

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 on a number of credit unions in recent months. 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.

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 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.