Tom Fleming (Kerry South, Independent)
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38. To ask the Minister for Finance if he will facilitate credit unions to return to lending and serving their members by the Central Bank of Ireland easing or lifting unreasonable, inflexible lending restrictions as these section 35 restrictions are preventing members from benefitting from improvements in their financial circumstances; if the tiered regulatory approach proposals contained within the consultation paper published by the Central Bank of Ireland, which would have a significant detrimental impact on many credit unions, will be revised before the next phase of the consultation process; and if he will make a statement on the matter. [20561/14]

Jack Wall (Kildare South, Labour)
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42. To ask the Minister for Finance his views on a submission (details supplied) regarding credit unions; his plans to address the concerns raised by such a senior member of the organisation; his views regarding the future outlook for small branches of the organisation as outlined in the submission; and if he will make a statement on the matter. [20614/14]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 38 and 42 together.

  Credit Unions have an important role to play in providing credit in local communities around the country.  While lending restrictions have been imposed on some credit unions, I have been informed by the Central Bank that these restrictions are imposed in the context of on-going matters of supervisory concern arising in individual credit unions. Where lending restrictions are imposed they tend to take the form of a restriction on individual loan size or on commercial lending activity and in some cases, a limit on the total lending permitted each month. At this time less than 10% of all credit unions have a restriction in place which limits the total amount of lending within the month, while close to 40% of all credit unions have a restriction on commercial lending activity.

For those credit unions where there is an individual loan size restriction in place, the level at which the limit is imposed ensures that the vast majority of those credit unions can continue to make loans significantly greater than the average loan for the sector of just above €6,000. Lending restrictions are, in most cases, intended to be short-term in nature and kept in place until the credit union has addressed the issues giving rise to the particular concerns advised to the credit union. These restrictions are reviewed on a regular basis.

  Section 35(2) of the Credit Union Act, 1997 permits a credit union to have up to 30% of its loan book outstanding for more than 5 years and up to 10% of its loan book outstanding for more than 10 years. Based on the most recent information provided by credit unions  to the Central Bank in the December 2013 quarterly prudential returns, average lending over 5 years as a percentage of gross loans was some 11%, while average lending over 10 years as a percentage of gross loans was about 2%. These figures indicate that, in general, credit unions are currently well within the limits as set down in the 1997 Act.

On foot of recommendations from the Commission on Credit Unions, section 11 of the Credit Union and Co-operation with Overseas Regulators Act 2012 substantially amends section 35 of the 1997 Act. Section 11 will be commenced in tandem with the new Central Bank regulations, which are to be introduced as part of the tiered regulatory approach recommended by the Commission.  This tiered approach will address a range of areas including lending, investments, savings, borrowings, additional services, reserves and liquidity. The structure of the tiered regulatory approach has not yet been agreed. The Central Bank has issued a consultation paper on the  proposed tiered regulatory approach in order to provide an opportunity for stakeholders to set out their views across a range of issues. The consultation process was extended by one month to 31 March 2014, at the request of sector stakeholders. The Central Bank is currently considering over 160 submissions received and will communicate with credit unions and other stakeholders in relation to the proposed next steps.

I have, on a number of occasions, highlighted  the Governments' recognition of the important role of credit unions as a volunteer co-operative movement in this country and also the importance of getting lending going in the economy. However, the issue of lending needs to be constructively considered in order to ensure a viable credit union sector into the future.