Written answers

Thursday, 26 March 2015

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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79. To ask the Minister for Finance his views on the efforts of the credit union sector to expand into mortgage lending; and if he will make a statement on the matter. [12522/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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My role as 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 Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions.  Within her 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.

Currently credit unions are not prohibited from providing mortgages to members. Mortgages are subject to the maturity limits contained in section 35(2) of the Credit Union Act 1997, which sets out the percentage of a credit union s loan book that can be outstanding for periods exceeding both five and ten years, as well as limits on the maximum outstanding liability to an individual member.

On 27 November 2014, the Central Bank issued a consultation paper - CP88 "Consultation on Regulations for Credit Union on commencement of the remaining sections of the 2012 Act ". This consultation paper includes draft lending regulations. Under these draft lending regulations credit unions can continue to provide mortgages. Existing maturity limits that are currently contained in section 35 of the 1997 Act are included in the draft lending regulations. A maximum maturity limit of 25 years is also introduced in the draft regulations.  The draft lending regulations also include a large exposure limit on the maximum exposure a credit union may have to a borrower or a group of borrowers who are connected.

Where a credit union is providing mortgages, it must ensure that it has the appropriate systems, controls and expertise to undertake this type of lending. Also, scale is an important factor in determining whether a credit union can put these processes in place and offer mortgages as a viable business line. 

The Government recognises the important role of credit unions as a volunteer co-operative movement in this country and welcomes any initiatives that might enhance the business model while simultaneously ensuring the protection of members' savings.

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