Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

275. To ask the Minister for Finance in view of the Registrar of Credit Unions remit to maintain the financial stability and well-being of credit unions, if he will provide details of the initiatives that have been undertaken by the Central Bank of Ireland to ensure development and growth of the credit union sector in recent times; and if he will make a statement on the matter. [20150/15]

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

My role as Minister for Finance is to ensure the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions .

The Central Bank, under the Credit Union Act, 1997 is responsible for administering the system of regulation and supervision of credit unions with a view to:

(a) the protection by each credit union of the funds of its members, and

(b) the maintenance of the financial stability and well-being of credit unions generally.

The three key strategic objectives that underpin the Central Bank's work in delivering this mandate are to:

- resolve weak and non-viable credit unions to protect members savings and maintain  financial stability within the credit union sector;

- develop an appropriate legislative and regulatory framework to protect the stability of individual credit unions and to allow the sector to develop; and

- bring about longer term restructuring of the sector to ensure its long-term sustainability.

In line with recommendations of the Commission on Credit Unions Report a consultation protocol has been put in place between the Central Bank and credit unions. This provides that prior to the introduction of new regulations the Central Bank will engage with credit unions. The Central Bank has recently consulted on draft Regulations for Credit Unions on commencement of the remaining sections of the Credit Union and Co-operation with Overseas Regulators Act 2012 - Consultation Paper 88, that are proposed to apply to credit unions. The Central Bank has sought views from credit unions on the proposed regulations. This includes regulations on lending, savings, investments and additional services.

Specifically in relation to additional services CP88 indicated that the Central Bank is open to proposals from credit unions on new additional services they wish to provide to members where:

- the proposed additional service is supported by a robust business case;

- the proposed additional service is not contrary to financial services legislation;

- the board of directors has a sound appreciation of the nature of the additional service proposed and is fully informed of the strategic, governance, risk management, operational, financial and legal implications involved; and

- systems and controls are in place to ensure any risks involved in the provision of the additional service are managed and mitigated.

Following the introduction of the regulations, the Central Bank also indicated in CP88 that where credit unions set out a clear path on how they wish to develop, the Central Bank will consider any amendments to the regulations that may be appropriate.

The consultation closed on 27 February 2015  and a feedback statement and final regulations are planned to be published by end June 2015, following consideration of the submissions received.

The credit union sector is currently being restructured on a voluntary, incentivised and time-bound basis. The Central Bank is taking a proactive approach to facilitating restructuring and works closely with the Credit Union Restructuring Board (ReBo) and individual credit unions on restructuring proposals. The Central Bank supports restructuring proposals that are financially sound, supported by proper risk and control frameworks and have clear leadership and vision for the future direction of the merged credit union. The important objective is to ensure that restructuring achieves better outcomes for current and prospective members, enhances the financial soundness of credit unions and acts as an enabler for future growth and development, setting the sector up for a viable and successful future.

The Registrar of Credit Unions has indicated that as part of the Central Bank's role to support the sustainable and prudent development of the credit union sector, the Central Bank intends to invite interested parties to discuss areas of credit union business model development and anticipates that these dialogues will provide credit union stakeholders with a well grounded basis to develop sound risk-based developments to their business models.

The Government recognises the important role of credit unions as a volunteer co-operative movement in this country and while my role and the Central Bank's role in relation to the credit union sector are  distinct, we are both working to protect members' savings and maintain the financial stability and well-being of credit unions generally.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

276. To ask the Minister for Finance his Department's strategy for the credit union sector and where it fits within the overall financial landscape; and if he will make a statement on the matter. [20151/15]

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

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.

As I have previously stated, credit unions have a key role to play in providing access to credit and other important services in local communities throughout the country. The Government recognises this and has put in place a number of measures to ensure that credit unions can continue to provide these vital services to their members and to ensure the stability of the sector into the future. These measures include:

- the establishment of the Commission on Credit Unions;

- the publication of the Credit Union and Co-operation with Overseas Regulators Act 2012;

- the establishment of the Credit Union Restructuring Board, ReBo;

- the establishment of a stabilisation levy to support credit unions that are undercapitalised but are otherwise viable;

- the availability of €250 million for voluntary restructuring of credit unions facilitated by ReBo; and

- the availability of €250 million for resolution purposes.

Credit union strategy is a matter for credit unions themselves and is specifically provided for in Section 17 of the Credit Union and Co-operation with Overseas Regulators Act 2012.

The setting of strategy for a credit union is a function of the board of directors and Section 17 provides that this should be carried out in close co-operation with a credit union's management team.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

277. To ask the Minister for Finance if he will provide detailed information, in tabular form, on the number of credit unions currently operating under lending restrictions; with restrictions on lending to persons; with aggregate monthly lending in bands of €10,000; and if he will make a statement on the matter. [20152/15]

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

I have been informed by the Central Bank that it has been necessary to put lending restrictions in place in credit unions where there are regulatory concerns and resultant risk to members' savings.

Currently about 52% of all credit unions are subject to lending restrictions. Almost all credit unions with a lending restriction in place have a maximum individual loan size restriction as detailed in the table below.

There are two types of lending restrictions:

1. Monthly lending restrictions. At this time less that 10% of all credit unions have this restriction in place which limits the total amount of lending within one month. Therefore, over 90% of credit unions (i.e. over 340 credit unions) have no monthly lending restrictions.

2. Maximum loan size. The average loan size in the credit union sector is just above €6,000. Currently 5 individual credit unions have lending restrictions that limit the amount per loan to less than €10,000. The vast majority of credit unions (over 95%)  can continue to make individual loans significantly greater than the average loan size for the sector. 

As at 21 May 2015

In February 2015 the Central Bank commenced a lending restriction review initiative, whereby credit unions that are subject to a lending restriction, but are satisfied that they have made the necessary improvements and have embedded these improvements in robust risk sensitive lending practices, may apply for a review of their lending restriction. A communication has been issued to all relevant credit unions outlining the process for the review of lending restrictions and requested them to indicate by 31 March 2015 whether they intend making an application for a review of their lending restriction or not. The closing date for receipt of applications to review lending restrictions under this initiative is 30 September 2015.

I have, on a number of occasions, highlighted the Government's 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.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

278. To ask the Minister for Finance if he will confirm, of the credit unions that had lending restrictions in place at the end of 2014, the number that had them in place at the end of each of the years 2009 to 2013; and if he will make a statement on the matter. [20153/15]

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

I have been informed by the Central Bank that it has been necessary to put lending restrictions in place in credit unions where there are regulatory concerns and resultant risk to members' savings.

At the end of December 2014 there were 206 credit unions that were subject to lending restrictions. The number of those 206 credit unions that were subject to lending restrictions at the end of the previous 5 years is outlined in the table below.

In February 2015 the Central Bank commenced a lending restriction review initiative, whereby credit unions that are subject to a lending restriction, but are satisfied that they have made the necessary improvements and have embedded these improvements in robust risk sensitive lending practices, may apply for a review of their lending restriction. A communication has been issued to all relevant credit unions outlining the process for the review of lending restrictions and requesting them to indicate by 31 March 2015 whether they intend making an application for a review of their lending restriction or not. The closing date for receipt of applications to review lending restrictions under this initiative is 30 September 2015.

I have, on a number of occasions, highlighted the Government's 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.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

279. To ask the Minister for Finance his plans to remove the current constraints imposed by section 35 on credit unions. [20154/15]

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

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.

Section 35 of the Credit Union Act, 1997 (1997 Act), contains lending limits that apply to all credit unions including a limit on the maximum outstanding liability to an individual member and limits on the percentage of the loan book that can be outstanding for periods exceeding both five and ten years. 

Section 11 of the Credit Union and Co-operation with Overseas Regulators Act 2012 (2012 Act), will substitute a new section 35, which relates to lending, into the 1997 Act. On commencement of section 11 of the 2012 Act, the current large exposure and maturity limits contained in the existing section 35 of the 1997 Act will be removed and the Central Bank will be provided with regulation making powers, including powers to set large exposure and maturity limits for lending. 

The Central Bank issued a consultation paper - Consultation on Regulations for Credit Union on commencement of the remaining sections of the Credit Union and Overseas Regulators Act 2012 - CP88 - on 27 November 2014. This paper includes draft lending regulations for credit unions. Under these regulations credit unions will continue to be allowed to lend up to 30% of their loan book over five years and up to 10% of their loan book over 10 years, subject to a maximum maturity of 25 years. In addition, credit unions will be able to apply to the Central Bank for an extension to their longer term lending limits - up to 40% of their loan book over 5 years and up to 15% of their loan book over 10 years.  Approval will be subject to conditions set by the Central Bank. As indicated in CP88, the Central Bank is reviewing the conditions that currently apply for credit unions to be approved to extend their longer term lending limits. 

The Central Bank has provided a 3 month consultation period and the closing date for submissions was 27 February 2015. Following review of all submissions received the Central Bank will publish a feedback statement outlining the feedback received, the Central Bank's response and the final regulations for credit unions. All submissions received will be made available on the Central Bank's website at this stage. The Central Bank is planning to publish the feedback statement at the end of June.