Tommy Broughan (Dublin North East, Independent)
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171. To ask the Minister for Finance if he will increase the lending limit of €25,000 by credit unions; if his officials have examined the possibility and implications of this; and if he will make a statement on the matter. [39012/15]

Michael 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. The imposition of lending restrictions is a matter for the Central Bank.

While it is important to distinguish this division of roles, it is equally important to recognise that both the Registrar of Credit Unions and myself, as Minister for Finance are working together for the safety of members' savings and the security of the credit union sector.  

Section 35 of the Credit Union Act, 1997 contains a lending large exposure limit of the greater of €39,000 or 1.5% of total assets. On commencement of new regulations, published in July, the maximum exposure a credit union may have to a borrower, or a group of borrowers who are connected, will be the greater of €39,000 or 10% of the credit union's regulatory reserve.

I have been informed by the Central Bank that while the important role of credit unions within their communities and, of course, that many members have a demand for credit is fully accepted, from a regulatory perspective it is important that credit unions are prudent in how they lend money, particularly as it is the money of the saving members of credit unions that is ultimately lent to borrowing members. Ensuring that those borrowers can repay is paramount in the protection of those savings. Accordingly, the Central Bank expects credit unions to apply prudent lending standards to the granting of all new loans or top-ups of existing loans and to have systems in place to ensure that such applications are fully assessed to confirm the member's creditworthiness. 

The Central Bank has further informed me 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. The majority of lending restrictions in place enable credit unions to lend amounts in the range of €10,000 to €30,000 and these are reviewed on a regular basis to determine whether or not they are still set at appropriate levels.

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, could apply for a review of their lending restriction. The closing date for receipt of applications to review lending restrictions under this initiative was 30 September 2015.

59% of applications received have been reviewed by the Central Bank.  Of the applications which have been fully reviewed, 83% have had their lending restriction lifted and are now operating under the board's stated credit risk appetite. c.40% of credit unions that applied made their application in September. These applications are currently under review.

Currently approximately 39% of credit unions have a lending restriction compared with 52% at the start of the review process.

The Government's priorities remain the protection of members' savings, the financial stability of credit unions and the sector overall and it is absolutely determined to continue to support a strengthened and growing credit union movement.