Michael McGrath (Cork South Central, Fianna Fail)
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78. To ask the Minister for Finance his plans to remove the restriction on credit unions banning them from lending more than 10% of their loan books for more than ten years; and if he will make a statement on the matter. [39974/15]

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 and removal of lending restrictions is a matter for the Central Bank.

Section 35 of the Credit Union Act, 1997 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 years and ten years. Under these provisions credit unions can lend up to 30% of their loan book over five years and up to 10% of their loan book over 10 years and may apply to the Central Bank for an extension to their longer term lending limits.

I have been informed by the Central Bank that as set out in the Feedback Statement on CP88 under the Credit Union Act 1997 (Regulatory Requirements) Regulations 2015, 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 can 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. Data from the September 2015 Prudential Return indicates that lending over 10 years in credit unions accounts for 2.18% of total loans in the credit union sector.

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 those which have been fully reviewed, 83% have had their lending restriction lifted and are now operating under the board's stated credit risk appetite. Approximately 40% of credit unions that applied, submitted their application in September and these applications are currently under review.

Given a number of areas identified in feedback received on CP88 and through other engagements with sector stakeholders the Central Bank will engage with interested parties to participate in focussed dialogue in the coming months. One area of initial focus will be credit unions' aims regarding longer term lending including further developments on the provision of mortgages to members.

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.