Willie Penrose (Longford-Westmeath, Labour)
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151. To ask the Minister for Finance in the context of recent submissions and consultations with all of the stakeholders associated with the broader credit union movement, if he will now take steps to defer the implementation of the CP88 regulations, which the Central Bank of Ireland is intent on imposing on the credit unions, which will ultimately undermine the development of safe and vibrant credit unions, and which, as currently drafted, will impose lending restrictions on amounts and terms, saving restrictions, investment restrictions, liquidity restrictions and impose a one size fits all approach in terms of a regulatory reserve ratio of at least 10% of total assets rather than a risk-based reserve assessment, and which, in effect, undermines the ethos of member-owned co-operatives; and if he will make a statement on the matter. [45042/15]

Michael Noonan (Limerick City, Fine Gael)
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The Credit Union and Co-operation with Overseas Regulators Act 2012 (2012 Act) was signed into law by the President in December 2012.

It was agreed at that time that it would be neither practical nor feasible to commence the 2012 Act in its entirety in one fell swoop. Following on from that, an implementation timetable for the 2012 Act was devised in consultation with stakeholders, including credit union representative bodies.

Commencement of all sections of the 2012 Act has been aligned with the credit union financial year and the introduction of the underpinning Central Bank regulations, with a view to implementation of the 2012 Act in a coherent and cohesive manner. This has provided credit unions with the time necessary to ensure that the required processes and procedures are in place prior to implementation of each tranche.

I have met with the three credit union representative bodies and their concerns around the new regulations were discussed. Officials from my Department have also met with the sector. It is my intention to commence the remaining sections of the 2012 Act on 31 December 2015 in line with the introduction of the regulations by the Registrar of Credit Unions. These sections of the 2012 Act, when commenced will replace, amend or supplement existing sections of the 1997 Act.

Separately to the consultation process, as outlined in the Central Bank's feedback statement on CP88, I proposed that in the interests of clarity and fairness, credit unions are provided with details of the process of applying for a retention of savings above the limit amount.  I have been informed by the Registry of Credit Unions that all credit unions have been contacted and given further information on its application criteria for the retention of savings in excess of €100,000.  The Registry of Credit Unions intends to engage with the representative bodies and to invite comments from them prior to finalisation of the application process. On finalisation of the application process, the Registry will provide an application form and explanatory notes in order to assist credit unions in making an application. It is anticipated that application forms will be available this month.  It is envisaged that applications will be accepted in the first quarter of 2016 and that applicant credit unions will be informed by the end of the second quarter of 2016 on the outcome of the process, which is well within the 12 month transitional period. Where a credit union has demonstrated that it meets the criteria, it will be in a position to retain members' savings in excess of €100,000 held at the commencement of the regulations.

I welcome the steps that have been taken to provide clarity for credit unions on the criteria for retaining savings of over €100,000 and I also welcome the Central Bank proposed engagement with the representative bodies to seek their comments on the application process. 

The Central Bank has also informed me that it is committed to undertaking a review of the continued appropriateness of the savings limit, once the impact of the restructuring process can be assessed. It is envisaged that this review will commence within three years of the introduction of the regulations. My officials have asked the Central Bank to consider accelerating this review and this is currently under consideration by the Central Bank. The Central Bank has agreed to provide regular updates to my Department on developments regarding this matter.  

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. These lending restrictions 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. 

The Central Bank further informs me that at this stage where a review has been completed 74% of the applicant credit unions 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. The majority of these applications are still in the process of review. 

This review has reduced the number of credit unions with lending restrictions as currently approximately 35% of credit unions have a lending restriction compared with 52% at the start of the review process.

The Central Bank has further informed me that all credit unions were contacted and invited to attend information seminars being held around the country from mid to end November. These seminars provided credit unions with the opportunity to engage with the Central Bank  on the new regulations and to discuss development of the credit union business model, including any changes to the regulatory framework that might be required to facilitate those developments.  

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.