Written answers

Wednesday, 20 April 2016

Department of Finance

Credit Union Regulation

Photo of Brendan GriffinBrendan Griffin (Kerry, Fine Gael)
Link to this: Individually | In context | Oireachtas source

106. To ask the Minister for Finance his views on a matter (details supplied) regarding credit unions; and if he will make a statement on the matter. [7617/16]

Photo of Michael NoonanMichael 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.

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

A number of matters have been raised in this question which I will address in the order in which each was asked.

- The Department has received a number of social housing proposals which are at various stages of development. The Department of the Environment, Community and Local Government is the Department primarily responsible for the formulation and implementation of policy and for the preparation of legislation in relation to housing. It must be pointed out that any such proposal, including the funding of SMEs will ultimately be a matter for regulatory approval by the Registrar of Credit Unions.

- The Personal Microcredit Scheme was commenced on a pilot basis in November 2015. 30 credit unions are involved in providing individual loans of between €100 and €2,000 with a maximum interest rate of 12%. The initiative is being led by the Department of Social Protection in conjunction with the Department of Finance and other interest groups. Monitoring data are being collected on a regular basis which will inform the structure and support necessary for a national roll-out.

- The Credit Union Advisory Committee (CUAC) is currently carrying out a review of implementation of the recommendations of the Commission on Credit Unions. This report is due to be completed by end June 2016.

- The Government provided €250 million in the Credit Union Fund. This funding is ring-fenced specifically to provide financial support for credit unions restructuring under the Credit union Restructuring Board (ReBo). The terms of the Restructuring Scheme, agreed between the Department of Finance and DG Competition at the European Commission are specific to restructuring credit unions and are measures granted under a State aid scheme. There is no flexibility within the Scheme to provide funding for any measure other than restructuring.

- The Deposit Guarantee Scheme (DGS) protects depositors in the event of a bank, building society or credit union, authorised by the Central Bank of Ireland being unable to repay deposits. The DGS protects depositors up to €100,000 per person per institution. While Article 13(1) of the DGS Directive states that Member States may provide for lower contributions for low-risk sectors regulated under national law, this must be read in conjunction with the entirety of Article 13 and, in particular, Article 13(2) which states that the method for calculating contributions to the DGS shall be approved by the competent authority which is the Central Bank, in co-operation with the designated authority, which also the Central Bank.  In accordance with the requirements of Article 13, the European Banking Authority (EBA) issued guidelines on methods for calculating contributions to DGSs. Competent authorities must ensure that these guidelines are applied by DGSs when developing methods for calculating risk-based contributions by their members. The Central Bank as the competent authority has indicated that it intends to follow those guidelines. I have been informed by the Central Bank that the calculation methodology currently being developed will assess and rank each credit institution separately. Therefore, individual credit unions will be separately assessed and ranked, and those deemed to be lower risk under the risk categories as set out in the EBA guidelines will pay a lower contribution. Conversely, individual credit unions deemed to be higher risk under these risk categories will pay a higher contribution.  It is important to highlight that neither the Minister for Finance nor the Central Bank can act outside the parameters of Article 13 as a whole, which gives the Central Bank the mandate to determine and calculate risk based contributions.

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.

Comments

No comments

Log in or join to post a public comment.