Joan Burton (Dublin West, Labour)
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197. To ask the Minister for Finance the progress his Department has made with the Central Bank on the request by a number of credit unions to expand their debit card and mortgage services; and if he will make a statement on the matter. [16369/17]

Michael Noonan (Limerick City, Fine Gael)
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The Credit Union Act, 1997 (1997 Act) sets out the services that a credit union may provide to its members. In addition, the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (2016 Regulations) set out services exempt from additional services requirements. Where a credit union wishes to provide services to its members, other than those services that are provided for under the 1997 Act or the list of services exempt from the additional services requirements set out in the 2016 Regulations, an application may be made to the Central Bank for approval to provide such additional services in accordance with the provisions set out in sections 48-52 of the 1997 Act.

Debit card provision (and the necessary underlying payment account service) is an additional service and as such requires Central Bank approval. The Central Bank has recently approved a suite of additional services known as a Member Personal Current Account Service (MPCAS) under the Additional Services Framework set out in sections 48-52 of the 1997 Act. This service, which was recently approved for a number of credit unions, provides for credit unions to offer debit cards, overdrafts and a full range of payment services within an appropriate risk framework. The Central Bank is currently processing a significant number of additional applications for this service. Details of MPCAS and the approval process, along with the application requirements and related guidance are on the Central Bank's website. In its communication to the sector on MPCAS on 9 December 2016, the Central Bank highlighted that it will continue to consider all applications for provision of additional services including debit cards.

Currently credit unions can provide mortgages to members, within certain maturity limits contained in the 2016 Regulations. The 2016 Regulations set out the percentage of a credit union's loan book that can be outstanding for periods exceeding both five and ten years, as well as limits on the maximum outstanding liability to an individual member. Under the 2016 Regulations, issued by the Central Bank in January 2016, credit unions 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 are 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 is subject to conditions set by the Central Bank. There are currently 11 credit unions approved to avail of increased longer term lending limits.

The Central Bank informs me that the December 2016 Prudential Return indicates that for the sector overall, total gross loans over 10 years amount to c. 2.7% of total loans in the credit union sector compared to the limit of 10% (and in some cases 15%). 

The Central Bank has indicated that while it can see longer term lending, including mortgages, as part of a balanced portfolio of total lending, in their analyses, credit unions need to consider the impact of longer term lending on interest margins, return on assets and on balance sheet structure, the issue of funding longer term lending with short term funding is a challenge for the credit union business model. The Central Bank further informs me that consumer mortgage lending is an activity that has its own unique risk profile, and proposals to become involved in mortgage lending in a significant way must be supported by an evidenced based business case. 

The Credit Union Advisory Committee's (CUAC) recent report provides a number of recommendations, one of which is to conduct a full review of lending limits. I have established an Implementation Group which is due to meet for the third time later this month. The Implementation Group  is currently assessing each of those recommendations with a view to implementation as appropriate. Central to its work is ensuring a full examination of lending limits and concentration limits as recommended. I look forward to regular progress reports from the Implementation Group as these recommendations are developed and implemented.