Robert Troy (Longford-Westmeath, Fianna Fail)
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122. To ask the Minister for Finance when credit unions will be able to invest into the social housing fund. [47249/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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In 2017, the Central Bank undertook a review of the investment framework for credit unions. On 1 February 2018, the Central Bank published the feedback statement on CP109 and amending investment and liquidity regulations for credit unions. These amending regulations have been applicable to credit unions since 1 March 2018. Under these regulations, credit unions are permitted to invest in a range of specified investment classes, which includes ‘Investments in Tier 3 Approved Housing Bodies (AHB)s’.

Regulations permitting this investment class commenced on 1 March 2018. Since this date, credit unions have been permitted to invest in regulated investment vehicles where the underlying investments of the regulated investment vehicle are investments in Tier 3 Approved Housing Bodies in for the provision of social housing. The Regulations require that investments by credit unions in Tier 3 AHBs must be made through a regulated investment vehicle. The maximum permitted investment amount per credit union is 50% of a credit unions regulatory reserves where a credit union has total assets of at least €100 million and 25% of a credit unions regulatory reserves for all other credit unions. These limits may facilitate a combined sector investment in Tier 3 AHBs of close to €700 million.

As such the Government and the Central Bank have fulfilled their role and it is now up to both the credit union and social housing sectors themselves to progress and develop any specific funding mechanisms. Notwithstanding the above, my Department will continue to engage with the credit union movement on appropriate mechanisms for them to establish a vehicle to invest in approved housing bodies.

Robert Troy (Longford-Westmeath, Fianna Fail)
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123. To ask the Minister for Finance the reason credit unions are unable to invest in bonds (details supplied). [47250/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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Section 43 of the Credit Union Act, 1997 outlines the legislative requirements in relation to credit union investments. It states that a credit union shall manage its investments to ensure that those investments do not (taking account of the nature, scale, complexity and risk profile of the credit union) involve undue risk to members' savings and, for that purpose, before making an investment a credit union shall assess the potential impact on the credit union, including the impact on the liquidity and financial position of the credit union. Section 43(3) provides the Central Bank with the power to make regulations in relation to investments.

In 2017, the Central Bank undertook a review of the investment framework for credit unions. In May 2017, Consultation Paper 109 (CP109) was published which consulted on a number of potential changes to the investment framework. CP109 outlined the Central Bank’s view that any changes to the investment framework for credit unions should reflect the fact that it is the savings of credit union members (which can be withdrawn on demand) that will be invested by credit unions and that the risk profile of credit union investment portfolios should reflect this.

On 1 February 2018, the Central Bank published the feedback statement on CP109 and amending investment and liquidity regulations for credit unions. These amending regulations have been applicable to credit unions since 1 March 2018. These regulations reflect a change to the definition of bank bonds which precludes investment by a credit union in bonds that are subordinated to any other liability of a credit institution in recognition of their risk profile and complexity. It is not deemed appropriate for credit unions to be holders of instruments such as subordinated bank bonds specifically designed to absorb losses in a resolution scenario as it would directly expose them to burden sharing in line with EU Commission policy, reflected in the resolution framework introduced under the Banking Recovery and Resolution Directive BRRD. This preclusion for credit unions reflects the potential implications for credit unions should such instruments be written down or converted to equity upon the failure of a credit institution.

Credit unions continue to be permitted to invest in senior bank bonds.