Mattie McGrath (Tipperary, Independent)
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220. To ask the Minister for Finance if he has engaged with the Central Bank regarding its decision to advise credit unions not to pay a dividend or give members a rebate on their loan interest. [10451/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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In accordance with the Credit Union Act credit unions need the approval of their members at an AGM to pay dividends. In the rules set by members, not by legislation, most credit unions cannot pay a loan interest rebate without having first approved a dividend.

I have been informed by the Central Bank, that in a circular issued to all credit unions recently they set out their expectations on the payment of dividends and rebates. This set out that, in the context of the 2020 year-end, credit unions must be cognisant of the significant risks posed by the COVID-19 pandemic and Brexit impacts potentially yet to be fully realised, not only to their own business models but to the wider economic environment. The importance of (1) maintaining and building adequate levels of reserves, including adequate operational risk reserves, which is key to ensuring credit union financial stability and resilience and (2) the protection which capital reserves provide against the potential macroeconomic impacts of disruptive events, including capacity of credit unions to absorb credit or other losses that may arise, were also highlighted.

More specifically on distributions for the 2020 year-end, given the current level of risk and uncertainty regarding the economic outlook, the Central Bank expects all credit unions to take a prudent approach. Credit unions are expected to give priority to the maintenance and building of their reserves over the payment of any distributions to members and accordingly, it is not expected that proposed distributions (dividend or loan interest rebate) by credit unions would feature in the 2020 financial year.

Where a credit union may be considering a proposed distribution, my understanding is that the Central Bank expected such credit unions to contact their supervisor in the Registry of Credit Unions to clearly outline the rationale for proposing such course of action.