Dáil Éireann Debate, Thursday - 16 January 2014
24. Deputy Michael McGrath asked the Minister for Finance the steps being taken by the regulatory authorities to ensure the health of the credit union sector and that any weak credit unions are supported; and if he will make a statement on the matter. [1630/14]
View answerUnder section 84 of the Credit Union Act 1997, the functions of the Registrar of Credit Unions at the Central Bank are to regulate credit unions with a view to the protection by each credit union of the funds of its members and the maintenance of the financial stability and wellbeing of credit unions generally.
The Registry of Credit Union applies a risk based approach to the supervision of credit unions which supports early identification of problems and mitigation by credit unions of risks identified. The Probability Risk and Impact System - PRISM, is the Central Bank’s risk-based framework which allows for the identification of risks by their impact on financial stability and the consumer and by the probability of the risk occurring.
The Government established the Commission on Credit Unions in May 2011 to make recommendations in relation to the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect members’ savings and financial stability. The Commission published its final Report in March 2012 and over sixty of its recommendations have been implemented in the Credit Union and Co-operation with Overseas Regulators Act 2012. The Government has accepted fully the Commission on Credit Union’s Report and the recommendations are currently being rolled-out under the Credit Union and Co-operation with Overseas Regulators Act 2012.
The Credit Union and Co-operation with Overseas Regulators Act 2012 helps underpin the stability of credit unions. The Act contains measures to reform and strengthen credit unions and deals with four broad areas namely:
- Prudential regulation: including reserves, liquidity, lending and risk management
- Governance: dealing with the roles and responsibilities of the Chair, Board, Manager and Board Oversight Committee
- Restructuring, including the establishment of the Credit Union Restructuring Board – ReBo: restructuring via transfers, mergers and amalgamations on a voluntary, incentivised and time-bound basis
- Stabilisation: provision of support to credit unions that are viable but undercapitalised
The Act is being commenced in accordance with the published Implementation Plan, which will allow credit unions sufficient time to prepare for these changes.
The Government has made available €500 million to support the stability of the credit union sector. This amount is divided between two funds with €250 million in each. The Resolution Fund which provides funding for credit unions requiring resolution and the Credit Union Fund which provides funding for voluntary restructuring under ReBo. A stabilisation levy will be introduced in 2014 to support credit unions that are under capitalised but are otherwise viable.
ReBo is a statutory body set up to facilitate the restructuring of credit unions on a voluntary, incentivised and time-bound basis. The focus of restructuring is to bring stability to the credit union sector without impinging on some credit unions to succeed on a standalone basis. All restructuring proposals require Central Bank approval.
Under the Central Bank and Credit Institutions (Resolution) Act 2011 the Central Bank can take resolution action where necessary via a High Court process. This provision was used to safeguard members’ savings at Newbridge Credit Union.
The Registry of Credit Unions introduced a Fitness and Probity regime on 1 August 2013 for credit unions with total assets of greater than €10m. This was the beginning of a phased approach to the introduction of Fitness and Probity measures for all credit unions, with the second phase due to commence on 1 August 2015 when all remaining credit unions will be brought within the scope of the regime. Currently relevant credit unions require pre-approval by the Central Bank for a Chair and Manager prior to either of these positions been taken up. This will ensure that any individual carrying out these roles is fit and proper to do so.
This Government has introduced a number of measures in relation an effective regulatory structure for the sector and I am satisfied that these measures will underpin a stable credit union sector into the future.
