Cormac Devlin
Question:74. Deputy Cormac Devlin asked the Minister for Finance his views on legislating on reserve requirements for banks and credit unions. [9683/22]
View answerTuesday, 22 February 2022
Questions (74)
Written answers
Since the Financial and Banking crisis, a number of regulatory, supervisory and legislative changes have taken place at International, EU and domestic level to ensure a safer, more stable and resilient financial and banking sector. These changes include the implementation of revised capital requirements for banks under the Capital Requirements Directives and the Capital Requirements Regulation as amended.
Ireland’s position is represented at EU Council negotiations by officials from my Department on these issues and is supported by expert analysis from a range of sources including the Central Bank of Ireland.
Specifically relating to the minimum reserve requirements for credit institutions, these are governed by the minimum reserve system which is set out in the Regulation (EU) 2021/378 of the European Central Bank of 22 January 2021 on the application of minimum reserve requirements. Banks and credit unions are within scope of this regulation.
Credit unions are also subject to statutory regulatory reserve requirements prescribed by the Central Bank under Section 45 of the Credit Union Act 1997, and the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (the Credit Union Regulations). The minimum regulatory requirement of 10% that applies to Credit Unions is set by the Central Bank of Ireland as Regulator and is set out in Regulations and not Primary Legislation.
For ease of reference the full provision is set out in Regulation 4 of the Credit Union Regulations which provides that:
“(1) Subject to paragraph (2), a credit union shall establish and maintain a minimum regulatory reserve requirement of at least 10 per cent of the assets of the credit union
(2) A newly registered credit union shall establish and maintain an initial reserve requirement that: (a) is sufficient to meet the credit union's anticipated growth over 3 years; (b) takes account of operating losses that can be expected to occur until the credit union reaches an operationally viable performance level; and (c) is at least equal to the greater of: (i) €10,000; or (ii) minimum regulatory reserve requirement specified in paragraph (1).”