Dáil Éireann Debate, Tuesday - 4 October 2016
147. Deputy John Lahart asked the Minister for Finance if he will consider relaxing the criteria for decision-making with regard to the granting of credit union loans; if his attention has been drawn to the negative effect that the current lending limits have on the persons that need loans the most; and if he will make a statement on the matter. [28528/16]
Amharc ar fhreagraMy role as Minister for Finance is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.
The Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions. Within her independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members.
While it is important to distinguish this division of roles, it is equally important to recognise that both the Registrar of Credit Unions and myself as Minister for Finance work together for the safety of members' savings and the security of the credit union sector.
Section 35 of the Credit Union Act, 1997 states that the ability of the loan applicant to repay shall be the primary consideration in the underwriting process of the credit union. Section 35 also states that a credit union shall manage and control lending to ensure the making of loans does not involve undue risk to members' savings taking into account the nature, scale, complexity and risk profile of the credit union. The Central Bank has indicated that all applications for credit should be appropriately assessed to ensure that the applicant's financial position, including commitments to other financial institutions is fully disclosed. Advancing credit to individuals who do not have the capacity to repay does not assist those individuals but can potentially exacerbate their difficulties.
In November 2015 the Personal Microcredit Scheme was launched as a pilot scheme in 30 credit unions on a voluntary basis and is now being made available to all credit unions. The initiative was first developed by bodies with an interest in social finance and these later joined an implementation group which included the Central Bank, the Department of Finance, the Department of Social Protection and credit union representative bodies. The main purpose of the Personal Microcredit Scheme is to provide small loan amounts, of between €500 and €2,000, to financially excluded people whose only other financial recourse would be to moneylenders.
Separately, on 29 June 2016 the Credit Union Advisory Committee (CUAC) presented me with a Review of Implementation of the Recommendations in the Commission on Credit Unions Report. This Review makes many recommendations, one of which is a full review of lending and concentration limits, including the basis of the calculation of those limits together with the associated liquidity requirements. I have stated previously that I intend to implement all recommendations in CUAC's Report and to that purpose the main credit union representative bodies has each been invited to nominate an individual to participate in an Implementation Group to be established for one year, which will oversee, monitor and report regularly to me on the implementation of those recommendations.
In February 2015 the Central Bank commenced a lending restriction review initiative, whereby credit unions subject to a lending restriction that are satisfied they have made the necessary improvements and have embedded these improvements in robust risk sensitive lending practices, could apply for a review of their lending restriction. The closing date for receipt of applications to review lending restrictions under this initiative was 30 September 2015. I have been informed by the Central Bank that as of July 2016, 26% of credit unions operate under lending restrictions, compared with 52% of credit unions at the start of the review process. While 13 credit unions have a monthly maximum lending restriction imposed, almost all credit unions with a lending restriction in place have a maximum individual loan size restriction. In the majority of cases, the maximum individual loan size is in excess of €10,000. The average new credit union loan in 2015 was €3,400.
