Minister for Finance Michael Noonan has said he is to establish a Restructuring Board in the coming weeks to implement the recommendations of a report on the credit union movement.
The report by the Commission on Credit Unions, published last week, said the restructuring of credit unions will require significant funding, including State funding. The amount required will not be known until the restructuring process gets under way, according to the report.
Suggested potential sources of funding are: available excess capital from participating credit unions; the wider credit union sector; and exchequer advances provided on a recoupable basis.
The report said the restructuring should be done on a voluntary, incentivised and time-bound basis.
Speaking at the Irish League of Credit Unions annual general meeting this morning, Mr Noonan said the Government is “very much committed” to credit unions.
“We believe that you continue to have an important role to play both in the financial sector and in Irish society at large,” he said.
There are 404 credit unions in the Republic with about three million members and assets of about €14 billion.
Mr Noonan said the forthcoming Credit Union Bill will give effect to the changes to regulation and governance outlined in the commission’s report.
“These changes will be introduced on a phased basis over time and will be calibrated according to the tiered regulatory approach,” he said.
“The new framework will also be developmental. It will create the environment for credit unions to grow their business and improve the quality of services available to members. This will be important if credit unions are to adapt and compete in a changing financial sector, while still retaining core credit union values.”
The Minister said Bill will also establish the statutory stabilisation scheme to be funded by credit unions, as recommended by the commission. “This will be an important tool to deal with undercapitalised but viable credit unions that meet the conditions of the scheme into the future,” he added.
“The report’s recommendations on consultation, impact assessments and an appeal mechanism will further help to support a regulatory regime that is modern and effective; yet balanced and proportionate.”
Mr Nooan said restructuring presents an opportunity to stronger credit unions to develop a more sustainable business model. It also provides a mechanism to deal with the financial stresses in credit unions in an orderly and constructive way.
“Without restructuring, there is the risk that problems will unwind over an extended period and in a way that erodes member and public confidence,” he said. “However, we must be realistic. The Central Bank will still have to take resolution action in cases where the circumstances warrant it.”
He said not all credit unions will undergo restructuring, and some will continue to operate successfully on a stand-alone basis if they choose, provided that they have a viable business model and are capable of meeting regulatory requirements.
Mr Noonan said the Restructuring Board will be constituted on the basis outlined the commission’s recommendations, “which will ensure that the credit union voice is well represented at the table”.
