The Minister for Finance, Mr. Michael Noonan T.D., has today published the Credit Union Bill 2012. The Bill gives effect to many of the recommendations of the Final Report of the Commission on Credit Unions, which was agreed unanimously by the Commission’s members, including credit union stakeholders.
The Bill deals with four broad areas:
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: 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 Minister stated: “The publication of the Credit Union Bill 2012 will strengthen the regulatory framework for credit unions and provide the basis for a restructuring of the sector over time in a way that is stable and protects credit union members. The Bill delivers on the Government’s commitment to implement the Final Report of the Commission on Credit Unions, which was unanimously agreed by all Commission members, including representatives of the credit union movement”.
The Minister also welcomed the recently-published ECB opinion on the Bill. The opinion states that “the ECB notes the robust nature of the new measures” and welcomes the Bill as a substantial enhancement of the tools available “to improve protection for credit union members and stability in the credit union sector.”
The publication of the Bill marks the delivery of a further commitment under the EU-IMF programme of support for Ireland to publish legislation by end September to strengthen the regulatory framework for credit unions, including making legislative provision for effective governance standards and prudential requirements.
Notes for Editors
The Bill gives effect to many of the recommendations of the final report of the Commission on Credit Unions, which was agreed unanimously by the Commission’s members, including credit union stakeholders. The Commission was specially reconvened on a once-off basis to consider the General Scheme of the Bill to ensure its consistency with the Report’s recommendations.
Main points of the Credit union Bill 2012
· The Bill sets out the framework for the prudential requirements that are to apply to credit unions in areas such as reserves, liquidity, lending and risk management. The policies and principles in respect of each area are set out in the Bill, with scope for Central Bank regulations in relation to standards, procedures and other more detailed matters.
· Regulatory requirements will be calibrated according to the nature, scale and complexity of credit unions, which allows for the tiered regulatory approach recommended by the Commission on Credit Unions.
· The Central Bank is required to consult with the Minister and credit union stakeholders and to ensure that the regulations are proportionate having regard to the nature, scale and complexity of the credit unions they apply to. Many of these changes will be phased in over time.
· It has also been agreed in the Commission on Credit Unions Report that the Central Bank will adopt a consultation protocol in respect of its engagement with credit unions and will also conduct a regulatory impact analysis when setting out new regulations.
· Credit unions will become subject to the Central Bank’s administrative sanction procedure, with recourse to an appeal via the Irish Financial Services Appeals Tribunal (IFSAT). Regulatory directions will also be appealable to IFSAT.
· The Governance provisions in the Bill clarify the roles and responsibilities of the chair, board and management of credit unions.
· In accordance with the agreed recommendations of the Commission on Credit Unions, term limits for directors are provided for which allow a director to serve 9 years on a credit union board in any 15 year period. Other exclusions from board membership are provided for in accordance with the Commission’s recommendations, including employees, voluntary assistants, directors of other credit unions and professional advisors.
· The Bill provides the statutory basis for the restructuring of credit unions. Restructuring is to be achieved on a voluntary, incentivised and time-bound basis over a four-year period. The guiding aims of restructuring are:
the protection of credit union members’ savings;
the stability and viability of credit unions and the sector at large
the preservation of the credit union identity and ethos.
· Under this process, credit unions approved by a new Restructuring Board (ReBo) for restructuring - by way of amalgamations or transfers - will be provided with funding where required, and subject to conditions, to ensure that they have adequate capital, and to upgrade systems. Restructuring will not apply to all credit unions. Some credit unions will continue to operate successfully on a stand-alone basis should they so choose, provided that they have a viable business model capable of meeting regulatory requirements. The Bill sets out the statutory basis for the ReBo.
· The Bill sets out the basis on which stabilisation support may be made available with Central Bank approval to viable but undercapitalised credit unions. Stabilisation is to be funded by the credit union sector. During the restructuring process, a recommendation from the ReBo is required before the Central Bank can consider a credit union for stabilisation.