Bill plans stronger credit unions

Credit union chiefs who fail to adhere to proposed new legislation run the risk of heavy fines of up to €250,000 and multi-year prison sentences.

Fri, 29 Jun, 2012 - 01:00

Geoff Percival

Finance Minister Michael Noonan last night published the general scheme of the Credit Union Bill, the first step towards legislation aimed at introducing major changes to the sector.

Much of the bill, which will be referred to the Attorney General’s Office for formal drafting, before being referred to both the European Central Bank and the Joint Oireachtas Finance Committee for opinion, gives effect to recommendations included in the report of the Commission on Credit Unions, published in April.

One of the key elements is the establishment of a restructuring fund to provide funding for credit unions in need of aid.

While Mr Noonan said last October that between €500m and €1bn could be pumped into the creaking sector, a solid figure has yet to be arrived at.

However, a key element of this fund is the inclusion of existing credit unions. Its funding will come from a mix of state aid and excess capital from the credit union network.

Any credit union unable to contribute to the restructuring fund will not be able to carry on functioning as a stand-alone unit. Those deemed to be avoiding their duty stand to face severe penalties.

Credit union officers who connive in the operation of a credit union which has not contributed to the restructuring fund face up to three years in jail and a fine of €250,000.

The immediate expectation from April’s recommendations was that consolidation would sweep over the movement, with as many as 100 unions seeking to merge with better-performing counterparts over the next four years.

Mr Noonan last night called the proposed bill “an important step” in implementing the recommendations of the Commission on Credit Unions.

“The bill 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,” he said.