EN ECB -PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 4 September  2012  
on credit unions  
(CON/ 2012/ 68) 
 
Introduction and legal basis  
On 18 July 2012, the E uropean Central Bank (ECB)  received a request from the Irish Minister for 
Finance for an opinion on the General Sch eme of the Credit Union Bill 201 2 (hereinafter the ‘General 
Scheme’ ). 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third and sixth indents of Article 2(1) o f Council Decision 
98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions
1, as the General Scheme relates to the Central Bank of Ireland (CBI) 
and contains rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of 
Procedure of the European Central Bank, the Governing Council has adopted this opinion.  
 
1. Purpose of the General Scheme  
1.1  The General Scheme propos es wide- ranging measures to strengthen the regulatory framework f or 
credit unions, including more effective governance and regulatory requirements .  
1.2 The publication of the  Gene ral Scheme was a structural benchmark of the EU -IMF Financial 
Support Programme for Ireland.   
1.3 The General Scheme’s  regulatory requirements framework for credit unions include s requirements 
in respect of reserves, liquidity, borrowing, lending, savings, in vestments, operations, risk 
management, records management, information systems and outsourcing. Credit unions will also 
be required to prepare a strategic plan. The CBI is given the power to make regulations relating to 
the above matter s after consulting with the Minister and other bodies.   
1.4 The General Scheme  sets out a statutory governance code with minimum governance standards for 
credit unions . Credit unions will be required to submit an annual compliance statement to the CBI 
certifying compliance with  these governance standards. The  General Scheme sets out the roles and 
                                                      
1  OJ L 189, 3.7.1998, p. 42.   
ECB -PUBLIC  
2 responsibilities of the chair, board and management of credit unions. It also deals with fitness and 
probity, skills, conflicts of interest and the need for robust systems, processes an d controls.  
1.5 The General Scheme establish es a statutory stabilisation regime for credit unions. It sets out the 
conditions under which stabilisation support will be available to viable but undercapitalised credit unions. In particular, t he CBI may, subject to the consent of the Minister, provide stabilisation 
support to a credit union. The General Scheme provides that credit unions contribute to a  
stabilisation  fund that will meet all costs of stabilisation sup port. The implementation by the CBI of 
the stabi lisation regime will be examined by a Stabilisation Committee, whose members will be 
appointed by the Minister.    
1.6 The General Scheme  establish es a process for the restructuring of credit unions. It sets out the 
process under which funding will be available  to facilitate the restructuring of credit unions  and 
establishes a restructuring fund . The Minister may provide financial support fr om the Restructuring 
Fund to a  credit union. C redit unions wi ll contribute to the Restructuring Fund t o meet the  cost of 
restructuring . The Minister will be reimbursed for any funds  advanc ed to the Restructuring Fund. 
The restructuring process will be facilitated and overseen by a  Credit Union Restructuring Board 
(the ‘Rebo ’), whose members will be appointed by the Minister. Any restructuring plan approved 
by the Rebo  must be submitted to the  CBI  for approval .   
 
2. General observations  
2.1 The EU -IMF Financial Support Programme requires reform of Irish credit union law  and 
strengthen ing of the  regulatory framework applying to credit unions , including  effective 
governance and stabilisation requirements.  The ECB notes that the General Scheme is in line with 
the requirements of the EU -IMF Financial Support Programme for Ireland.   
2.2 As specified in the ECB’s Convergence Report s
2 and opinions, a ny involvement of a national 
central bank (NCB)  in the application of measures to strengthen financial  stability must be 
compatible with the Treaty, i.e. NCBs’ functions must be performed in a manner that is fully 
compatible with their func tional, institutional, and financial independence so as to safeguard the 
proper performance of their tasks under the Treaty and the Statute3. To the extent that national 
legislation provides for a role of an NCB that goes beyond advisory functions and requires it to 
assume additional tasks, it must be ensured that these tasks will not affect the NCB’s ability to 
carry out its ESCB -related tasks from an operational and financial point of view4.  Additionally, the 
inclusion of NCB representatives in collegiate decision -making supervisory bodies or other 
                                                      
2  See 2012 Convergence Report p. 26.  All ECB reports and opinions are available on the ECB’s website at 
www.ecb.europa.eu.  
3   Opinion  CON/2010/31.  
4  Opinion CON/2009/93.  
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3 authorities would need to give due consideration to safeguards for the personal independence of the 
members of the NCB’s decision -making bodies5. 
2.3 The ECB notes the robust nature of the new measures and welcomes the ir substantial enhanc ement 
of the regulatory tools available to the CBI6 to improve  protection for credit union members and 
stability in the credit union sector .  
2.4 As regards the financing of these enhanced CBI powers, the ECB refers to the prin ciple of financial 
independence under which an NCB  must have sufficient means to perform its tasks related to the 
ESCB and its national tasks7. As pointed out in previous ECB opinions, when allocating specific 
non-ESCB related tasks to the NCBs, e.g. tasks in the area of financial supervision or consumer 
protection, an adequate amount of human and financial resources must also be allocated in order for these tasks to be carried out in a manner which will not affect the NCBs’ operational capacity to 
perform their ESCB -related tasks
8. The CBI should therefore possess sufficient human and 
financial resources to efficiently perform any additional tasks introduced by the General Scheme in 
addition to its current tasks, and should not be adversely affected in carr ying out its ESCB -related 
tasks, from an operational or financial point of view, due to any additional tasks introduced by the General Scheme. 
2.5 The ECB looks forward to further consultation on the Credit Union Bill 2012 once it is published.  
 
3. Stabil isation Fund  
3.1 The General Scheme specifies in Head 30(1) that nothing in the s tabilisation part of the General 
Scheme prevents or restricts the performance by the Governor or the CBI of functions in relation to 
any credit union including functions under  the Central Bank and Credit Institutions (Resolution) 
Act 2011. This provision should also specify that nothing in the General Scheme will prejudice the 
compliance by the  CBI with the prohibition on monetary financing under Article 123 of the 
Treaty
9.  
3.2 Head 30(2) states that , subject to the consent of the Minister, the CBI may provide stabilisation 
support to a credit union and Head 30(2A)(a) states that before deciding to provide stabilisation 
support the CBI must have regard to the best use of the re sources available in the Stabilisation 
Fund. Head 30(7) provides that the Stabilisation Fund should meet cost of the stabilisation support 
                                                      
5   Opinion CON/2010/94.  
6  See also paragraph 2.1 of Opinion CON/2009/50.  
7  See the ECB’s Convergence Report, May 2010, p. 21, paragraph 3.1.5 of Opinion CON/2009/93, paragraph 3.2.1 of 
Opinion CON/2011/46 and paragraph 3 of Opinion CON/2011/69.  
8  See, for example, paragraph 3 of Opinion CON/2007/8 and paragraph 3.3 of Opinion CON/2011/76.  
9   The moneta ry financing prohi bition in Article 123  of the Treaty is  further  clarified  in Council Regulatio n (EC) 
No 3603/93  of 13 Decem ber 1993 speci fying definitions  for the application  of prohibitions  in Article 104 and 104b(1) of 
the Treaty (OJ L 332, 31.12 .1993 , p. 1) accor ding to which  overd raft facilities or any other type of credit facility with the 
ECB or t he NCBs  of Member  States  in favour  of Union institutions  or bodies,  central govern ments, regiona l, local 
or other  public authorit ies, other bodies  gover ned by public law, or public undertakings  of M ember States are 
prohib ited, as is any purchase directly from  these public  sector entities by the ECB or NCBs  of debt instrum ents. 
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4 and any other support, financial or otherwise, including costs incurred by the CBI in the exercise of 
its functions under this relevant part of the General Scheme, required as a condition of stabilisation support. T he ECB understands that Head 30(2) in conjunction with Head 30(7) requires the 
stabilisation support to be  provided directly from the Stabilisation Fund , and not from CBI’s funds . 
This understanding is confirmed by Head 32(2) which specifies that the CBI does not provide any 
funds to the Stabilisation Fund from its own resources. In line with this understanding , and having 
regard to the principle of financial i ndependence which is part of the principle of central bank 
independence referred to in Article 130 of the Treaty , the General Scheme should unambiguously 
state either that the CBI will not provide any funding to finance the stabilisation support to credit 
unions  or that the CBI provide s stabilisation support from the Stabilisation Fund and not from its 
own funds .  
3.3 In addition, i t is unclear how the Stabilisation Fund will be financed prior to contributions be ing 
made by the credit unions. It is also unc lear how stabilisation support can be provided where there 
are insufficient resources in the Stabilisation Fund. The ECB would welcome clarifications on 
these points in the General Scheme. 
3.4  Under Head 44(6)  of the General Scheme, in conjunction with Se ction 61H of the Central Bank 
Act 1942, the CBI may collect levies on behalf of the Rebo from credit institutions in respect of the 
performance by the Rebo of its functions only if the CBI and the Rebo agree on an arrangement  for 
this purpose . The ECB expe cts that if the CBI enters into such  an arrangement with the Rebo, the 
CBI’s role will remain consistent with the prohibition of monetary financing under Article 123 of 
the Treaty, as supplemented by Regulation (EC) No 3603/93, which prohibits, inter alia , any 
financing by a central bank of the obligations of the public sector vis -à-vis third parties and further 
requires  an arrangement with the Rebo under Head 44(6) in conjunction with Section 61H(4)  of 
the Central Bank Act 1942 to  be without prejudice to the independence of the CBI , in particular its 
financial and institutional independence.  
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main , 4 September  2012.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI