Ms Selina Gilleece:

I will deal with the tiered approach first. The Deputy asked if we thought there should be an additional layer or tier included in the current proposed three-tier structure. I have listened intently to some of the arguments on the proposed tiered system. Yesterday there was considerable debate on promoting the UK two-version model.

It was certainly indicated this would be a preferable approach with regard to credit unions in Ireland. I want to ensure Deputies are very clear on the alternative proposal. Credit unions in the UK have 1% market penetration and £1.6 billion in assets as opposed to more than €13 billion in Ireland. The credit union is a relatively new phenomenon in the UK whereas the credit union movement has been in Ireland for 50 years. Version 1 credit unions in the UK are required to have a reserve level of only 3% and version 2 credit unions are required to have an 8% level, whereas in Ireland credit unions are required to have a minimum reserve base of 10%. It is inappropriate to tinker with what is being proposed. As was stated yesterday, credit unions in the UK want to emulate what is happening in Ireland.

As I outlined, tier 2 credit unions will continue to be regulated as they are at present and this is a very important point. Tier 1 credit unions, which are those with less than €10 million, will have slightly softer regulation because of the reduced risk. I use the word "softer" although it is probably not appropriate. Tier 3 credit unions, which have a wider range of investments, risks and activities, will require stronger regulation. This is appropriate because it is about saving and protecting our members' money and we do not have any difficulty with this.

With regard to the terms of office for the auditor, credit union managers work with auditors more closely than anyone else in the credit union, with annual and interim audits being conducted. We have good and strong relationships with our auditors. The commission has stated it is appropriate for a credit union to seek to replace its auditor at the end of a six year term and this new auditor should not be from the same practice. We believe this is good governance. It reduces the risk of over-familiarity and, as Deputy Mathews stated this morning, it allows the accounts to be seen by a fresh pair of eyes. The suggestion of passing on information from one auditing company to another when an order is being replaced is very good and is best practice.

A question was asked about the development of a protocol with MABS. Credit unions recognise it is important to have such a protocol, but we have difficulties with the fact that at present credit unions working with members in arrears are categorised by MABS as less important than other creditors. Credit unions were responsible for founding MABS 20 years ago and many of us have been involved in the management committee of MABS during the past 20 years. It creates a difficulty for us when MABS approaches us that credit unions are towards the end of the list for repayments. We have seen instances where catalogue companies have had priority over us. We need to work with MABS on a protocol. Other financial institutions have signed up to a protocol with MABS. We see the impact of the mortgage arrears resolution process on credit unions. We have always worked with MABS and wish to continue to do so, but we need to be very careful because personal insolvency legislation is being introduced and we do not know what its impact will be on credit unions. We do not even know what shape it will take or how it will apply to our members. If we want to protect our members' money we must be very careful in our relationship with MABS.