Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank all Deputies for their approach to the Bill. It is important legislation. Even though we have all been very complimentary about the credit union movement it is also true that it did not escape unscathed from the collapse in the financial services industry consequent on the collapse of the construction and building industry. Some credit unions had moved away from their traditional areas of activity and some of the bigger credit unions were heavily involved in funding construction and development in a way that was unexpected. Deputies are aware of examples of that. There is quite a degree of impairment in the credit union movement. If the more than 400 credit unions were all branches of the same organisation there would be certain difficulties in them and one would have to distinguish one from the other. Members will be aware from the reports already published that there is a significant number of credit unions whose reserves are quite low and the Government has pledged to repair that situation through a variety of means. One of the reasons the Bill is proceeding as a matter of urgency is that the Government has committed to putting €250 million into an account to be used for the credit union movement and we need to get it in this calendar year, because it is in this year's accounts which is why we need to move it forward. There is pace attached to the way we are dealing with it. I do not know what the full impairment was, but the first shot was somewhere between €0.5 billion and €1 billion and I do not know whether it will reach that amount. That will not be known until people go into the credit unions and examine the situation. We have had only one example of that in Newbridge. Certainly that was a revealing exercise when the special manager went in there.

We want to treat the credit union movement fairly. We want to provide the capital that is required to repair the damaged credit unions and to provide a framework to enable ReBo, the new group, to do what is necessary to repair any damage the credit union movement has suffered in the course of the crisis. The purpose of the Bill is to ensure the credit union movement will be strong and the threats to its vitality and ongoing success will be removed and that there will be a framework in accordance with law within which it will operate.

I believe there is a misunderstanding. Given the ongoing contact between the credit union movement and my officials the ground has narrowed from the original communications. I would like to provide similar information in order that we can confine it to where there is a real difficulty rather than chasing hares that are not relevant. I will read another note which is in reply to the key question of how financial services legislation will apply to credit unions.

A key question is how financial services legislation will apply to credit unions. The Central Bank Acts have limited application to credit unions. My officials carried out a review of the Central Bank Acts and the Building Societies Act in assessing section 184 of the Credit Union Act of 1997. They found that only certain provisions would apply to credit unions. These include the following: the Irish Financial Services Appeals Tribunal, in Part VIIA of the Central Bank Act 1942; the Financial Services Ombudsman, in Part VIIB of the 1942 Act; and the administrative sanctions procedures, in Part IIIC of the 1942 Act.

Although currently applicable to credit unions in practice, the following provisions may also be caught by section 184 disapplication provision. In other words, the following are provisions that no longer apply: provisions relating to collection of regulatory levies in respect of which specific provision is made for credit unions, in Part IIIA of the 1942 Act; powers of the Registrar of Credit Unions for the purposes of supervising or regulating credit unions, in Part IIIA of the 1942 Act; and provisions empowering the bank to carry out studies, surveys and analysis with respect to the provision of financial services to consumers, including the power to compel the production of information for these purposes and to publish its findings in respect of same, insection 5(c), Part II of the 1942 Act.

The Department of Finance has identified a number of provisions in the Central Bank Acts and the Building Societies Act which directly apply to credit unions, in apparent conflict with section 184 of the Credit Union Act 1997 - for example, section 134 of the Central Bank Act 1989, which contains a direction-making power which permits the Minister, in consultation with the bank, to suspend certain business in the national interest. This direction-making power extends to licence holders and persons exempt from holding a licence under section 7(4) of the Central Bank Act, 1971, which includes credit unions. The Central Bank Act of 1971 mainly applies to licence holders, which does not include credit unions. Section 14(1) of the 1971 Act specifically refers to credit unions: Section 14 (1) specifically refers to credit unions and states they cannot use the word "bank" in their names. Therefore, the disapplication clause of the Central Bank Act 1971 causes an uncertainty as to whether this prohibition is enforceable against credit unions. Section 27 provides that persons shall not advertise for deposits or other repayable funds but there is an explicit exception provided forinter aliacredit unions, which will be unaffected by the repeal of section 184.

Deputies can see that the detail is rather complex. We can supply the briefing notes on this if Deputies require them in advance of Report Stage. I would like to give Deputies as much information as possible to reduce the areas of misunderstanding so that we can concentrate on what, in the opinion of Deputies, might need to be amended.