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

The Deputies are quite familiar with the process. The Long Title of the Bill states in summary the purpose of the legislation. It includes the fact that the objective is to change the governance requirements for credit unions by removing certain management functions from the boards of directors of credit unions, providing for a separate management structure and improving the oversight and the general policy functions of boards. I do not think anyone would disagree with this objective. It is something that is required to reposition credit unions and ensure they are run, managed and overseen properly. Most of what is proposed runs directly from the Commission on Credit Unions.

The groups that had proportionately the most members on that commission were the Irish League of Credit Unions, ILCU, and the other credit union group. The commission examined this issue in detail. The exclusions from board membership are specifically recommended in its report, which was co-authored and agreed by the ILCU. I am not slagging anyone. I am just setting out the facts of the situation.

Deputy Collins asked why we would make these exclusions. They are designed to ensure that people are not overseeing their own work or answerable to themselves. In any kind of management system in a financial institution, people do the work and people oversee it. In this light and on the specific recommendation of the commission, employees and volunteers of credit unions cannot also be directors.

Regarding the issue of employees and volunteers at other credit unions, members need to have confidence that board members are free from conflicts of duty and loyalty. A director who is making decisions about business strategy or a possible amalgamation might find it difficult to maintain sufficient objectivity where the decision might also affect the neighbouring credit union where he or she works. There would be the potential for conflicts of interest.

If the committee believes that this provision goes too far, there is one matter in respect of which I can provide some satisfaction. There is a provision whereby, if one is a voluntary assistant in one credit union, one cannot be a director of another. Arguably, this is harsh, as there is no direct conflict. I could make the argument about voluntary assistants in another credit union, but the risks are much lower, as the assistant has no financial or employment interest at stake. If the committee believed it appropriate, I could remove voluntary assistants at other credit unions from the list of exclusions.

The effect of amendment No. 29 would be to allow a person to sit on the board of one credit union while being responsible for overseeing the board of another, possibly neighbouring credit union. In such a case, the person on one board would have full access to the records and documents of a neighbouring credit union and would be able to attend its board meetings. There is scope for divided loyalties. This is best avoided if we want to engender confidence in the objectivity of those on board oversight committees. I note that the National Supervisors Forum, NSF, which represents those who sit on board oversight committees, have not sought this amendment in its submission.

I accept that there are safeguards in the Bill against conflicts of interest and that a member of a board oversight committee at one credit union could bring many skills to the board of another. I will reflect further on this case. However, my main priority is to avoid any conflict that might compromise the best interests of credit union members.

If accepted, amendment No. 30 would allow employees of representative groups to sit on credit union groups even where to do so would expose them to potential conflicts of interest. This exclusion was agreed by the Commission on Credit Unions, including the three credit union groups present that would be affected by it. On these grounds, I do not propose to accept the amendment. I note that the ILCU made it expressly clear when it appeared before the committee in September that it had no difficulty with this particular exclusion.

Amendment No. 32 would allow a person who is in arrears for more than 90 consecutive days under a debt obligation to that credit union to sit on its board. Credit unions are primarily about savings and loans. A core focus at board level is on lending, provisioning and credit control. Allowing those with a manifest arrears problem to remain on the board and make key decisions about lending in arrears in the wider credit union creates potential conflicts of interest. I do not know how someone who is known to be in arrears and is a director of the board can insist on a profile of on-the-nail repayments for other people in arrears. The Deputy can see the possible conflict. It may sound harsh in the individual case but, in the general interests of the particular credit union, it is appropriate that this provision should be made. I do not propose to accept the amendment.

Amendment No. 33 would allow family members of a voluntary assistant to sit on the board. This exclusion was specifically recommended by the commission to avoid conflicts of interest where the board member must undertake effective oversight of volunteers, including his or her own family member. If a young, bright son was an accountant, his mother was on the board and he was overseeing her, there would be a potential conflict. However, it is not as great a conflict as others. I will reflect on whether family members of volunteers ought to be removed from this provision, given the fact that the Bill also provides against conflicts of interest and that it will be important to retain scope to draw from a sufficiently wide pool of volunteers. I may be able to remove the exclusion if I believe that the conflict of interest provisions elsewhere in the Bill are strong enough to afford protection. If they are not in the first instance, I will examine them to determine whether they need to be strengthened. I can give ground on this issue.

I have tabled a number of amendments, but we have not reached them yet.