Mr. Kevin Johnson:

Good afternoon Chairman and members. CUDA is grateful for the invitation to discuss topical issues pertaining to credit unions. CUDA was formed in 2003. It is owned by and represents many of the largest credit unions in the country. It also provides a wide range of support services to them and a growing number of credit unions throughout the country. I am the CEO of CUDA and I am joined by my colleague, Ms Elaine Larke, who is head of legal and compliance at CUDA. Members have a copy of my slides which I will go through.

The blueprint for the future of credit unions in Ireland has been set out in the report of the Commission on Credit Unions which was published in April 2012 and resulted in the Credit Union Act 2012. The commission's report provided a factual insight into the financial position of credit unions. It looked at international best practice and presented its views on where the credit union movement in Ireland should be headed. It went on to make proposals for stabilising and restructuring the sector and for strengthening the legislative and regulatory frameworks, including an improved governance regime. We are now in the final stage of implementation which should see the introduction of a tiered regulatory framework. Unfortunately, we are not getting that and this deviation has the potential to place the credit union movement in jeopardy.

CUDA works with credit unions to help them develop their business models in line with their requirement to remain viable and relevant. These business models reflect the needs of the credit union members. Like the commission, we realise that not all business models are or will be the same. The commission envisaged an environment that offered a flexible approach to the regulation of credit unions and assists credit unions in determining the business model they wish to adopt. Some examples have been illustrated on slide No. 3. It was to allow some credit unions to continue to offer basic savings and loans. It was also to allow other credit unions to develop and offer a greater range of services as long as they have the necessary scale and comply with specific additional requirements. This is what is meant by a tiered regulatory framework.

While sharing the same ethos, values and principles, the business models vary as they are driven by the needs of their respective members. Slide No. 4 demonstrates the breadth of needs that exist which can be categorised across personal business and community needs. CUDA supports credit unions achieve their clear vision of helping members become financially independent through access to financial services, products and education. CUDA has identified a spectrum of co-operation which ranges from knowledge sharing right through to the good work of the ReBo team who support credit unions which wish to merge.

In 2011, CUDA developed the credit union support platform. Building on that success, CUDA introduced a shared compliance and risk management officer service and now a series of exciting and innovative projects are ongoing under the auspices of the solution centre. There is little point in working on expanding these services if we do not have an enabling regulatory and legislative framework that supports the development of enhanced business models.

Credit unions have taken on significant change and the quid pro quowas that there would be a tiered regulation. Unfortunately, the Central Bank is now choosing to deviate from the commission's recommendations. New regulations for credit unions, following the consultation paper CP88, primarily focus on minimising or eliminating risk to the detriment of the appropriate development and evolution of the sector.

The vast majority of credit unions are financially sound, compliant, competent and ready to provide more services to more people. It is time to recognise that fact and to allow them to do what they do best which is to offer the services their members rightly expect from a modern credit union. Strangling credit unions with over-zealous regulation will see their demise and force credit union members to switch to more expensive banks.

There is a simple answer to this dilemma. Before the Minister, Deputy Noonan, allows further rules to come into effect, by commencing the remaining sections of 2012 Act, he should conduct a review on how the commission’s recommendations are being implemented and whether the legislation and regulations reflect the current needs of credit union members. This will afford the opportunity to ensure there are no unintended consequences and that all the good work of all the stakeholders, is not unravelled.