Mr. David Matthews:

I thank members for their questions and comments. I will deal with Deputy Ó Cuív's question first. It is probably not as relevant to credit unions because they are local anyway. Since they are not branches of a larger entity, they have a local presence and they intend to keep that local presence. Where there is consolidation, it is generally around a county town in such a way that employment will be maintained locally rather than coming in to one of the larger cities. From that point of view our position is clear.

Deputy Heydon asked a question about smaller credit unions. A big debate is ongoing in credit unions about feasibility, what makes a feasible credit union and whether it relates to a particular size of assets - in other words, whether the ideal size is a €20 million, €50 million or €100 million credit union.

From the point of view of the league, feasibility is about far more than finance and assets. Obviously, financial aspects arise and they tend to relate to loans, loan growth and managing the cost base. However, equally important is the ability to provide the local services that are needed by credit union members and not necessarily on a for-profit basis because credit unions are not-for-profit organisations after all. The third pillar is the ability to govern the credit union in question, to have good governance structures within the credit union and to be able to maintain these in future. If a credit union can answer those three questions in the affirmative, then it should be an option for that credit union to stay as a stand-alone entity rather than consider the merger option. Having said that, where credit unions merge, generally the objective is to keep the local services and to keep what has become a branch. In other words, the objective is to keep open what was a credit union and what has become a branch, where possible and sometimes to improve the services on offer as well. That is our standpoint on the matter.

Reference was made to the Central Bank view on credit unions. The Central Bank has said consistently that it wants to see a strong well-governed credit union movement that should represent a feasible alternative in the financial services market in Ireland. We have to take the Central Bank at its word in this regard. The Central Bank instituted a strengthened regulatory framework for credit unions in recent years - I am using Central Bank terminology. There has been considerable restructuring of the credit union movement. To be fair to the Central Bank, as these new scenarios are being embedded in the credit union movement, we are beginning to see more leeway from the bank. The bank is allowing credit unions to do a little more now, especially in the area of payments, mortgages and personal micro-credit. The Central Bank is a major stakeholder along with the credit unions and others in this regard. The bank had to revisit its standards and rules to allow these changes to proceed.

We are beginning to see more activity and more leeway from the Central Bank. By nature, the regulator will be slow to make changes and to change its mind. Credit unions must continue to show the Central Bank that we can reach the standards required. Moreover, we must keep the pressure on the regulator to make the changes we want to see. My colleague, Mr. Knox, will discuss the departmental role.