Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I welcome our guests and apologise for my late arrival. I had to cover for the party leader in the Chamber this afternoon. There is nothing worse than somebody arriving late, repeating many of the points that have been made and asking the same questions, so I will make a couple of observations and put one question. The question will be on the recommendations the witnesses would like the committee to make. When I suggested to the Chairman that we hold these hearings, it was with a view to the committee, on an all-party basis and including members of no party, collectively making recommendations to the Oireachtas and the Government that might make a difference. It is not about a long wish list but about the priority areas where we could make meaningful changes. That will be my question presently for each of the witnesses.

The frustration coming across is palpable, but there is also an honesty that is welcome. When we consider what has happened over the last number of years in the approach to regulation and so forth we should also recall the context. In October 2011, the Minister, Deputy Noonan, was obviously advised by somebody to tell the Seanad that the cost of rescuing credit unions would probably be over €500 million and might be up to €1 billion. That was the thinking and the context. Somebody advised him that this was the likely scenario for credit unions. It was very wide of the mark. A small number of individual credit unions got into difficulty and did not have good practices. Everybody must acknowledge that. However, I have gone through the numbers and when one takes into account the various levies that have been paid into the different funds, the net cost is negligible. It is a net cost to the State of a few million euro to support the movement. There was a real suspicion within the system as to what credit unions were doing and how healthy or unhealthy they were and that informed the approach of the Central Bank in particular to the credit union movement. That is my understanding of it, and I could be wrong. However, I believe there was a feeling that the movement was in far worse shape than it transpired was the case when the deep-dive assessment was carried out.

The failure to implement the tiered approach to regulation was a travesty and a betrayal. All of the changes that were introduced were supposed to be in the context of the tiered approach. If that approach had been the overarching strategy within which all the other changes to regulation occurred, it would not have been anywhere near as bad as it has turned out to be for credit unions. The CUAC report of last June was refreshing and straightforward. It contained many interesting items. One that struck me was the following statement:

The loan to asset ratio has fallen steadily in recent years to a present level of 26% which is a cause of deep concern. There are only 5 countries out of 105 with credit union movements, which have a loan to asset ratio inferior to that in Ireland. A further major issue for the credit union loan books is that over the period there has been a significant shift away from larger value, longer duration loans to smaller value, shorter duration loans. Both trends raise fundamental questions around the credit union business model(s).

The main recommendation of the report was that there should be an implementation group to oversee the implementation of its recommendations. However, it took eight months for that group to meet. That says it all about the lack of priority afforded to the movement.

We are here to try to make a difference. We will be meeting with the Department and the registrar. What would each of the witnesses like us to recommend? There are many issues involved, including the restrictions on where credit unions can place their investments, the different types of lending restrictions, the longer term restrictions, the issue of the reserves, the difficulty in getting sanction for new services and the issue of lending to approved housing bodies and local authorities and legislation to address that. What can we usefully do? At the end of this process, I hope the committee will agree unanimously on a report, which will go to the Oireachtas for debate and to the Minister for Finance for implementation. If it requires legislation, which I expect it will, so be it. We can do that. If the witnesses would state the key items they would like the committee to recommend after we have had our engagement on Thursday, that would be very helpful.