Mr. Philip Hosford:

We are very much in favour of having strong capital. Head 2 provides detail on the capital levels for credit unions, namely, a basic capital level plus a capital level around the risk weighting of assets and a capital level around operational risk. We would like more detail in the legislation around how this would be put together, in particular on the risk weighting of assets. The main assets in credit unions would be loans, investments and fixed assets. We believe that if there was more detail embodied in the legislation it would provide a safeguard for credit unions that there might be caps in particular areas and different capital requirements which apply to different types of assets.

That would give us something we could work with. We are happy for the Central Bank to have a large role in giving an indication based on the risk of our individual credit union of what our capital levels should be. If there was a bit more detail embodied in the legislation, it would give us more to work with. We would know, for example, in the area of lending there is a higher capital requirement based on commercial or development lending than on secured or personal lending. We would know what we are working with a bit more and it would give us a bit more detail.

The other point is that we felt if there was a cap in a particular area, we would know the maximum capital that we might have; if it were 14% or 12%, for example, we would know what we are working towards. Overall we are very much in favour of strong capital and we see it essential to have capital built. If there was more detail, we would have more to work with and it would take away a bit more of the unknown from our perspective.