Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)

I propose to share time with Deputies Finian McGrath, Connolly and Cuffe.

I wish to put on record Sinn Féin's opposition to the way this legislation is being rushed through the Dáil. This legislation is primarily designed to facilitate one building society, the Irish Nationwide Building Society, in giving up its mutuality and enabling it to be taken over immediately.

While Irish Nationwide by its past treatment, including overcharging of members and the fact its chief executive had to be compelled to come before the Flood tribunal to explain why his society had not complied with a tribunal order, has done the reputations of building societies no service, neither should its record be used to advance the cause of demutualisation.

Before the demutualisation of the Irish Nationwide Building Society proceeds, measures must be taken to ensure those members who were scandalously treated in the past receive fair recompense. Mutual bodies, including building societies and credit unions, reflect the principle that our needs can often be satisfied by acting together rather than alone. Mutuals are usually formed so members can obtain goods and services which would otherwise be unavailable or prohibitively priced. When demutualisation happens, it is those disadvantaged communities whose needs are not met by banks which lose out.

A study of mutuality and corporate governance by the Centre for Business Research at Cambridge University found the beneficiaries of the wave of demutualisation which occurred across Britain during the 1990s included, "corporate managers whose earnings and status were enhanced following conversion, and speculative investors who profited from windfall gains". The losers were borrowers who faced higher loan costs and communities left with a reduced diversity of service.

Private sector banks motivated merely by profit have, in recent years, pulled out of disadvantaged areas such as parts of inner-city Dublin and rural areas where, because of the low incomes of those living in the area or the small population, they foresee low profit margins from the retention of those services. These types of areas benefit from the development of mutuals and gave birth to the credit union movement, one of the great movements of our country.

Properly run true mutuals can provide a better service at a lower cost. Sinn Féin supports the sections of the Bill which enable building societies which do not wish to demutualise to expand the range of products and services they can offer. While we may discuss the demutualisation of building societies now, the experience of other states suggests credit unions are the next likely target for financial predators.

I wish to deal with an important related issue. The future viability of the credit union movement is undermined by the failure of the Government to make changes on restrictions on lending practices of credit unions under the Credit Union Act 1997. Under the 1997 legislation, credit unions are restricted as to the proportion of their loans to be repaid over five and ten year periods. These restrictions do not apply to banks and other financial institutions. It means credit unions find themselves in breach of the law and if nothing is done, they will have to refuse top-up loans and many loans of five years and over.

Many credit union borrowers are on low incomes and have no equity to offer as security for bank loans. The credit union is their only source of borrowing. These restrictions cause difficulties for low-income families attempting to reschedule loans. The Minister must make a statement to the House on this matter and must take action to change the restrictions on credit union lending practices without further delay.

Provisions under the Building Societies Act 1989 preclude 15% or more of the shares in a successor company being held by any individual or institution for five years after demutualisation unless the Central Bank directs that these provisions should not apply. This protective provision should be retained. It is not acceptable to remove it simply to facilitate one building society, in this case Irish Nationwide, whose central managerial track record is dubious to say the least.

What impact will this legislation have on the capacity of new mutuals to be formed in the confidence they will retain their proper function of enabling their members to engage in self-help? We should not make it easier or more attractive to demutualise. We should increase protection for mutuals, in particular protecting them from so-called "carpetbaggers", individuals who join building societies and possibly in the future credit unions, to vote for demutualisation and share in the distribution of assets.

Where building societies choose to demutualise, increased protective provisions must be built into law to prevent individuals pushing for demutualisation because they are likely to gain a personal windfall. We cannot realistically expect those who would potentially make a huge personal gain from demutualisation to argue against it on the basis of the benefits of mutualisation for communities. By restricting the ability of directors and employees to make windfall gains from demutualisation, this conflict of interest is removed. I tabled an amendment to this effect and hope we will discuss it, although the time is extremely restrictive.

I fully endorse the position adopted by Deputy Gilmore of the Labour Party and the arguments he presented on the question of the procedures for addressing this Bill. Despite the Chair's judgment a moment ago, real and serious questions are raised and I have no doubt they will continue to be discussed and debated. I intend to oppose the passage of this Bill for the reasons I outlined.

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