Noel Harrington (Cork South West, Fine Gael) | Oireachtas source

It is sad to see such amnesia.

I welcome the Bill and congratulate the Minister on bringing it forward. The credit union movement has the largest membership of any organisation in the State, with more than 3 million members out of a population of 4.5 million and with approximately 400 individual credit unions. It has an extraordinary number of members, with 72% of the population being members of a credit union. The European average is 3.5% and the average in the UK, with which we are often compared, is 2.4%. There must be a message there in that the citizens of this country recognised the value of the credit unions and became members. It would be fair to assume that with such a large membership, they are not just membership clubs where members would have a forensic knowledge of the rules, regulations and responsibilities of that club. It has such a large number of members that it is, effectively, a financial institution and millions of members probably do not differentiate between the credit union and other financial institutions in terms of where they lodge their cash or where they go to access small loans and loans for house improvements etc. It is worth noting the not-for-profit ethos of credit unions and their role in attaining the economic and social goals of members, which make the movement unique.

The credit union movement in Ireland is relatively new and was founded in 1958. Credit unions are hugely important social and economic institutions with unique characteristics. The characteristics of credit unions in urban areas may be very different from those in more rural areas. Even in rural areas, one might get credit unions offering different types of expertise or supports. Credit unions have extended their appeal beyond their historical role of serving the financial needs of disadvantaged communities and individuals. Many members are likely to be members of other financial institutions and, indeed, some members of credit unions are members of more than one, such as the INTO credit union, which Deputy Finian McGrath mentioned, or the Garda credit union.

The legislation is a balancing act designed to protect the interests not only of the 3 million plus members of the credit unions but the unions themselves which, incidentally, manage approximately €15 billion in assets. Credit unions are a viable and attractive alternative to exorbitant rates charged by moneylenders, albeit licensed ones, operating throughout the country.

The vast majority of those involved in running credit unions do so on a voluntary basis. Without that valuable voluntary contribution, they could not operate and provide such valuable services to their members. We recognise that all our financial institutions have come under intense scrutiny in recent times because of the behaviour of some, so it is timely and appropriate that legislation is introduced which imposes new rules in the governance and operation of credit unions.

I am aware that the Irish League of Credit Unions has reservations about certain sections of this Bill but one must strike a balance. The Minister carefully considered this in order to strike a balance between all the various interests to create a proper code of prudential regulation in the best interests of everyone involved, which also takes into account that credit unions do not, and will not, cause any liability for the State unlike the financial institutions which have raked in approximately €120 billion in funds just to be recapitalised.

While credit unions are considered the small fish or the minnows of the finance world, it should be noted that almost half of these unions manage assets of more than €20 million and it is, therefore, only right that these assets should be placed under a proper regulatory regime. The four main pillars, which have been outlined, to improve and bring best practice to the operation of credit unions include prudential regulation, something with which we have only recently become familiar - it was as distant to some institutions as doing the right thing; governance; restructuring; and stabilisation. Some of these pillars, in particular governance and restructuring, will cause some difficulties for many credit unions.

The credit union of which I am a member is a smaller one. It has approximately 4,800 members, of which 1,200 or so are active. Under the new governance regime, it will be almost impossible to get people to become involved in committees or to get people who have the financial experience or expertise required under the legislation to carry out duties. I predict that as a result of this legislation, many areas will see mergers of maybe five, six or seven credit unions with one CEO or manager, the relevant committees and officers. That is not a bad thing if it protects the members of the credit union, the citizens and the State and results in a more efficient service. However, it will remove some of the community-based ethos and democracy from credit unions, and that needs to be noted.

I expect it to be teased out further on Committee Stage.

Credit unions in other countries such as Australia have gone through a similar process of creating a proper regulatory regime. This led, in the short term, to the closure of some credit unions. I hope that will not happen here and that they will become associated unions or that they merge or amalgamate. In the long term the process worked in Australia through mergers and amalgamations, and it made it a stronger, albeit leaner, movement which is going from strength to strength. Most of the sections in this Bill are based on the report of the Commission on Credit Unions which was published in April this year. The Minister stated that the Bill includes 60 recommendations from the report.

As I said in my opening remarks, I welcome the Bill. It reflects what we are doing in this House, which is trying to create an environment, in a balanced and delicate way, for the credit union movement to operate and to go on to greater things while protecting the interests of the 3 million members and, indeed, the interests of all citizens. This means providing €250 million initially and ultimately up to €1 billion in State funding to support the credit union movement. Clearly, we cannot do that and allow things to continue the way they have been continuing. The credit union movement obviously cannot be blamed in any way for the mess in which we find ourselves, but operational difficulties have been highlighted and these are being addressed in the legislation.

I look forward to the issues we have discussed and others dealt with in the Bill being teased out further on Committee Stage in order that we can produce legislation with which all of those involved in credit unions can work. I hope when the Bill is passed that we can say we have improved the operation and running of the credit union movement, not just for the members of the unions but for all our citizens.

See this speech in context