Tony McLoughlin (Sligo-North Leitrim, Fine Gael) | Oireachtas source

To fully understand the importance of the credit union movement, it is necessary to remind the House of its history. The Irish credit union movement was founded as a result of the efforts of three dynamic, pioneering and entrepreneurial people, namely, a teacher, a civil servant and a bakery worker. In Dublin in the 1950s, these individuals witnessed the effects of high unemployment, such as sickness, malnutrition, moneylending, hunger, poor clothing, poor housing and, inevitably, the emigration of a parent or of entire families. In addition, State unemployment benefits were low and did not last indefinitely. This meant many families lived in abject poverty.

The founders of the credit union movement recognised that the root of the problem lay in the scarce availability and poor management of money and resolved to identify a system which would allow people to gain more control over their finances. Tomas O'Hogain, another pioneer of the movement, suggested that credit unions would give individuals economic independence and responsibility by taking part in common activities and aims. In November 1954 the National Co-Operative Council was established to promote non-farming co-ops and a Mr Denis Byrne, a member of the council, wrote a letter to the newspapers to point out "the scandal of the moneylender whereby those who can least afford it are charged the highest rate of interest – is seldom referred to in learned documents on banking and finance". The letter told how credit unions in the US protected American wage earners from loan sharks and suggested that if the idea were taken up in Ireland, it would surely "be an attractive pastime for those who not only believe in the principles of social and economic justice, but are prepared to work a little to foster them". Mr. Byrne's comments sum up in essence why credit unions have been so important to Irish society during the past 50 years. Many people from the poorer sections in our society were saved from the claws of moneylenders. However, we must recognise that there are those who still engage with these unprincipled individuals.

in 1957, Mr. Seán Lemass, the then Minister for Industry and Commerce and a future Taoiseach, set up a special committee to advise on legislative changes which would help to foster co­operative enterprise in the non-farming sectors. The deliberations of this committee were an important part in the process which led to the introduction of what became the Credit Union Act 1966. The latter provides the legal framework under which the credit union movement operates in the Republic of Ireland. When we, as legislators, reflect on the history of the movement and the involvement with it of many decent and honourable people, we must be mindful of those people's ideals and goals.

The Ireland of the late 1950s was impoverished and, like today, was experiencing an economic downturn. It is incalculable to judge how much the credit union movement assisted its members with finance to provide, transport, education, heat, light, business, a bed to lie in or perhaps the table on which to put the food. It is against this background that we must ensure this Bill will mean that the spirit of the original founders lives on and that the 3 million members with their almost €13.5 billion savings are protected.

Regulation and prudence are two words that were missing within the Irish banking sector from 2002 to 2008. The blame for the collapse has been well documented by political commentators and economists and now is not the time to debate it again. It is imperative that any Government engaged in the clean-up of a mess should identify the cause and legislate so that nothing like this can happen again. The Irish League of Credit Unions has played a significant role over many years in regulating its members and bringing forward best practice procedures for member branches.

Some issues have arisen which are of concern, such as the bad debts that some of the 500 branches have incurred. The Government has already shown its commitment to the credit union sector by putting aside a figure of €500 million to address problems in the sector at a time when the Government faces difficult budgetary choices and competing needs for scarce resources. It has been reported that up to 40 credit unions are in difficulty with some in need of help from the league. It is further reported that up to €1 billion of loans are either behind or not performing. This is an issue which needs prompt Government action.

The Bill sets out the framework for the prudential requirements that are to apply to credit unions in areas such as reserves, liquidity, and lending and risk management. The policies and principles in respect of each area are set out in the Bill, with scope for Central Bank regulations in relation to standards, procedures and other more detailed matters. Regulatory requirements will be calibrated according to the nature, scale and complexity of credit unions. This will allow for the tiered regulatory approach recommended by the Commission on Credit Unions.

Communities have expressed their concern to me about proposals which were agreed by the commission but which are of concern to many individual credit union members. These include the imposition of term limits, prohibitions on membership of boards and a board oversight committee. I ask the Minister to re-examine these proposals on Committee Stage against the implications for smaller credit unions which have been managed in an exemplary fashion and which will face significant difficulties looking for the necessary volunteers to serve on their local credit union. The rule for eligibility of persons to become directors seems to be a little too strict. Anyone related to a volunteer or employee of a credit union is debarred. Term limits for directors are provided for, allowing a director to serve nine years on a credit union board in any 15-year period.

Restructuring is recommended for credit unions who are experiencing difficulties. Approved mergers will be provided with funding where required and subject to conditions to ensure that they have adequate capital and to upgrade systems. This will not apply to all credit unions. I am aware of the many credit unions in my own constituency which have a strong and healthy balance sheet due to prudent and competent management over the past 20 years. I have written to the Minister on behalf of some local credit unions based in rural and low population areas Small credit unions from low populated areas will be threatened by some of these proposals. I suggest that some thought be given by the Minister on Committee Stage. Overall, this is positive legislation and I welcome the Bill.

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