John Halligan (Waterford, Independent) | Oireachtas source

No one denies that the credit union sector now finds itself in need of strong regulation, high standards of probity and better governance. A quarter of credit unions in the State are under close supervision by the Central Bank due to fears about rising loan arrears. Thousands of loans, totalling about €1 billion in value, are more than ten weeks in arrears, which is putting significant financial pressure on credit union balance sheets. According to statistics from the credit union movement, members are behind on their payments in one fifth of all loans given out by credit unions. Last year, more than 140 credit unions did not pay a dividend as they had recorded a loss or wanted to put more money aside to cover loans in arrears. It is also clear that struggling members have been forced to stop borrowing from their credit unions because they fear they will not be able to meet repayments. New figures show that the value of loans issued by community lenders collapsed by €500 million in the first nine months of the year. In light of these figures, it is commendable and right that the Government assist in the restructuring of the credit union sector. However, having studied the Bill and listened to the credit union representatives, I have concluded that the nuts and bolts of this legislation lose sight of the voluntary nature and ethos of the credit union movement. The sector has been doing its damnedest to get its financial house in order for some time. The Irish League of Credit Unions, which represents 3.1 million members, claims that just five member credit unions are set to record a deficit this year, compared to 81 last year. The league also says that more credit unions should be able to pay a dividend this year. Why, then, are we introducing legislation for the sector which will implement severe restrictions that are far more stringent than those imposed on the banks that bankrupted this country?

It is claimed some changes proposed in this Bill are potentially detrimental to certain smaller credit unions, in which board members often help out free of charge. As it is, many credit unions are finding it increasingly difficult to persuade people to become directors of their boards, especially with the introduction of the new fitness and probity rules for directors. Smaller credit unions, particularly in rural areas, often have limited pools of people from which to draw their boards. The proposed term limits will present a particular difficulty for such credit unions. The number of credit unions in Britain fell by approximately 70% when new regulations were introduced there, as the majority were successfully absorbed into larger bodies. With so many small rural banks and post offices closing around the country, including four in Waterford in the past two months, these small credit unions are the last financial lifeline left in many rural communities.

It is not right that mid-sized credit unions are being asked to face the tougher regulatory rules applied to larger institutions which are sometimes more at risk of failure. Will the Minister consider a scheme that incorporates the level of risk and complexity involved in credit unions? Surely we have learned our lesson and realised that the risk involved is just as critical as the size of the institution. Furthermore, I would like to voice my support for a scheme whereby credit unions could invest in socially valuable schemes and projects backed by Government guarantees. Such an initiative has the potential to create employment and assist in the development of local infrastructure and services, as well as contributing to local social and economic development at a time when we need it. Credit unions should be asked, although not compelled, to give loans to sporting and community organisations, as they sometimes already do whether above or below the radar. We should talk to them about that.

I do not have as much time as I would like.

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