Paul Connaughton (Galway East, Fine Gael) | Oireachtas source

I thank the Office of the Ceann Comhairle for selecting this topic. I mean no disrespect to the Minister of State, Deputy Perry, in saying I would have preferred it had the Minister for Finance, Deputy Michael Noonan, been present. I understand that is simply not possible.

There is an old saying that the sins of the fathers should not be visited on the sons. This is certainly true and I am positive that the past sins of the banking system must not be visited on credit unions, yet I am being informed constantly by credit union members that this is exactly what is happening. There is no need to recount what happened in the Irish banking sector and the role that light-touch regulation had to play in that calamity. However, there is a need to highlight the fact that the strictures introduced in the banking system are having an unduly negative effect on credit unions, once again favouring large corporate banks.

I wish to highlight two aspects of the difficulties facing credit unions, the one-size-fits-all regulatory approach and section 35 restrictions on rescheduled loans. Micro-managing credit unions is not the way forward. One should remember that the beauty of credit unions is the fact that they are local, know the people they are dealing with and are aware of conditions on the ground. Too often in this country, we throw out the baby with the bath water. The approach to credit unions appears to be another example of this. After our banking calamity came a raft of restrictions aimed at ensuring it would not be repeated. However, those most affected by the new regulations are the very people least responsible for the banking crisis, namely, credit union members. The Central Bank really needs to engage with credit unions and gain a better understanding of their work. If the Central Bank had a more realistic and common sense approach to the work of credit unions, consultation papers such as CP76 would be radically different.

The Government's achievement on the jobs front is the result of the targeted, motivated and well-organised campaign aimed at increasing job numbers. Common sense decisions are at the heart of this, yet I believe a blind spot continues to exist in respect of credit unions. Credit unions must be treated in a very different manner to banks. Their very existence has a different focus. Staff are not driven by bonus pay and incentives; rather, the movement exists thanks to the good will of thousands of volunteers. It is time for a complete rethink in regard to credit unions and their treatment by the State.

An example of why a complete rethink is necessary is the section 35 restriction on rescheduled loans. A credit union cannot grant further credit unless a rescheduled loan has performed for at least a year. Where the new terms have not been compiled for a year, a new loan cannot exceed €1,000. This is quite simply ridiculous. If a young person in a rural or urban area is fortunate enough to secure a job, he or she will need to visit his or her local credit union to seek funding for the transport necessary to go to work. Where will he or she get that money? Local people in the credit union are best placed to decide whether the advancement of €10,000 to a young person to allow him or her to obtain a car, purchase insurance and get on the road to work is a good investment. If the Central Bank does not understand the economics of such a transaction, the members of the Government do. The ethos of giving people a hand up rather than a handout must be reflected in the new regulatory framework.

Credit unions are not a luxury in our economy; they are the very essence of what our banking system should be. I refer to encouraging people to save, rewarding those with a good saving record and making sensible decisions on who to advance money to while all the time maintaining a commitment to the local community and encouraging prudent, financial habits and willingness to volunteer to help one's local community.

This issue is worth highlighting. While we all recognise the need for restrictions on lending, a common sense approach and one that values the ethos of the credit union is what is needed most.

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