Seán Sherlock (Cork East, Labour) | Oireachtas source

In 2010, various expert opinion in, or close to, the Central Bank was forecasting the demise of the Irish credit union movement. This expert opinion proved to be well wide of the mark. Only four credit unions out of well over 400 at the time, less than 1%, have been resolved since then. The credit union sector has worked hard at building up reserves which are the envy of every banking institution in Europe. The Irish credit union sector is the most heavily reserved financial sector.

Much mention is made of the Commission on Credit Unions. To be fair to the Government, its establishment was one of the first promises on which it delivered. The commission’s report, delivered in March 2012, was a comprehensive and balanced way forward. It sought a balance of measures to secure the future of credit unions. It pains me, however, to say the commission’s report is being implemented in a selective and unbalanced manner, causing distress to the sector and undoing many of the positives of the report.

The one size fits all regulatory regime being proposed by the Central Bank in Consultation Paper 88, otherwise known as CP88, is an exercise in suppressive regulation and micro-management, in which it proposes to effectively manage the very same credit unions it is supposed to be regulating on a dispassionate basis. Sure, the Central Bank consulted, and when it met with unanimous rejection from every organisation, body and credit union in the sector it decided to go ahead regardless. This is consistent with a pattern that is now well established. Our Central Bank has the most extensive powers of any regulatory body in Europe when it comes to regulating credit unions and yet it wants more. I urge review and caution here.

I am aware of credit unions that have not been allowed to hold AGMs for two, four or more years but the Credit Union Act is very clear. Section 78(4) states the bank may direct the credit union to "postpone, for a period not exceeding nine months, the holding of the annual general meeting of the credit union in respect of the financial year specified in the direction." There are questions to be answered as to why existing powers are being applied in this way. Remember, credit unions are the members' unions, and members have the right to know what is going on.

Very legitimate concerns have been raised by credit unions in recent days. They say that under existing regulation their efforts to introduce debit cards are being frustrated at every turn by the regulatory regime. Even the most basic, risk free, prepaid debit cards are being turned down. Now, the regulator wants to limit inflow of savings and loan types. What hope have we of developing a viable third force capable of competing with the banking sector?

The lending restrictions placed on credit unions by these self-same regulators have done profound commercial damage. It is commercially naive of the Central Bank to think it can switch off lending for four years and not damage credit unions and their credibility in the local market. This was not a wise use of power, and is a further indicator that the regulator should not become involved in the day to day running of the bodies they regulate.

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