John McGuinness (Carlow-Kilkenny, Fianna Fail) | Oireachtas source

I move:

That Dáil Éireann shall consider the Report of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach entitled Report on the Review of the Credit Union Sector with specific reference to the Credit Union Advisory Committee Review of Implementation of the Recommendations in the Commission on Credit Unions Report (June 2016), copies of which were laid before Dáil Éireann on 6 November 2017.

I welcome the opportunity to present to the Oireachtas the credit union report, which has been deliberated upon by the members of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach for some time. I thank the members of the committee for their input and I also thank all who appeared before us to outline the issues as they see them. I also acknowledge the exceptional work undertaken by the secretariat. Ours is a busy committee and the secretariat had to find time within its own resources to ensure that this report was completed to the type of detail that would impress on the Minister and Members of this House the need for appropriate changes to ensure that credit unions can continue to service local communities in the way they have done since their foundation.

There are 27 recommendations in the committee's report. We have had a reply from the Minister which is favourable towards the recommendations we have made. I emphasise the fact that so many Deputies who clearly understand the credit union movement are supportive of what the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach is trying to do. The credit union movement wants to be a co-operative movement that is fit for purpose. It is up for the change that is necessary to service its customers. It has brought about its own reforms based on its own due diligence of its organisation.

We are talking about almost 3 million members of the credit union movement, serviced through 361 credit unions. The movement is a significant contributor to the welfare and financial well-being of its customers and members. During the course of the crash, it was forecast that the credit union movement would cost the State €1 billion. That was far off the mark. In fact, it could be said that, barring some minor exceptions, the movement came in pretty clean in terms of its operations. Where there was a need for reform, amalgamation or other changes, the credit union movement moved quickly to ensure that corrective measures were taken and matters dealt with efficiently and in the interests of the movement itself.

It is no harm to look back on the work of the credit union movement since its foundation. It has always been tightly associated with local communities. Families have used credit unions for all sorts of loans, to ensure they could make ends meet, maybe build an extension, or get loans for the day-to-day things that matter in their lives. The movement has helped families to move on and have a better quality of life and a better understanding of financial matters. It has also enabled people who would otherwise have turned to moneylenders to be facilitated and helped out of difficult circumstances in which they may have found themselves, either as families or as individuals. We cannot ignore that. The co-operative movement right across Europe has shown that it is a significant contributor to the affairs of community and family. It is the way of the future for families, individuals and businesses to ensure that they have the right understanding, conditions and interest rates with their credit unions, and that they are given affordable, sustainable loans.

Credit unions have acted well and responsibly. What are they asking for? We have to look at the regulation and how it was applied. It was applied on a one-size-fits-all basis in a manner that was slow and cumbersome. We have to ensure that, in the future, the regulation of credit unions is carried out on the basis of their general activities, allowing them to flourish and contribute to the significant issues in the lives of their members. It is a significant burden on the credit unions that, even for smaller loans, they have to ask so much of the person making the application. There is no flexibility to allow credit unions, knowing the history of borrowers and what work is going to be done, to make simple and effective decisions on that basis. I do not know of many loans that the credit unions have given out that have faltered on the basis of poor information or not understanding the means of borrowers or the purpose for which money was being borrowed. They have a good track record. The Central Bank and the regulator should understand the movement far better and should be prepared to provide the flexible legislation that the credit unions are asking for and that Members of this House see as being essential for the credit unions to perform their duties to the fullest extent.

With regard to credit union activities and what they want, I was a member of the county enterprise board in Kilkenny many years ago when we linked up with the credit unions. Analysis was carried out by the board and the credit unions supported by way of funding the projects that were approved. That initiative worked and it was significant for the small businesses it supported. We have to allow flexibility within the credit union movement to ensure individual members can grow that type of business and be an effective lender in the market to those who want to build from scratch or whose businesses are small enough to engage with them. The threshold for the amount that can be loaned needs to be examined in the context of what the credit union movement wants to achieve.

Similarly, in recent times, permission has been given for the movement to invest in housing initiatives but the amount is tiny relative to what it could provide. Its €8 billion in surplus funds should be put to work in a better way for local economies and to provide a solution to the problems of expanding small businesses and addressing the housing crisis. Credit unions have a huge role to play and we need to consider that to ensure they can put their money to work in this context. They want to do so in a constructive, regulated way and the Government needs this to happen in respect of housing. We should allow the credit union movement to do what is necessary to put that money to work properly for its members and, indeed, for the country.

The committee has had discussions regarding the Sparkassen banking model in Germany and we are continuing to examine the possibility of the credit union infrastructure being used, perhaps in conjunction with post offices, to ensure the banking model Sparkassen represents is replicated in Ireland. I see no reason the regulator or the Central Bank should be an obstacle in developing that type of community banking system, which has proven to be a huge success in Germany. It was interesting for the committee to hear from Sparkassen officials that they continue to give to their members a tracker mortgage product with an interest rate of 1.2% and they can loan any amount ranging from €5 to €50 million to businesses or projects that are central to the local communities that each of its outlets supports while the profits from this activity go back into the community unlike in a banking system that is driven solely by profit for directors and shareholders. As a result of our experience in Ireland of the banking crash, it is absolutely essential that we examine what was successful for us during the period. When the banks closed in on people, credit unions made it possible for them to continue in business or to secure individual loans to get them over a particular problem at that time in their lives. We should not, as legislators, ignore the value of that type of community-driven movement, which benefits members and is focused on the their well-being and improving their lives.

The regulator has listened to the argument for too long and perhaps he was not convinced by what the credit unions were saying they wanted to do but the time has come for us to show leadership in this regard. If we truly believe in the credit union movement and in its value to family and community, then we should put in place the policy measures that are necessary through the regulator to enable credit unions to achieve what they want. They are willing to participate and they are anxious to get into proper lending, whether it is for business, mortgages and so on, while policymakers and the regulator are holding them back. I do not expect us to rush forward either but we should be more constructive in how we treat them because of how they were formed and because of the work they do locally.

It is essential for us, having read the report, not to put it on a shelf and to ensure it acts as an incentive for Government to engage directly with the movement, the regulator and the Central Bank to ensure whatever is necessary is put in place in a speedy manner in order that a flexible, regulatory system can be applied to credit unions on the basis of their individual activities without adopting a one-size-fits-all approach, given individual credit unions may not want to engage in a range of financial activities. Those that want to do more can be regulated as necessary but without that being over the top.

The OECD Secretary General commented on the organisation's Ireland survey for 2018 earlier before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. One of the issues raised in the report is the cost of doing business and the bureaucracy that attaches to that for SMEs and how they are regulated. The OECD says it is too heavy and cumbersome, and that we need to lighten the bureaucratic load and allow people to perform to their maximum while, at the same time, sensibly regulating them. The credit union movement wants sensible, flexible, workable regulation to enable individual credit unions to be part of the solution to the problems the country faces. If we are putting people first, and at the centre of our recovery and how business is done politically, then the easiest way to display that is by giving the credit union movement the supports it requires to fully develop the range of financial products it wants to sell.

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