Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I move amendment No.1:

To delete all words after “That” and substitute the following: “Dáil Éireann resolves that the Credit Union (Amendment) Bill 2021 be deemed to be read a second time this day nine months, to allow for the progression of the Review of Policy Framework which is at an advanced stage and for such progression to be taken into account in further scrutiny of the Bill."

I welcome Deputy Harkin's Private Members' Bill because I firmly believe that we both share the objective of strengthening and expanding the credit union movement. Since I entered office 15 months ago I have been working closely with the many stakeholders in the credit union sector to deliver the review of the policy framework for credit unions as set out in the programme for Government. I am pleased to inform the House that this work is nearing completion. I hope to update the House in the not too distant future of the Government's plan to support the credit union sector to enable it to thrive.

The credit union movement is one of the most valuable assets we have in our society. Credit unions play such an important role in the economy, with over a third of the unsecured lending market in Ireland, over €20 billion in assets, a branch footprint of over 400 offices across the country, millions of members and an unrivalled reputation. Credit unions have been at the centre of local and workplace communities for over 60 years, tailoring their products and services to match their members' needs. The movement has earned the number one spot for the best customer experience in Ireland for five consecutive years, rated first by consumers for value and loyalty. The €5 billion in loans right across Ireland is community banking in its truest form.

It is important to acknowledge the Taoiseach's decision to create, for the first time ever, a Minister of State with responsibility for credit unions to head up an ambitious review of credit union policy. This demonstrates clearly that this Government wants to see the sector thrive and expand. Credit unions hold almost €17 billion worth of people's savings. As a Government, we always have to put the public first and protect their well-being and their savings. Since entering office I have made good progress to help to support and deliver meaningful reform and to deliver on Government commitments. I am currently developing policy proposals that encompass the views of a large sample of stakeholders from across the sector. We are considering submissions made by the representative bodies and recommendations from two detailed reports produced by the CUAC. The Department is also considering the feedback from extensive stakeholder engagement which has been carried out as part of the review. In June and July I met three representative bodies, the Registry of Credit Unions, RCU, the CUAC and four collaborative ventures. We also met a number of credit union service providers and received an analysis from the CEO forum of the credit unions in relation to other markets outside the State. In total I have held 23 stakeholder meetings with the credit union sector so far this year. Well over 100 proposals are being considered in the Government review. They have come from a wide range of stakeholders throughout the credit union movement. I also brought through legislation to give credit unions the discretion, for the first time ever, to convene wholly or partly virtual annual general meetings last year. The new measures were introduced in response to public health guidelines restricting gatherings. The credit institution resolution fund levy and the credit union stabilisation levy have been reduced in the last year. Collectively these levies have been reduced by 56%, representing a €6.7 million per annum saving for credit unions. Lastly, we completed legislation to enable the wind-down of the credit union restructuring board.

The Government's review is now at an advanced stage. My meetings with the sector since I came to office have allowed me to gain further insight into collaboration and business model development. I came away from these meetings with a renewed belief that enhanced co-operation is essential for the future of credit unions, particularly in relation to growth in lending. I recently attended the launches of an agri-lending product and a retrofit lending product, both developed by a collaborative venture among credit unions. Similar projects have enabled the launch of two funds to lend to approved housing bodies, AHBs, for social housing. Every credit union in Ireland can invest in those funds. All of this makes clear the need to extend the credit unions' reach across Ireland. We need credit unions to get more people using their facilities. To do this there needs to be further collaboration and harmonisation on the products that credit unions offer. It is good to see credit unions offering current accounts, debit cards and ATMs. I see great potential here if they continue to integrate these products with other financial services which their members use. This will allow them to grow their market share. I would also like to see credit unions expand more into the mortgage and insurance markets and to increase their student loans. Recent bank branch closures offer them a huge opportunity to reach new customers. As some Deputies have already said there are some towns, including in my own county, where the credit union is the only financial institution left standing. I encourage credit unions to engage more with local community groups and voluntary and sporting organisations to increase their lending which is in keeping with their ethos and social value to the community.

I intend to issue proposals emanating from the review for consultation with stakeholders shortly. This consultation will involve meeting with representative bodies and other stakeholders, a commitment I made in my recent engagements. Potential legislative amendment will be considered as part of the review. We have heard some very important and constructive suggestions here today. However, my engagements have highlighted that there is no firm consensus on the desired legislative change which would assist in solving the financial challenges facing the sector. As has been mentioned already, some credit unions in parts of the movement are in favour of this legislation but others are not supportive of some of what is being proposed here today. I do not want to raise unrealistic expectations about the potential impact of any such change, if it were approved. Legislative amendments to the policy framework will not solve the financial and business model challenges arising from the low interest rate environment, muted credit demand, strong savings growth and high operating costs. As Minister of State I have made a commitment to work to strengthen the credit union movement but policy change is not a panacea. Representative bodies, collaborative ventures and individual credit unions must work together to lessen fragmentation, provide strategic direction and leadership and drive business model change.

Regarding Deputy Harkin's Bill, it is important to remember that the Central Bank is independent for good reason. As a Government, we always have to put the public first and protect their well-being and their savings. In its role as regulator, the Central Bank must be allowed to discharge its duties in an independent manner free from potential political or sectoral interference. Today's Bill assigns the Minister a role in setting a strategic plan for the sector, with the Central Bank reporting annually to the Minister on this plan. The Minister for Finance, Deputy Donohoe, and I believe it is not appropriate for the Minister for Finance to set out a strategic plan for the development of the movement. This is a matter for the movement itself and it needs to step up and increase its lending, reduce fragmentation and develop more collaborative projects. It is not for the Minister to decide on an appropriate future. We can assist and support but it is a matter for the credit union movement, in the first instance, to decide on its future.

I wish to respond briefly to some of the points raised thus far. I have listened carefully to what Deputies have said about services that are approved and the fact that if credit unions want to provide a new service, notwithstanding the fact that the service providers may already be regulated to do their end of the work, the credit unions must get separate sanction from the Central Bank. I take that point on board and it will feed into the consultation that is happening at the moment. Reference was made to the removal of certain requirements relating to members' funds, with the reserve requirements relating to members' funds to be cleared by the Minister. The last thing the Irish people want is politicians deciding the reserve ratios for financial institutions in this State. In fact, political interference would be the worst thing to happen in this area.

We have a different point of view as to whether the Minister should have a role in this area. The common bond has been mentioned to ensure there is no overlap. In parts of Dublin city and in other towns, five credit unions can serve the same street, so there is massive overlap in relation to the common bond. While it is intended and introduced for good reason, in its own right, it creates a lot of operational difficulties, which we will address as part of the consultation process.

Regarding regulation and the cost of it, the banks have to pay 100% of the costs of their regulation but it is Government policy that credit unions would only pay 50%. I note Deputy Harkin's comment that the future sustainability of credit unions is at risk. We all want to work with the credit union movement to grow its business and lending in the future.

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