Mairéad Farrell (Galway West, Sinn Fein) | Oireachtas source

I welcome the fact that we are having this discussion on the Credit Union (Amendment) Bill 2022 and, indeed, the work credit unions are doing at the moment and continue to do. It is very important, of course, that we listen to what the credit union sector has been saying regarding the powers and ability it has.

I have a particularly keen interest in the issue and I have been quite vocal about the reforms this sector needs to help it not just survive but thrive.

I am a proud member of my local credit union and I have had a long-term interest in this sector. I chose this subject for my master's thesis and I have long had an interest in it. I recognise the even greater importance that credit unions can take on, especially in light of a commercial banking sector that is highly concentrated at this moment in time and is struggling to introduce changes.

Credit unions function a bit like the community banking model and the not-for-profit banking sector, albeit with certain differences. Credit unions are highly valued by their members and by the communities in which they are located. They have continually enjoyed the significant trust of their members. When we consider the banking crisis, the credit union sector did not cause the latest banking crisis, yet many of the regulations that were brought in following the crash treated the credit unions as if they did. The sector has long called for changes that would allow it to fulfil its greater potential to access different credit markets here.

I am glad to see the first major legislative change for the credit union sector since the 2012 Act. There are some good provisions in this Bill. A number of the recommendations that came out of the strategic banking review, which the credit union movement fed into, are positive. I will not go through all of them but I will address a few, particularly those that relate to interest rate regulations, new governance proposals and lending and other business creation provisions.

With regard to interest rate regulation, the new maximum rates that can be charged on loans is welcome. They will provide added security for their members. Credit unions are moneylenders. In fact, the original motivation for establishing the credit union movement was to stop moneylenders and, therefore, credit unions have not been known to charge overly usurious rates to their members, but there is no harm in having additional protections here. On the proposal around new governance structures, I believe the options are constructive. There are provisions to provide a new governance structure for appointing the chief executive officer, CEO, as a board member, and to reduce the number of annual meetings to six. Each credit union is its own organisation. Some may choose to opt into this and others may choose to opt out. In my experience, many credit union board members are volunteers who care passionately about their organisations. They may feel that six meetings annually is not sufficient, but what they do in that regard is a matter for them and I believe the correct thing to do.

On the new provisions around inter-credit union lending and business creation, I am aware that has been long sought by the movement. It would allow one credit union to provide a loan to another or have one refer business to another. This would help to drive commercial activity and credit to members. The ability to establish these corporate credit unions, following the US model, will help the movement get more involved in the largest consumer market, namely mortgages. A corporate credit union would, in effect, serve as a kind of credit unions' credit union. It would be a group of credit unions that would come together for what would become a vehicle, perhaps for mortgage lending. This is something they have long called for and it is an issue I raised regularly in the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. I struggle to understand why we have waited for so long to do this. It is no secret that there is a lack of competition at the moment within the banking sector. Allowing credit unions to come more involved in mortgages would help to provide more competition.

I want to point out, however, one missed opportunity, which I have raised several times previously at the finance committee. I am referring to credit unions' capital requirements. Irish banks have some of the highest capital requirements in the EU due to the legacy of the banking crisis, but credit unions have even higher requirements, despite them not being the ones who caused the banking crisis. I believe we had an opportunity to restore the setting of these requirements to primary legislation as we had done before the 2012 Act. As I understand it, this is something the Government has decided to leave as a matter for the Central Bank. I believe the rationale for turning the matter over to the Central Bank is that it would be more responsive to changing market dynamics and that it could effect changes faster than amending the principal Act. I have seen only a kind of slow process progress in this regard and it seems that the Central Bank has been far more cautious. The credit union sector has long talked about this. Representatives feel the sector has been stymied over the past decade because of poorly targeted regulation. They want to see the setting of requirements restored to primary legislation. Does the Minister of State believe that this is a missed opportunity, and that it is something we can discuss at greater length at committee level?

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