Gerald Nash (Louth, Labour) | Oireachtas source

Like Deputy O'Reilly, I probably have my Mam to thank for introducing me to the credit union. In some ways, I have never looked back. I have maintained my old account there, as I am sure many have. At around the same time, I opened an Ulster Bank account and got my Henri Hippo savings device, if I can call it such. I may not have my Mam to thank for that, it may have been the powers of TV marketing.

I wonder where we should hand those back to when Ulster Bank retreats from the market in the coming weeks. In any case, I am pleased to contribute to the debate and to provide the full backing of the Labour Party for this significant legislation. First, I will declare an interest. Like Deputies Farrell and O'Reilly, I am a member of a credit union. That is not unusual and I join with probably more than half the population of the island who are credit union members. I have no doubt the majority of Members of these Houses are members of credit unions.

The credit union movement is very much part of Ireland's story. It is part of our history. For people of my class, credit unions are the financial institution of first, and often only, choice . We should never underestimate the importance and value of the opportunity credit unions provided to buy a first car, assist people like me to go to university and enable people to develop a modest home extension. All these small contributions have had transformational impacts on people's lives individually, and collectively on communities throughout the country. I heard it said many years ago, including by my parents, that the banks - the pillar banks, as we know them now - only welcomed the business class and professionals. That was true to a large extent. Credit unions, however, were and are for us all.

My political hero, John Hume, who founded the Social Democratic and Labour Party, was president of the ILCU at the age of 27. As a democratic socialist, he knew the importance of access to credit at affordable rates from a member-based body based in the community and in which all members had an equal share, regardless of who they were, how much they earned or the amount they had on deposit. The movement is informed by the best principles of the co-operative movement. The Bill strives to ensure that those principles that have served the movement well are very much at the centre of the legislation and will continue to inform the development of the credit union sector. It now has more than 3.6 million members and €20 billion in assets. The demands placed on credit unions have become increasingly diverse. Members want more widely available services and their credit unions to be more responsive to the complex needs of the membership base in what is a much more sophisticated and complex economy than when the credit union movement first emerged. The Bill should and can achieve that. It has the balance right.

The Minister of State will not mind me saying that great credit is owed to her predecessor, Deputy Fleming, for marshalling the Bill to this point and for the extensive engagement he undertook, along with departmental officials, with credit union representative bodies in the past two to three years. I acknowledge the briefing on the details of the legislation provided earlier by the Minister of State, Deputy Carroll MacNeill, for Opposition Members.

The Bill provides a legislative foundation for the long-awaited establishment of corporate credit unions, the enhancement of member services by allowing credit unions to refer members to other credit unions and participate in loans of other credit unions, for example, and an increase in the maximum monthly interest rate on credit union loans, from 1% to 2%. It also aims to support enhanced governance through a range of amendments. One of the important aspects of the amendments relating to governance is the opportunity to appoint chief executives or managers of individual credit unions and branches to the board without the requirement to have an election. That makes sense from governance and day-to-day management points of view. Some of the other aspects relating to corporate governance will allow managers to manage, as I stated at the meeting earlier. There are some very experienced managers in the credit union sector now. They are well qualified and subject to rigorous and robust regulation. It is positive that they be enabled to become members of boards.

The Labour Party supports the Bill in a spirit of co-operation. As has been referenced, all Deputies received a letter yesterday indicating that the ILCU backs the legislation but would be interested in working with us all, including the Minister of State and those of us in opposition, on appropriate amendments on Committee Stage to ensure the Bill meets all its objectives. One of the main aims of the Bill is to allow for the movement to ensure credit unions fulfil their potential as bigger and more substantial actors in the community banking space and in retail banking more generally. We all want that to be made a reality because competition in the Irish retail banking market is beyond dire. With the withdrawal of Ulster Bank and Permanent TSB not yet of the scale to challenge, although it is seeking to build all the time, we are left with AIB and Bank of Ireland. This, combined with the frankly baleful absence of a commitment to look seriously at the Sparkasse model of regional community banking has resulted in what is, in effect, a duopoly in the Irish retail banking landscape. That has been an unfortunate feature of the sector for some time and the situation is only gong to get more critical with the exit of Ulster Bank in the coming weeks. The banking review I had been seeking for a long time made it clear that the credit union system has a major function in having more market share and allowing greater competition. There is no doubt there is a greater appetite for risk now among credit unions, especially the larger ones. That is indicated in all the research.

We do have the bizarre situation that some credit unions can offer mortgages as a product while others cannot. There is €20 billion in assets in credit unions at present and the loan ratio is 28%. That is abnormally low for any financial institution and I understand it is historically low in the context of credit unions and, therefore, there is significant potential, even in the space of mortgages, for more lending if credit unions are enabled to collaborate and co-operate to do so. The provisions of the Bill relating to the establishment of corporate credit unions and the changes to the area of the common bond seek to address those kinds of practical issues for credit union members and the movement. Changes in this area will allow credit unions to share risk and continue to be prudent and responsible in their lending policies.

In some ways, credit unions have been preparing for this day for many years. It has been the direction of travel in amalgamations and greater collaboration where possible, albeit within a restrictive and restricted framework and regulatory structure. There is now approximately half the number of credit unions that there were pre crash but we should not read too much into that because the reality is that they have more assets now and, although there is a smaller number, there is less fragmentation and they are larger. Their membership is growing all the time, and that is a good thing.

In March 2018, changes were made to the ways in which credit unions could invest. Since then, they have had the ability to invest €900 million in total to approved housing bodies but it seems only a handful of such investments have taken place. More can be done in this regard. I hope the Bill, when passed, will give the credit union movement increased confidence to take on that kind of risk and invest in addressing Ireland's most fundamental social and, arguably, economic challenge. When credit unions are enabled to make these kinds of investments to develop public housing through approved housing bodies, they are investing in the future of their members. I encourage them to increase their activity in that regard. I hope the legislation gives credit unions increased confidence to do just that. They should invest in these kinds of approaches and interventions that, although expensive, give a long-term return and help to create a social and public good.

I turn to the issue of interest rates. There is currently a cap of 1% on the interest rate that can be charged. The legislation foresees the cap being raised to 2%. It seems from reading material provide by the Oireachtas Library and Research Service that there has been a lively debate within the credit union movement on the question of the interest rate cap. The interest rate that applies to credit unions in Britain, for example, is a maximum of 3%, while it is 1% in Northern Ireland.

I believe this issue relating to the interest rate and, indeed, the efficacy of the legislation more generally, should be kept under review. The Minister of State should consider undertaking a review of the operation of the Act, especially specific provisions such as the new interest rate cap of 2% in perhaps three or five years. She will know that it is normal and regular for legislation to include a provision to undertake frequent reviews of its efficacy. I propose that such an amendment be introduced on Committee Stage. I am happy to work with her on developing that fairly straightforward amendment.

Earlier, I referred to changes to the operation of the board to allow, as I described it, managers to manage. That is a positive in a fast-changing environment. It is also positive that the issue relating to the frequency of meetings of boards has been addressed and that there will be a requirement to have six board meetings a year. That is not too onerous and does not place too large an obligation on voluntary credit union board members. We know that in voluntary organisations throughout the country, it is difficult now to get as many people as we would like involved because of the time obligations and the commitment involved. Onerous responsibilities are placed on directors of credit unions. We should allow highly-qualified and highly-regulated credit union managers to manage. That board should not necessarily be involved in the minutiae of the day-to-day management of credit unions, though they do have important fiduciary and corporate responsibilities. That remains, of course, but we need to get the balance right.

In conclusion, we support the legislation. We will work with the Minister of State on the necessary amendments to make it more robust and responsive. We would appreciate the opportunity to see her commitment to the undertaking of frequent reviews of the operation of the Act and certain provisions, especially the question of the loan cap. What we need to focus on all the time is the growth of the credit union movement, its efficacy and its utility for people across the country who may be in need of banking services. It all revolves around the idea of stakeholder banking, not shareholder banking. It is about making sure that people have a stake in their credit union and a stake in society so that their financial institution of choice - in this case the credit union - is responsive to their needs and can develop and grow in what is a very complex economy at present. Fundamentally, this is a important legislation. It is landmark legislation and we need to get it right. I look forward to working with the Minister of State on developing it further through Committee and Report Stages.

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