Marian Harkin (Sligo-Leitrim, Independent) | Oireachtas source

I welcome the legislation. I wish the Minister of State well in her new role and the very best in guiding this important legislation through the Oireachtas. I am not sure if it is her first Bill but, one way or the other, I wish her well. I hope she will be open to at least listening to some of the arguments put forward on amendments, changes and, perhaps, improvements to the Bill. In saying that, I recognise the hard work and widespread consultation that has taken place up until now. I commend the Minister of State, Deputy Fleming, his officials and all the stakeholders on this, because it is significant work.

Going back to what I said at the beginning about possible amendments to this Bill, I hope we can have an open and constructive dialogue. Listening to all of the speakers, Government and Opposition, in this debate shows there is a good framework. We all have a common objective, that is, to ensure optimum delivery of financial services and choice for people through their credit unions. That is the central issue and point we always have to keep in mind. In order for this to happen, credit unions have to have a proportionate regulatory framework, which recognises their specificity; the fact that they are member owned, not for profit, volunteer-led and embedded in their community. That specificity is now allied to strong governance systems and a proportionate regulatory framework that ensures financial probity, stability and the opportunity for growth and expansion. That is what we need to be looking for. Furthermore, many people have said, credit unions provide a bit more competition in the market, especially with the exit of KBC and Ulster Bank.

The CV of the credit union movement is impressive. We have 280 different credit unions with more than 3.5 million members. Their assets are worth well over €20 billion. They have assets of approximately €22 billion, with €17 billion in savings and approximately €5.5 billion in loans. Crucially, credit unions provide more personal, unsecured loans than any other financial institution in Ireland. That tells one something. They are the people's bank. People come first and everybody is welcome in their local credit union. While there are approximately 280 credit unions, they are present in approximately 500 locations. Their presence is widespread and a testament to the faith people have in their local credit unions. They have more locations than all three pillar banks combined.

That faith and trust has been hard won and is managed, every day, by the provision of a service that is both digitally efficient and personal. The personal is not just about the availability to customers. That matters a great deal. People like to speak to other people, especially when it comes to their financial affairs, because it is not just a case of pressing a button for €100 or €200.

People want a bit of advice sometimes and reassurance, which credit unions certainly provide. The personal contact they provide informs the ethos of how they deal with their customers, and many people appreciate that. Those who are sometimes referred to as "older people" and are not digitally literate need this. When it comes to financial affairs, I think we all need it. I always say that if we did not have credit unions, we would want to invent them, but we do have them. All across the country, individuals, communities and volunteers have come together and recognised that credit unions play a vital role in financially supporting their local community by providing not only financial services but by supporting many community activities, such as sports club, Active Age, festivals and community infrastructure from the very large to the very small. Yesterday, I heard Deputy Troy speaking about the local credit union sponsoring the Fleadh. What we see is that credit union support is embedded through the community.

One of my great privileges as a Member of the European Parliament, where at one point I represented 15 counties, was the opportunity to visit so many credit unions in different counties across Ireland and to see, at first-hand, how they operated, the challenges they faced and, crucially, how they contributed to their local communities. I can remember visiting Clones, County Monaghan; Donegal town; St Jarlath's Credit Union in Tuam; Ballinasloe; Limerick city; and of course my friends in the midlands. I am not leaving out the credit unions in my own constituency. I am not going to name them as there are too many. Credit unions have a presence all over Ireland and they work quietly but assiduously to support their local communities and members. This is the context in which we discuss this legislation, and it is why we must always remember how vital credit unions are to the 3.6 million people who use and often rely on them and to the communities they support.

The other context is the programme for Government, which includes specific commitments, such as enabling credit unions to grow as a key provider of community banking in the country. The Government also committed to reviewing the policy framework within which they operate and to enable and support them in their expansion of services. The Government has followed on from that by appointing a Minister of State with responsibility for credit unions. All of this paints a very positive picture. That is the context, but when we are looking at legislation and regulation, we have to view credit unions through the prism of being member owned, not for profit and that they serve their communities.

Before I deal with some of the detail of the Bill, I will make one brief point based on my experience over a number of years. After the financial crash of 2008, regulation in Ireland and elsewhere came down very heavily on financial institutions, and that was right. However, in Ireland in particular, the regulatory regime imposed on credit unions was completely disproportionate to the risk they posed to our financial system. The banks cost us €46 billion, and counting, and made beggars of us as we waited, month after month, for the International Monetary Fund, IMF, and the European Commission to arrive on our shores and reign us in. The credit unions, with the exception of a few, remained solvent and continued to support their members. I am not precisely sure but it is my understanding that the cost for any bailouts, which were few in number, were largely borne by the contingency funds the credits unions had in place. Yet, the Central Bank used a sledge hammer to crack a nut and imposed disproportionate regulation on credit unions. Many of the Minister of State's colleagues in government alluded to the debate on this in the Dáil yesterday and in the Seanad. I will come back to that later.

Some of the overhang from disproportionate legislation is still there. While I know the Minister of State is not all-powerful, nonetheless, I would like to see some movement on this. While we should not forget lessons learned because that is important, we should also be prepared to accept that legislation put in place at a particular time may need to be changed or modified to better suit current and future circumstances. I would appreciate if she would keep that in mind in her overall role as the Minister of State with responsibility for credit unions.

The Bill has been broadly welcomed across the House because many of its proposals contribute to the strengthening of the ability of credit unions to provide a wider range of services to their members. This is an important piece of what I would call enhancing legislation. I refer to some of the detail of the Bill. It allows credit unions to refer lending business to one another and to participate in loans to other credit unions. This is a positive move but it is constrained. If a credit union does not provide a certain service, such as a mortgage, it can refer a member to another credit union to avail of that service. However, if a credit union has approximately €75 million in assets, a decent amount for a credit union, due to regulatory limits in place, and while not discussing that aspect, the credit union might only be able to provide 30 mortgages. That is not 30 mortgages per year. That is 30 mortgages in total. In such a circumstance, the credit union would not be able to refer the member to another credit union once it has reached its limit of 30 mortgages. I know the common bond is a core aspect of credit unions, and we need to maintain that, but I believe this warrants further discussion. It is highly restrictive. The question we have to ask is what purpose it serves. Who does it benefit? From my perspective, and I am sure from the Minister of State's perspective, one must ask whether it benefits credit union members, obviously within the constraints of financial probity and all of that. The retail banking review speaks of a full service to members. I am not sure this restriction facilitates that. Perhaps it needs another look.

The legislative basis to increase monthly maximum interest rates from 1% to 2% on credit union loans is appropriate. It might not sound great to some people but it allows credit unions to price-in risk for unsecured loans, especially for people who may not have a chance of getting a loan from a bank and who would otherwise go to moneylenders that charge extortionate rates. It is a fine balance but we need to find a way for people, those who cannot go to a bank because the bank is not interested in the person's business, to be able to get an unsecured loan without having to go to a moneylender. This measure is a positive step. One of the core functions of credit unions is the provision of services to those whose needs will never be met by a bank.

Even though it is not covered in the Bill, I ask the Minister of State, as a follow on from the Bill, to look at the issue of capital reserves, an issue raised by many Deputies in the Chamber. The pillar banks are around 3%. I am not sure; the Minister of State knows more about this than I do. Credit unions are around 10%, a rate that is much higher than in other countries. The issue is not just about the amount of the capital reserve.

The issue is that if a credit union has an unsecured loan to a member or if it has a bond with the Irish Government, there is a 10% capital reserve requirement on both transactions. Of course, that 10% reserve is high, but the issue is more about how proportionate it is that all of that business cannot be lumped into one pot, as it were. I am not sure how it ought to be managed but there should be a differentiation based on the types of assets a credit union holds. We know that all credit unions have risk compliance, internal audits and strong governance structures in place. Taking that into consideration, I believe we need to look at their assets when decisions about their capital reserves are being made and the situation should be reconsidered.

Liquidity is another regulatory issue that needs to be examined. There are requirements for a credit union if up to 20% of its loans are for more than five years. If, for example, 16% of a credit union's loans are over five years, it must have 20% liquidity of unattached savings. However, if it goes above 20% to 21% of loans of over five years, it has to have liquidity of 30% of unattached savings. That is completely out of sync with banking requirements, especially when credit union savings are growing. While that is not directly involved in this Bill, it is a matter I hope the Minister of State will get around to during her term. I hope she will consider that, tease it out and thrash it out with the credit unions and the Central Bank.

I welcome the Central Bank engagement protocol. That is important. More important still are the stakeholder engagement meetings, which stakeholders, the Department of Finance and the Minister of State can attend. If she will forgive me for saying so, the Minister of State's attendance at those meetings, where possible, is important. She will then understand the nuts, bolts and workings of these issues in a way I never could. It is a positive forum. The role of the Minister of State could be very valuable in that regard.

I am supportive of the idea of corporate credit unions which allow for flexibility in their work and the ability to pool their resources. The idea is that of a credit union for credit unions. Any regulations that follow from this Bill, and there may be some, should support that proposal.

Enhanced governance measures are to be welcomed. It is great to see them. I mentioned the aftermath of the crash, when incredible pressure was put on volunteer board members. Some of it was completely unacceptable and part of the problem was that people just said it was too much and they could not do it. Proportion is everything in this case. Enhanced Government measures are in place and some changes have been made in that area, which I welcome. It is good to see.

I also support the fact that we can alter the scope of permitted investment by credit unions where they are able to invest in an entity because that helps to support the delivery of services to credit unions, which then deliver those services to their members.

I will make a quick comment about credit union levies, which are in the amount of approximately €25 million per annum. Is that proportionate? I am not asking the Minister of State to abolish them because they have a role. However, I would ask that in the very near future, she might review those levies.

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