Tuesday, 24 November 2015
Credit Union Sector: Motion [Private Members]
That Dáil Éireann:is concerned that the planned commencement at the end of December 2015, without amendment, of the remaining sections of the Credit Union and Co-operation with Overseas Regulators Act 2012, and the regulations set out in Central Bank of Ireland (CBI) Consultation on Regulations for Credit Unions on commencement of the remaining sections of the 2012 Act (CP88) pose a significant threat to the competitive viability of the credit union movement across Ireland;notes that:— as banks close branches and restrict in-branch services, credit unions provide important competition and choice to consumers;
— predictions of a cost of up to €1 billion to support the sector have proven entirely inaccurate;
— the regulatory measures contained in CP88 were conceived at a time when the Government was convinced that significant funds would be required to support and resolve the sector;
— the recommendations of the Commission on Credit Unions have only been selectively and half-heartedly implemented to date;
— recommendations of the Commission on Credit Unions relating to the growth of the sector have largely been ignored;
— credit unions have adopted a wide range of new compliance measures over the last five years;
— 55 per cent of credit unions would be impacted by the impending €100,000 cap on member savings;
— there is up to €8 billion in un-lent deposits held by credit unions which could be utilised to stimulate the domestic economy; and
— the sector has significant potential to provide funds for mortgage lending for both social and commercial housing in Ireland;agrees that:— the introduction of a €100,000 limit on savings held in credit union accounts will place the sector at a significant disadvantage vis-à-vis the banks;
— the sector should not be regulated on a one-size-fits-all basis, rather a tiered regulatory approach that supports growth and development should be adopted;
— capable, larger credit unions should be allowed to offer a wider range of products and services through broader investments and lending; and
— collaboration and efficiency through shared services should be facilitated within legislation; andcalls for:— the Minister for Finance not to commence the remaining sections of the Credit Union and Co-operation with Overseas Regulators Act 2012 pending a full consultation process with all the stakeholders in the sector;
— an immediate and urgent review of the Report of the Commission on Credit Unions recommendations and the extent to which they have been implemented, particularly in respect of growth and development opportunities for the sector;
— a revised Regulatory Impact Analysis, including financial impact, to be undertaken by the CBI of the regulations which are proposed to be introduced at the end of 2015;
— the immediate appointment of a member of the credit union movement to the Credit Union Advisory Committee; and
— engagement by the Department of Finance and the Department of the Environment, Community and Local Government with the credit union sector to support the provision of mortgage lending by credit unions.
On behalf of the Fianna Fáil Party, I am pleased to move this motion on the future of the credit union sector in Ireland. I wish to share time with Deputies Browne, Maloney and Calleary.
I firmly believe this debate represents a last chance to ensure the credit union sector can operate on a level playing pitch as it competes with the interests of large financial institutions. This is the second time in a short number of months in which we have debated the major challenges facing the credit union movement. Since Fianna Fáil first proposed a motion on the subject back in June, I have sought to engage proactively with local credit unions and their representatives.
I know that Deputies in all parties have received extensive correspondence from credit union members and directors. The credit union movement has been mobilised. It is a recognition of the seriousness with which the movement views its current plight that it continues to urge the Minister to step back from implementing the outstanding sections of the 2012 Act and the regulations contained in Central Bank Consultation Paper 88.
I acknowledge the presence in the Public Gallery of members of the Irish League of Credit Unions, the Credit Union Development Association, the Credit Union Managers Association and many individual members of credit unions throughout the country. Communities owe a great debt of gratitude to the credit union movement in Ireland. Our credit unions should rightly be a source of pride, reflecting as they do the long tradition of community and voluntary service in this country. As banks close branches and restrict in-branch services, as we saw in a recent announcement by Bank of Ireland, credit unions provide important competition and choice to consumers. In fact, in many parts of the country they are now the only local provider of financial services.
The reason there are so many people here, as there were on two occasions in June of this year, is that members are desperately concerned about the future of the credit union sector. I do not believe it is an exaggeration to state that they now fear for the very future of a vibrant credit union sector and they want us, as public representatives, to acknowledge this reality and take appropriate action.
I have been consistently impressed by credit union members, as well as by the passion of their boards and staff members for serving their members. They also have a passion for providing essential financial services for members of the community, many of whom are unable to access services in local financial institutions. They are frustrated, however, and over the course of these two evenings we will outline the reasons that is so.
There have been huge changes in how credit unions are regulated. Credit unions are effectively reeling from the collective impact of a number of measures over recent years. The cumulative impact of those measures is the key issue. Members have told me that in many ways they regard CP88 as the last straw for the sector after being hit by the impact of personal insolvency legislation, section 35 restrictions on lending, and Basel III rules on the investments they can hold. Many are now questioning whether credit unions can earn sufficient income to be able to offer a decent return to their members. Credit unions are no different from any other organisations. They must earn a return which they can in turn pass on to their members.
In the UK, the sector is viewed as a valuable social amenity where the work of the sector is recognised at all levels for its contribution to the community. In North America and other developed countries, the credit union sector is an integral part of the financial services network. In those countries, credit unions offer services such as mortgages, payment and card services, and insurance. They are supported and encouraged by their governments. In Ireland, the Government has failed the credit union movement by neglecting to bring forward a strategy over the past four years to underpin the development and growth of the credit union sector.
It cannot be stated often enough that credit unions have survived the financial crisis well with just 1% of credit unions needing State funding. If there is a problem with the provision of financial services in this country, and there has been in recent years, it most certainly is not with the credit unions. The restructuring board, ReBo, has done commendable work and appears to be providing good support to those credit unions which need it. However, the facts are that the advice the Minister for Finance received some time ago about the health of the credit union sector was plainly wrong. His sources informed him, and he went on to inform Seanad Éireann, that up to €1 billion could possibly be required to stabilise the credit union sector. He set aside €500 million in two separate €250 million funds. As we now know, the amount used to date on the credit union sector has been a tiny fraction of that. In simple terms I believe the Minister was grossly misled in relation to the underlying health of the credit union movement by whoever provided him with this advice. The question must now be asked whether these are the same sources that are now encouraging the imposition of even more restrictive rules on credit unions. They are sources that do not understand the underlying ethos of the credit union movement.
The first line of the Government's counter motion states that "the Government has a clear policy to support the strategic growth and development of credit unions in Ireland as set out in the Report of the Commission on Credit Unions and its recommendations". These are fine words but are not evidenced by the facts on the ground. The work of the Commission on Credit Unions is not in dispute. No stakeholder has sought an amendment to its findings. However, the substantive issue is the selective implementation of its recommendations and the interpretations being adopted by the registrar within the Central Bank. The primary example is a failure to implement an appropriate tiered regulatory framework as envisaged by the Commission on Credit Unions. That is an issue that comes up time and again. There is a need for a tiered regulatory framework but it is not happening.
The registrar proposed a tiered system in the previous Consultation Paper 76, which was not consistent with the spirit of the Commission on Credit Unions. The commission had strongly recommended a system that would be reflective of the nature, scale and complexity of credit unions. Such a system would enable smaller credit unions to continue successfully to offer basic services with a lower regulatory demand on them while also enabling other more expansive credit unions, perhaps serving a larger urban population, which wish to expand their range of services for members to put the necessary framework in place to get on with it. That simply has not happened.
While these are regulatory issues, the Minister has the power to postpone the commencement of the final sections of the 2012 Act until such time as the regulatory framework reflects the intentions of the recommendations by the Commission on Credit Unions as opposed to copperfastening the continuation and reinforcement of a one-size-fits-all approach. The latter approach, which is currently being adopted, is stifling the growth and potential of the movement. The Minister should take this course and allow time for an effective consultation with stakeholders.
I assume that the Minister had to leave the Chamber for a good reason. I hope he participates fully and listens to the arguments during this important debate today and tomorrow.
In his countermotion the Minister also notes that "the safety of members' savings and the security of the credit union sector as a whole are priorities for this Government". These are certainly soothing words but by allowing the registrar to cap savings at €100,000 the Minister appears to be suggesting that a person's savings are, in effect, safer in a bank. That is the message this proposal is sending out to the wider community. While less than 1% of members would be impacted by this change, there is huge reputational damage to credit unions which have carefully protected members' savings over the past 50 years.
The Government amendment will refer to how the Central Bank has stated that credit unions can apply to keep funds greater than €100,000. This is not a solution because yet again it pushes the burden back on credit unions. No doubt the Central Bank will also look for credit unions to have their auditors validate the requirements at considerable expense. Following such close oversight by the Central Bank of credit unions in recent years it is reasonable to ask whether the Central Bank cannot determine in advance the credit unions to be exempted from the savings cap. The Minister of State knows as well as I do that the Central Bank has been crawling all over credit unions in this country in recent years. Through that work, the Central Bank should be able to identify the credit unions in respect of which this cap should not be applied. In the case of other credit unions, the cap does not apply because it does not affect their members. For those affected, this sends out a negative signal and amounts to a statement of a complete lack of confidence by this Government and the regulator in the future of this movement.
I acknowledge the independence of the regulator. However, the scope of its powers in respect of the cap on credit union savings are being utilised in a manner that is neither fair nor equitable. It is a regular refrain of the Central Bank that credit unions need to get back to their traditional lending model. They are certainly keen to do that. However, the figures relating to lending are stark. Credit union members have in excess of €11 billion in savings but only €3.5 billion on loan from a total of more than €13 billion in assets. Approximately €8 billion is placed in investments by the credit union movement at the moment, much of which could be put to productive use in the economy through small, medium and large-scale lending. This should be facilitated in a prudent and responsible manner.
I understand the loan-to-deposit ratio has fallen by a sizable 11% since the Commission on Credit Unions carried out its report. This trend is simply unsustainable. Credit unions need to be given the freedom to earn enough income to survive. The alarm bells are ringing in terms of the longer-term sustainability of these trends. The Minister of State must sit up, take notice and respond accordingly.
Certainly, credit unions are keen to be able to make available loans of smaller amounts. These can help to keep people out of the clutches of moneylenders. Money lending is the inevitable consequence of the continued implementation of the section 35 restrictions and the onerous constraints placed on credit unions as well as their capacity to serve their members. The Government is pushing people into the hands of moneylenders, some of whom are legal, many of whom area illegal, but all charging excessive and exorbitant interest rates. This work is central to the function of credit unions, but lenders in credit unions are being stymied.
Personal insolvency legislation is having a seriously detrimental impact. There is a strong argument to the effect that credit union loans should never have been categorised as unsecured loans. After all, members' money is at stake, as the Minister has pointed out repeatedly. An example was brought to my attention recently. It related to a credit union which had issued a loan of €6,800. It will now receive €163 as part of an insolvency settlement. This is a write-off of members' savings, not shareholder profit. Credit union loans should be categorised as a separate class of loan in insolvency legislation to reflect the unique nature of credit unions and their role in society.
The long-term lending capability of credit unions is an important consideration. The Central Bank CP88 regulations copperfasten the existing rules from section 35 of the Act around loan maturity limits such that no more than 10% of a credit union loan book should be for a period of greater than ten years. These limits are restricting the day-to-day operation of credit unions and denying them some vital lending opportunities currently available in the marketplace at a time when the economy is recovering. One of the central findings of the Commission on Credit Unions was that section 35 would be reviewed, but that simply has not materialised. Again, this is an example of the selective treatment of the recommendations of the commission.
Prudential returns indicate that lending over ten years in credit unions accounts for 2.18% of total loans in the sector, a pitifully low amount. There is nothing to suggest that this is going to increase any time soon. Again, the signal from the Central Bank is negative and regressive in this regard. The Irish League of Credit Unions has delivered a cogent and well-thought-out policy platform in its Six Strategic Steps policy document. This has been backed up with a detailed policy statement on how credit unions could provide funding for social housing. The Minister for the Environment, Community and Local Government, Deputy Kelly, has that proposal on his desk. We urge him to consider it actively.
The Government amendment notes that the Central Bank has informed the Minister how since 2010 it has received less than ten applications for approval of additional services under sections 48 to 52 of the Act. This is disingenuous and my consultation with credit unions suggests it is misleading. Some services, such as debit card services, do not require approval under sections 48 to 52, yet they must receive the blessing or consent of the registrar. Some credit unions have been trying for over two years to introduce basic services such as debit cards.
In summary, the key issue in the view of Fianna Fáil is the lack of a national policy to develop the credit union sector in future. Unless this is urgently addressed, the sector is in danger of declining on an ongoing basis. No one in the House, including the Minister of State, is keen to see that happening, but the evidence is clear.
I have no doubt the Central Bank will implement rules from a macro prudential point of view. However, this does not address the need for a policy to support and underpin the growth of credit unions. In simple terms, credit unions have taken the pain in respect of the additional costs and burden of regulation. However, rather than be allowed to harvest the benefits of this work, they are about to be subjected to a further setback with more sweeping restrictions on their potential to grow and serve their members and the wider community. This is the reason we are calling on the Minister to call a halt to the implementation of the remaining sections of the 2012 Act. We call on the Minister not to sign the CP88 regulations. The Minister should immediately conduct an urgent review of the report of the commission and its recommendations, in particular in respect of the growth and development of the sector. The Minister should conduct a revised regulatory impact analysis of the regulations to date, including a financial impact analysis. The Minister should immediately appoint a member of the credit union movement to the credit union advisory committee, which seems to have an important role in shaping policy in this area. The Minister should ensure full and proper engagement with the Department of Finance, the Department of the Environment, Community and Local Government and the sector in respect of the provision of longer term lending to support the housing sector and lending to mortgages. I look forward to the debate this evening and tomorrow evening. I hope we are being listened to.
I welcome the opportunity to comment on the motion relating to credit unions. I was a director of Enniscorthy Credit Union before I was elected to this House. Therefore, I am very much aware of the importance of credit unions in urban and rural areas. We must all accept that the credit union movement is critical to the economic and social well-being of communities throughout Ireland. There are almost 3 million members and nearly 400 offices nationally. Primarily, credit unions offer savings and loans services to their members. The importance of the credit union in every part of the country is highlighted by the fact that the sector employs 4,000 people and has almost 10,000 volunteers. That is an important mix. There are paid people as well as thousands of volunteers throughout the country who are prepared to give of their time freely and without cost to ensure that credit unions survive and continue to play a vital role in the economy.
The credit union is often referred to as the ordinary person's bank. It is for weddings, confirmations, communions and funerals. It is for people who need money in a hurry without having to go through the bureaucratic nonsense that exists in the banks at present. I can go to my credit union, make a case and apply for a loan. More than likely, within a week or three or four days I will get approved for the loan, particularly if I am a member of the credit union and I have built up a good credit rating throughout the years. What happens in a bank? To secure a loan I have to go in to the local bank and fill out forms on a computer. The girl working there may help me or she may not. I may have to do it myself. Then when I am leaving I will ask when there will be a decision. The reply of the staff is likely to be that they do not know because the decision has to go to Dublin. In other words, there are faceless people in Dublin making decisions on applicants for loans. They have no idea who the loan is for, what the applicant is like, what the credit rating is or whatever.
More often than not, bank employees in Dublin will refuse loans, because that is how banks are currently operating.
As I said, credit unions are places where people can go in their hour of need. They can save with the credit union and can make a personal case for a loan or money in a hurry. It is very important that the credit union structure remains in place. There is too much interference from the Central Bank and the regulator, and I hope the Minister for Finance, Deputy Noonan, who is usually full of common sense, does not allow them to dictate how credit unions should operate in the future.
Credit unions are co-operating in a shared service arrangement and implementing new regulatory and risk management systems. Some credit unions got into difficulty during the Celtic tiger era, but the number is minuscule compared to the number that exist in the country. There has been a change in the credit union structure in regard to regulation. There are now professionally qualified people working in the area and the movement has employed people who have a knowledge of finance and how loans operate. The overall regulatory framework within credit unions throughout the country has improved.
We have seen in the past number of weeks how banks have closed branches and restricted in-branch services, whereby they will no longer deal with the public, particularly the elderly and those with disabilities. People can lodge money in banks, but they will not see anybody. That is not the case with credit unions. If one calls into a credit union, one can meet the manager, staff and those working behind the counter, who will help and support one with whatever application or information one requires. In many parts of the country, credit unions are now the only local providers of financial services. However, credit unions are about to be hit with a wave of new restrictions on their activities before the end of the year. As Deputy Michael McGrath said, it is time for the Minister to pause and hold back. He should not rush into making decisions that will impede and restrict the operation of credit unions in the future.
One of the most serious of the new restrictions is the impending €100,000 limit on savings. This is an unnecessary limitation on customer choice. It will send out a signal that credit unions are less safe than competitor financial institutions. In a parliamentary question and during a previous debate in the House I asked the Minister for Finance to clarify the question of savings clubs. I am the chairman of the Rapparees-Starlights GAA club in Enniscorthy. We have a savings club that collects between €500,000 and €600,000 a year. We deal with the credit union in Enniscorthy, which provides a very good service and takes care of the issuing of cheques to customers. How will the club operate in the future if the limit is €100,000? Will we and other savings clubs have to break the structure of the scheme into five or six amounts of €100,000 each? The Minister did not answer my question. The Minister of State is from Wicklow and must know how credit unions operate. I am sure he will examine the issue and, in conjunction with the Minister, Deputy Noonan, examine how the problem can be resolved. If we or any other savings club have to leave the credit union system, we would have to go to the banks and would immediately be liable for charges. A savings club in Wexford has informed me that because of the charges imposed by banks it now has to charge savers €10 per person per year. Such charges do not exist in the credit union system and it is important that we get a satisfactory explanation of the issue.
People have built up savings over the years and have received lump sums from redundancy, retirement or whatever. Only a small number of people have more than €100,000 saved, but some people in credit unions have more than €100,000 saved, and they should not have to move from a credit union to a bank because of the restriction. It is one restriction that the Minister should reconsider before he makes any final decisions in this area. The recommendations of the commission on credit unions have been selectively and half-heartedly implemented to date, particularly those relating to the growth of the sector, which have been largely ignored. As I said, many credit union members have built up savings over the years and need more flexibility and latitude and a change to the €100,000 limit.
The proposed cap on savings, which has already caused reputational damage to credit unions, will drive funds from the credit union sector into the banking sector and will distort competition in the banking and credit union sectors, which is not a good thing. Credit unions should not be subject to bureaucracy, red tape and the same structures as banks. They operate in a different manner for different people, and it is very important that the role of credit unions, as a place where decisions are made quickly and decisively in the interests of members, should continue.
I welcome this debate on the credit union movement and the Central Bank regulations. I thank Deputy Ó Fearghaíl for making a few minutes available to me to make my contribution.
The credit union movement in Ireland is one of the great success stories of modern times. One of the reasons for this, apart from the fact that it has almost three million members and €8 billion in assets, is its history. From the bottom up, men and women in the movement have volunteered, which is one of its great qualities. One of its great strengths and, by that token, one of the reasons it has been so successful and widespread in terms of its presence in villages, towns and cities, is that it is a great movement. It is a movement on a par with others in that it has its roots very much within communities throughout the country. One cannot make many comparisons of the quality of service that the credit union movement has provided. In years gone by it was commonly referred to as "the working man's bank," although one now has to refer to "the working man's or working woman's bank," with which I have no difficulty, as, I am sure, no man or woman has either.
The movement has evolved over time and is now much more sophisticated, and quite rightly so, because of the changes brought about by technology and so on. The movement has been true to its origins in that it is deeply rooted in society. There is a widespread difficulty with moneylenders in this country and the interest rates they charge. They cause misery for the families who fall victim to them. The first port of call for such families is the credit union movement, rather than banks. That is the experience in the constituency I represent, which is largely working-class.
As Deputy McGrath said in his introduction, we must cherish the movement and not put it on a par with banks. The credit union movement has a completely different character from the banks. Some of its functions may be similar, such as lending money and taking in money and there is nothing wrong with this, but the credit union movement is not a banking movement in the traditional institutional sense that we understand banks, and nor should it be as it would take away from its character. Much of the regulation to which we are referring is coming from the Central Bank. No disrespect to the Central Bank, but I often say that if we had a choice in 2007 or 2008 between the Central Bank and some of the banks running the country's monetary system and having the credit union movement running the financial system, we would not have had the mess we have just come through.
There is a touch of irony when one looks at some of what is coming from the Central Bank. I refer in particular to CP88, which sets out a template for the credit union movement. The Central Bank has many questions to answer, as we discovered during the banking inquiry. We do not have an inquiry into the credit union movement because there is no similarity whatsoever, but we see the Central Bank coming in with regulations, as obviously it is saturated by having to control all institutions.
I come back to my original point. They are two separate entities and CP88 will restrict and handicap the credit union movement. The Minister was quite practical last June when replying to me in the House with regard to reviewing the situation. As Deputy McGrath stated, he should withdraw the section and not sign it. The Department of Finance can always come back to the credit union with regard to this regulation if it is needed, but at this moment it is not needed.
I thank Deputy McGrath for giving us this opportunity, almost five months to the day since we spoke about credit unions in the House when, ironically enough, the Acting Chairman was also in the Chair. As I look at the Government's countermotion, there is some progress but some of it is absolutely contradictory. Every Government Deputy who comes in here and inevitably pats the credit union movement on the head and tells it they are great guys and girls and are wonderful and they love them should know for what they will vote tomorrow evening. It is the Minister for Finance's intention to commence the remaining sections of the 2012 Act on 31 December. No matter how many concerns they express about CP88, they will vote to endorse its implementation.
They will also vote to endorse the contradiction in Government policy on credit unions. They support credit unions, and come to the House with fine soothing words about how good they are, but in the countermotion they contradict themselves. One line of the motion states that the Minister for Finance recognises the concerns of the credit union movement with regard to the savings limit of €100,000 but in another line commits to introducing the regulation which will copperfasten it. The Minister for Finance also notes the setting of the savings limit is a matter for the Registrar of Credit Unions, which means the buck is passed straight away. The Registrar of Credit Unions must be answerable to somebody, and presumably it is answerable to the Central Bank of Ireland.
Another line in the motion states that the Central Bank informed the Minister for Finance that it had invited a number of interested parties in the credit union sector to participate in focused dialogue in November 2015, with a view to gaining a better understanding of how credit unions want to develop their business model and identify changes that may be required to the framework to facilitate prudent development. Hello to the Central Bank of Ireland and welcome to the party. In 2015, it finally gets around to having a discussion and a dialogue with the credit union movement on where it wants to go and where it sees itself going. The frustration is that we have a Central Bank and a regulator which do not get it, do not want to get it or, at the very worst, want to strangle the growth of a movement with so much to offer, so much potential and so much interest not the country, but in individual communities and for individual people by giving them a better chance and better opportunities.
Deputy Maloney is right. Figures published today show how much people will spend over Christmas. This is the time of year that people borrow to give their families the best Christmas possible. Those who have the ability and the opportunity will do so through their credit union, but many will not be able to because silly rules are strangling the ability of credit unions, particularly in large urban areas, to make these small loans. People will go to money lenders who have interest rates of 300% 400% and 500%, who do not adhere to any code of conduct and never engage in structured dialogue with the Central Bank of Ireland because they do not want to and do not have to because we have something that is strangling the very growth of credit unions.
In the context of the collapse of the banking sector and the collapse of trust, imagine if somebody had said 2.89 million people in this country have, between them, €11 billion in savings, with €3.5 billion of this out on loan, and €13 billion in assets spread between 342 branches affiliated with the league and a few others throughout the country, and they want to assist in the financial recovery of the country? In 2008 and 2009 we would have gone with arms open to them, but the Government, the Central Bank and the regulator seem to want to restrict them and push them back, and push back the potential and ambition of the movement. When the political system and the House struggled to come up with an idea and a solution to the housing crisis, the Irish League of Credit Unions came to the table with a proposal, money and a willingness to lend this money in the co-operative meitheal spirit on which it is founded. It put its money where its mouth is instead of just talking about it, and yet the Minister, Deputy Kelly, is engaging with it but there is very little sense of urgency. The urgency with which the credit union movement responded to homelessness and community development throughout the country is not replicated in either the regulatory or the political system.
This debate provides an opportunity for the political system to stand up and say we will not just give the credit union movement soft soothing words. Nobody does this better than the Minister, Deputy Noonan. When he comes to the House, he will sit all 3 million members of the credit union movement on his lap, tell them they are great and that he loves them, and Barney-like he will hug them, but he will send them out the door and introduce CP88 and further restrict growth.
It is true that 99% of members may not be affected by the €100,000 limit, but if one receives a redundancy payment, sells a house or wins the lotto one will have a requirement and one should be able to use the local credit union. We have the notion a credit union should go cap in hand to the Central Bank to apply for special permission. The Government is supposed to be reducing regulation and making it easier for SMEs to do business, but here it is putting another regulation in the way of the most local of SMEs, and the most well-founded and grounded of SMEs, namely, the local credit union.
There are many issues on which we should engage with the credit union movement but we are avoiding them. These include SME lending. In June, I spoke about Microfinance Ireland, an organisation which has finally got its act together and doing good things, but this is only in the past 12 months. The credit union movement is ideally situated to partner Microfinance Ireland on loans for SMEs and companies which cannot get funding from Leader or from Microfinance Ireland because of displacement rules. If we gave the credit union movement a role in supporting small local companies which will never export and which are not into IT or technology, it would provide a crucial role and would protect and enhance jobs.
We have spoken about the alternative and the trust we put in our credit unions with regard to moneylenders. In June, we spoke about the investment credit unions have made in their staff, making them do the most up to date courses possible in financial management, prudential management and law. They are briefed and they know their stuff. They are more on top of their brief than many bank officials or, dare I suggest, many people who seek to regulate this evening.
We will not hear of credit unions replacing every counter in their branches on a Friday evening to open on Monday with one cash counter and a load of computers and ATMs, so that when the computer says "No" that one desk has a queue going out the door.
We do not hear of credit unions shutting down branches with minimal or no notice or telling older citizens they can talk to the computer, ring a call centre or bank online, when there is no broadband, never mind the ability to do anything online. We do not hear of credit unions increasing banking fees by 240% in the manner in which all our established banks have done to small businesses in the past number of years. We do not hear of credit unions telling people what day they can lodge coin and what days they cannot, even if it requires somebody to keep cash on a premises, particularly at a time of security worries.
Credit unions are meitheal, rooted in 346 communities across the country. We want to leave them there and strengthen those roots. Instead of patting them on the back, the Government should stand back. Tonight, the difference between November and June is not a question of a month or the temperature; the Government has no time left. It can decide on the basis of this motion not to proceed. There is an election coming and maybe something as substantial as this should really be done by a Government with a new mandate. The Minister of State and the Government Deputies should stand up for the credit union movement as pats on the back will not work on this occasion.
I move amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:"notes that:— the Government has a clear policy to support the strategic growth and development of credit unions in Ireland as set out in the Report of the Commission on Credit Unions and its recommendations;and
— the safety of members’ savings and the security of the credit union sector as a whole are priorities for this Government; the Government recognises the important role of credit unions as a volunteer co-operative movement in this country and also the importance of getting lending going in the economy;
— this Government has put in place a number of measures to ensure that credit unions can continue to provide vital services to their members and to ensure the stability of the sector into the future;
— this Government established the Commission on Credit Unions; the commission reviewed the future of the credit union movement and made recommendations in relation to the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect members’ savings and financial stability;
— in particular, this Government has accepted fully the report of the Commission on Credit Unions and its recommendations; the report of the Commission on Credit Unions made a number of recommendations regarding the strengthening of the regulatory framework for credit unions; the Commission on Credit Unions also recommended that regulation making powers be delegated to the Central Bank of Ireland, CBI;
— the commission participants agreed to the recommendations; the membership of the commission included members of the credit union representative bodies and other stakeholders;
— over 60 recommendations from the report of the Commission on Credit Unions have been implemented in the Credit Union and Co-operation with Overseas Regulators Act 2012 - the 2012 Act;
— it was agreed at that time that it would be neither practical nor feasible to commence the 2012 Act in its entirety in one fell swoop; following on from that, an implementation timetable for the 2012 Act was devised in consultation with stakeholders, including credit union representative bodies;
— commencement of all sections of the 2012 Act has been aligned with the credit union financial year and the introduction of the underpinning CBI regulations, with a view to implementation of the 2012 Act in a coherent and cohesive manner; this has provided credit unions with the time necessary to ensure that the required processes and procedures are in place prior to implementation of each tranche;
— the Registrar of Credit Unions at the CBI is the independent regulator for credit unions and the setting of regulations in relation to the credit union sector, including those set out in the CBI consultation on regulations for credit unions on commencement of the remaining sections of the 2012 Act, CP88, are a matter for the registrar;
— the Registrar of Credit Unions has completed a full consultation process in relation to CP88;
— as part of the consultation process the Minister for Finance proposed that in the interests of clarity and fairness, credit unions are provided with details of the process of applying for a retention of savings above the limit amount;
— through the setting of regulations, ongoing supervision of the sector and consultation with stakeholders, the Registrar of Credit Unions acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members;
— it is the Minister for Finance’s intention to commence the remaining sections of the 2012 Act on 31 December, 2015 in line with the introduction of the regulations by the Registrar of Credit Unions; these sections of the 2012 Act, when commenced, will replace, amend or supplement existing sections of the Credit Union Act 1997;
— the Minister for Finance has been informed by the Registry of Credit Unions that all credit unions have been contacted giving further information on its application criteria for the retention of savings in excess of €100,000; the Registry of Credit Unions intends to engage with the representative bodies and to invite comments from them prior to finalisation of the application process; where a credit union has demonstrated that it meets the criteria, it will be in a position to retain members’ savings in excess of €100,000 held at the commencement of the regulations;
— the CBI has also informed the Minister for Finance that it is committed to undertaking a review of the continued appropriateness of the savings limit, once the impact of the restructuring process can be assessed;
— over 99% of credit union members will not be impacted by the €100,000 cap on member savings;
— the Minister for Finance recognises the concerns of the credit union movement in relation to the savings limit of €100,000;
— the setting of the savings limit of €100,000 and other matters contained in CP88 are a matter for the Registrar of Credit Unions;
— the Minister for Finance has met with the credit union representative bodies in November 2015 and the perceived impact of the new regulations was discussed and further follow-up meetings between the Department of Finance and the representative bodies will take place this week;
— at the meeting with the movement, the Minister for Finance has asked the representative to revert with their specific concerns and has committed to communicate these concerns with the Registrar of Credit Unions;
— the need for credit unions to grow income has been recognised as a requirement for sector viability; while developing new products and services is a necessary element of this, the CBI has highlighted the importance of credit unions ensuring that they are in a position to grow their income from their traditional lending business; the CBI has informed the Minister for Finance that since 2010 it has received less than ten applications for approval of additional services under sections 48 to 52 of the Credit Union Act 1997; these applications have all been received in recent months and are currently at a various stages of the approval process;
— the CBI has informed the Minister for Finance that it has invited a number of interested parties in the credit union sector to participate in focused dialogue in November 2015 with a view to gaining a better understanding of how credit unions want to develop their business model and to identify changes that may be required to the regulatory framework to facilitate prudent development;
— credit unions are not prohibited from providing mortgages to members; mortgages are subject to the maturity limits contained in section 35(2) of the Credit Union Act 1997; the CBI issued a feedback statement on CP88 and the regulations in July; the regulations which are due to commence on 31 December 2015 contain a specific section on lending, under these lending regulations credit unions can continue to provide mortgages;
— the Government established the Credit Union Restructuring Board, ReBo; to date, ReBo has assisted with 36 mergers involving a total of 74 credit unions; in total, 189 credit unions are engaged with ReBo at varying stages of the restructuring process;
— a review of ReBo was conducted this year; the Minister for Finance announced 31 March 2016 as the final date for acceptance of any further restructuring proposals; this will enable ReBo continue to engage with the sector and complete the performance of its functions within its time-bound mandate;
— the current Credit Union Advisory Committee, CUAC, was established in September 2014 for a period of three years to advise the Minister for Finance regarding the improvement of the management of credit unions, the protection of the interests of members and any other matters the Minister may seek the advice of the committee on;
— CUAC has met with all credit union representative bodies and other stakeholders since it was established; a recent meeting was held between the CUAC and the representative bodies and the perceived impact of the new regulations was discussed;
— Department of Finance officials have engaged with the Department of the Environment, Community and Local Government regarding credit unions involvement in social housing initiatives; a meeting is scheduled between the two Departments to discuss credit unions involvement in social housing initiatives.”
I welcome the debate. I have much to say to Deputy Calleary and I am sure he will not consider my words to be merely soothing. I and every Deputy in the House knows the importance of the credit union movement and my family has relied on the credit union movement on many occasions. My words are not meant to be soothing and this debate should not be reduced to any sort of partisanship. I hope this debate and the ongoing engagement that the Government and all parties are having with the credit union movement can be about the best outcome possible and ensuring that the credit union movement can continue to play its very vital role in providing access to credit and other important services in local communities throughout the country. Credit unions are an integral part of communities across the country and, as Deputies have correctly stated, they provide a unique range of services to their members. The Government is fully committed to supporting the credit union sector and has put in place a number of measures to ensure that credit unions can continue to provide these vital services to members and to ensure the stability of the sector into the future.
Some of these measures include the establishment of the Commission on Credit Unions, the publication of the Credit Union and Co-operation with Overseas Regulators Act 2012, the establishment of the Credit Union Restructuring Board, ReBo, and the establishment of the current credit union advisory committee in September 2014. Only this week we have seen the sort of initiative that Deputy Calleary rightly seeks, a personal micro-credit initiative in collaborations with the credit unions, An Post and the Department of Social Protection. This is to help the very people we speak about, who need access to loans, so as to keep them out of the arms of moneylenders. It is a good scheme and I am sure it will be welcomed by all Members on this side of the House.
The safety of members' savings and the security of the credit union sector as a whole are priorities for this Government and the Minister for Finance. I know they are priorities for everybody in the Gallery, credit union directors, volunteers, staff and members. The Minister has on a number of occasions highlighted the Government's recognition of the important role of credit unions as a volunteer co-operative movement in this country and also the importance of its role in getting lending going in the economy. I reiterate that acknowledgement and recognition this evening.
Credit Unions provide a unique and trusted service to their members. The Government has a clear policy to support the strategic growth and development of credit unions in Ireland as set out in the Commission on Credit Unions report and recommendations. This Government established the Commission on Credit Unions in May 2011 to make recommendations on the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect members' savings and financial stability. The commission report was agreed and co-authored by key stakeholders, including credit union representatives. The commission worked intensively over a nine-month period to address and deliver on ambitious terms of reference. The process was a participative one, with wide representation from the credit union movement. The agreed commission report sets out the blueprint for the future viability of credit unions in Ireland, and its constituent elements are interrelated and mutually reinforcing.
Deputies are aware that the commission published its final report in March 2012. The Government fully accepted all the recommendations in the Commission on Credit Unions report and over 60 of its recommendations have been implemented in the Credit Union and Co-operation with Overseas Regulators Act 2012. The legislation contains measures which will reform and strengthen credit unions and deals with four broad areas, namely, prudential regulation; governance; restructuring, including the establishment of the Credit Union Restructuring Board, ReBo; and stabilisation.
The Credit Union and Co-operation with Overseas Regulators Act 2012 provides the statutory basis for the restructuring of credit unions and placed the Credit Union Restructuring Board on a statutory footing from 1 January 2013. ReBo is currently in the process of overseeing and facilitating restructuring on a voluntary, incentivised and time-bound basis and is working towards the timetable set out in the Commission on Credit Unions report, with a view to completing the process in 2016. To date, 74 credit unions have been assisted in ReBo-approved mergers. In total, 189 credit unions are engaged with ReBo at varying stages of the restructuring process, or over half of all credit unions in the country. In October 2015, the Minister announced 31 March 2016 as the final date for acceptance of any further restructuring proposals by ReBo. This will enable ReBo to continue to engage with the sector and complete the performance of its functions within its time-bound mandate. ReBo is available to support any credit union requiring assistance with the application process and such credit unions are encouraged to make contact with ReBo as soon as possible.
With regard to the new regulations for credit unions, let it be clear from the outset that the Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions. Within her independent regulatory discretion, the registrar acts to support the prudential soundness of individual credit unions, maintain sector stability and protect the savings of credit union members. The report of the Commission on Credit Unions made a number of recommendations regarding the strengthening of the regulatory framework for credit unions. The Commission on Credit Unions also recommended that regulation-making powers be delegated to the Central Bank, and therefore it is a matter for the registrar to make regulations and set limits. The Government has no role in setting regulations relating to a strengthened regulatory framework for credit unions in Ireland.
The registrar has completed a full consultation process relating to CP88. A public consultation process was launched in November 2014. Separately, as part of the consultation with the Minister for Finance, he proposed that in the interests of clarity and fairness, credit unions are provided with details of the process of applying for a retention of savings above the limit amount. Before discussing some of the specific issues that have been raised relating to the new regulations, it is important to understand the context of the commencement of the legislation. The Credit Union and Co-operation with Overseas Regulators Act 2012 was signed into law by the President in December 2012. It was agreed at that time that it would be neither practical nor feasible to commence the 2012 Act in its entirety in one fell swoop. Commencement of all sections of the 2012 Act has been aligned with the credit union financial year and the introduction of the underpinning Central Bank regulations, with a view to implementation of the 2012 Act in a coherent and cohesive manner. This has provided credit unions with the time necessary to ensure that the required processes and procedures are in place prior to implementation of each tranche. Currently, it is the Minister for Finance's intention to commence the remaining sections of the 2012 Act on 31 December 2015 in line with the introduction of the regulations by the Registrar of Credit Unions. These sections of the 2012 Act, when commenced, will replace, amend or supplement existing sections of the 1997 Act.
As stated previously, the setting of savings limits is a matter for the Registrar of Credit Unions, the independent regulator. In her feedback following the public consultation on CP88, the registrar stated:
I am aware that during the consultation process the proposal for a maximum individual member's savings limit of €100,000 has drawn a large degree of comment. Having considered the feedback received, the Central Bank is of the view that the limit of €100,000 is appropriate at this time given the stage of development of the sector and the Central Bank's mandate to ensure the protection of members' funds.
As outlined in the Central Bank's feedback on CP88, as part of the consultation process the Minister for Finance proposed that in the interests of clarity and fairness, credit unions are provided with details of the process of applying for a retention of savings above the limit amount of €100,000. The Minister for Finance has been informed by the Registry of Credit Unions that all credit unions have been contacted, giving further information on its application criteria for the retention of savings in excess of €100,000.
The Registry of Credit Unions intends to engage with the representative bodies and to invite comments from them prior to finalisation of the application process. When the application process is finalised, the registry will provide an application form and explanatory notes in order to assist credit unions. It is anticipated that application forms will be available during December 2015. It is envisaged that applications will be accepted in the first quarter of 2016 and that applicant credit unions will be informed by the end of the second quarter of 2016 on the outcome of the process, which is well within the 12-month transitional period. Where a credit union has demonstrated that it meets the criteria, it will be in a position to retain members' savings in excess of €100,000 held at the commencement of the regulations. The Minister for Finance has welcomed the steps that have been taken to provide clarity for credit unions on the criteria for the retention of savings over €100,000 and also welcomes the Central Bank's proposed engagement with the representative bodies to seek their comments on the application process.
The Central Bank has also informed the Minister for Finance that it is committed to undertaking a review of the continued appropriateness of the savings limit, once the impact of the restructuring process can be assessed. It is envisaged that this review will commence within three years of the introduction of the regulations. Department of Finance officials have asked the Central Bank to consider accelerating this review and this is under active consideration by the Central Bank. The Central Bank has agreed to provide regular updates to the Department of Finance on developments in this matter. The Central Bank has informed the Minister for Finance that over 99% of credit union members will not be impacted by the €100,000 cap on member savings. The Minister for Finance and the Government recognise the concerns of the credit union movement in relation to the savings limit of €100,000. However, it must be reiterated that the setting of the savings limit of €100,000 is a matter for the registrar.
The Minister for Finance has met with the credit union representative bodies in November 2015 and the perceived impact of the new regulations was discussed. Further follow-up meetings between the Department of Finance and the representative bodies will take place this week and our counter-motion recognises the fact that these further meetings are due to take place. I welcome this ongoing engagement between the credit union representative bodies and the Department of Finance. At the meeting with the representatives, the Minister for Finance asked the representatives to revert with their specific concerns and has committed to communicating these concerns to the registrar.
The need for credit unions to grow income has been recognised as a requirement for sector viability. At the meeting between the Minister for Finance and the representative bodies, the Minister invited the representative bodies to share any business model development ideas they may have in order to grow income and assist sector viability. I will get to some of them in a moment. The Central Bank has informed the Minister for Finance that it has now contacted all credit unions inviting them to attend information seminars that are currently being held around the country and will conclude at the end of this month. These seminars will provide credit unions with the opportunity to engage with the Central Bank on the new regulations and to discuss development of the credit union business model, including any changes to the regulatory framework that might be required to facilitate such developments.
Separately, the Central Bank has informed the Minister for Finance that following on from the areas identified in feedback received from CP88 and through other engagements with sector stakeholders it is proposed that meetings will be held to focus on the following areas: the services credit unions wish to develop in the areas of card services and payment accounts and credit unions’ aims regarding longer term lending, including further developments on the provision of mortgages to members, which I know is an issue that has been raised by a number of the representative bodies. To commence this dialogue process, an initial meeting with a number of credit union stakeholders, including the representative bodies and a number of credit unions, was held in mid-November by the Central Bank.
The Central Bank has informed the Minister for Finance that since 2010 it has received less than ten applications for approval of additional services under sections 48 to 52 of the Credit Union Act 1997, although I accept the point Deputy McGrath made on this earlier. These applications have all been received in recent months and are currently at various stages of the approval process. Following on from the meeting between the Minister for Finance and the representative bodies earlier this month, the Minister looks forward to receiving proposals that will support and grow income and maintain viability while protecting members’ savings.
Currently credit unions are not prohibited from providing mortgages to members. Mortgages are subject to the maturity limits contained in section 35(2) of the 1997 Act which sets out the percentage of a credit union’s loan book that can be outstanding for periods exceeding both five and ten years, as well as limits on the maximum outstanding liability to an individual member. The Central Bank issued a feedback statement on CP88 and the regulations in July. The regulations, which are due to commence on 31 December 2015, contain a specific section on lending. Under these lending regulations credit unions can continue to provide mortgages. Existing maturity limits that are currently contained in section 35 of the 1997 Act are included in the lending regulations. A maximum maturity limit of 25 years is also introduced in the regulations. The lending regulations also include a large exposure limit on the maximum exposure a credit union may have to a borrower or a group of borrowers who are connected.
The Central Bank considers that credit unions must have appropriate systems, controls and expertise to undertake mortgage lending and is of the view that scale is an important factor in determining whether a credit union can put these in place and offer mortgages as a viable business line. The Government recognises the important role of credit unions as a volunteer co-operative movement in this country and welcomes any initiatives that might enhance the business model while simultaneously ensuring the protection of members' savings.
I am pleased that the financing of social housing is being seriously considered by the credit union sector and I thank the sector for that. Various options are being explored. This is an important issue, which has been highlighted by a number of representative bodies. The Department of Finance has received a number of such proposals. While the Department of the Environment, Community and Local Government is the Department primarily responsible for the formulation and implementation of policy and for the preparation of legislation in relation to housing, Department of Finance officials are working closely with them. A meeting is currently scheduled for officials in both Departments to examine how credit unions can assist in the area of social housing. I look forward to the outcome of these meetings and welcome the proposals that have been put forward.
Section 44 of the Credit Union Act 1997 provides that a credit union may establish a special fund to be used by the credit union for social, cultural or charitable purposes by a resolution passed by a majority of its members present and voting at a general meeting. Where individual credit unions intend to establish such a fund, the Central Bank would expect the credit union to take account of the need to ensure the protection of the funds of its members.
Commencement of the remaining sections of the Credit Union and Co-operation with Overseas Regulators Act 2012 (2012 Act) will replace, amend or supplement existing sections of the 1997 Act. It will, in effect, remove some of the requirements, including limits, that currently exist in certain sections and will provide regulation-making powers to the Central Bank. The power to make regulations in relation to investments in projects of a public nature is specifically referenced in legislation and, therefore, such investments could be facilitated by future regulations, where appropriate, when there are specific proposals put forward by the credit union sector.
The Credit Union Advisory Committee, CUAC, was established on 22 September 2014 for a period of three years to advise the Minister for Finance regarding the improvement of the management of credit unions, the protection of the interests of members and any other matters that the Minister may seek the advice of the committee on. The committee is chaired by Professor Donal McKillop, the former chairman of the Commission on Credit Unions. The CUAC has met with a number of credit union stakeholders including the ILCU, CUDA, CUMA, NSF, Central Bank, ReBo and individual credit unions. On 19 October 2015, the CUAC met with a number of the representative bodies and the perceived impact of CP88 was discussed. The CUAC will continue to be available to meet with credit union stakeholders and advise the Minister for Finance on any other matters the Minister may seek the advice of the committee on.
The Government recognises the important role of credit unions. We want to work with the sector and with all Members in this House in respect of the important role they have, the unique part they play in communities and the role they can play in getting lending going in the economy. The Minister for Finance is always open to considering new proposals in respect of credit unions, particularly those that would see the development of the credit union business model and an increase in income for the sector. All proposals to date have been at an early stage and we await further details as the projects progress and based on the discussions the Minister very recently had with the representative bodies. Credit unions have gone through a period of considerable change since the commission report and the movement has risen to the challenges that has posed. This Government has worked closely with key stakeholders in the credit union movement to reach agreement on the report and recommendations of the Commission on Credit Unions. This Government will continue its ongoing engagement with the movement to ensure the safety of members' savings, to support credit unions to broaden the range of services to members and to safeguard the credit union sector as a whole into the future.
We want strong, vibrant credit unions offering a safe and secure place for members' savings but also being positioned to offer their members a wide range of services including loans and debit card facilities. The credit union movement has emerged stronger than ever before. Many credit unions are now in a position once again to offer dividend payments and interest rebates to their members this year and this is to be welcomed. The regulatory framework has been much enhanced. While I am fully aware of the obligations that the enhanced regulations have on the day-to-day operation of every credit union in the country, I also know that every Member in this House, and every member or director of a credit union recognises their importance not only in protecting members' savings, but also in strengthening the movement, which is at the heart of the new regulatory regime. I look forward to continued engagement this week with the representative bodies and the Department of Finance and I look forward to supporting the continued growth of the sector.
I thank the Fianna Fáil Party for bringing forward this timely Private Members' motion. It is appropriate we debate this in the House because it is the subject that is occupying the minds of credit union members, credit union boards and those connected with credit unions across the country. It is something that has raised fears perhaps not so much about the short-term view but certainly about the long-term view of the regulatory framework of the Department of Finance and those involved in policy-making as to what is, and should be, the credit unions' future role in society. Part of that is probably linked back to the early days of the credit union and just how much that ethos has changed. It has changed from being such a noble cause which has facilitated a group of people who have goodwill and who are motivated not by profit but by the idea of looking after those members who might need a handout or a few bob in a tough time, rewarding those members who lodge their money and being there in a time of crisis. It was almost a trade union-type response to combatting the moneylenders and those who would try to exploit people. The point credit unions have, through their success, reached is incomparable from their early days. Those involved in the credit unions at the very beginning will remember the suspicion and the raised eyebrows as if they were some kind of subversive movement trying to undo the banks or those in greater authority.
This is not a plug but one need only look at the credit unions in Galway, such as St. Anthony's & Claddagh and Naomh Pádraig. However, St. Columba's Credit Union has set up St. Columba's Credit Union Limited, SCCUL, a private limited company financed by members' funds. That company has been involved in so many area unrelated to the credit union. It has Ballybane Enterprise Centre, which has an incubation hub for small business, which is thriving and in which one cannot get a desk. It runs fund-raising for those who are in need of respite care and for counselling services. It is involved with the Brothers of Charity in Kilcornan, where it runs programmes to help people realise their potential and get back on their feet through therapeutic work. It is involved in business mentoring programmes. The SCCUL Ballybane Enterprise Centre awards, credit union awards, is one of the biggest business events in Galway every year, with hundreds of companies attending. The awards have the biggest business names in Galway, all acting as competitors but also as judges. It goes to show what the power and innovative mind of a voluntary system, without a profit motive, can achieve with volunteers' money invested properly in social enterprise.
When regulating the credit unions or attempting to confine them, sometimes I think we are still talking about the model that existed back in the early days and are not recognising that what has evolved is something much bigger, much more complex and much more professional and yet, importantly, still maintaining that crucial volunteer ethos. Let us not, with regulation and legislation, hamper or crucify that because it is something important and is succeeding rather well.
When I met credit union representatives in Galway, the issues raised with me were put forward in a straightforward, calm and rational way. There was no fear-mongering or no attempt to sensationalise. There was a list of issues that credit unions had serious concerns about.
The Government's amendment to the motion is probably one of the more conciliatory amendments I have seen in Private Members' time in a long time in that it certainly attempts to address the issues raised with me in the meeting I had and it tries to give some kind of a steer as to how the Government can deal with credit unions and engage with the independent regulatory framework. That is a question credit union members across the country are entitled to ask. They are entitled to ask why the Parliament, the Minister for Finance and those who they have elected to represent them are so prohibited from acting because there is an independent regulator. Perhaps the amendment to the motion is saying, "Look what happened when there was political interference, cronyism and a shoddy regulatory system crashed the economy". However, one is also entitled to ask, "What if we have gone so far that we are actually causing damage?". When this particular regulation is addressed, maybe we need to look at how much the people have a role in the regulatory framework. If the regulatory system does not look after people, then perhaps we have gone a bit too far.
On the issue of the €100,000, I accept the arguments put forward by Deputy Calleary. There are many bona fide reasons someone may have €100,000 in a credit union. It is not because he or she is getting paid big money or he or she is making a fortune. He or she may have sold a house, got an inheritance or has money received from somewhere else. The wording I am seeing today about the ability of credit unions to apply for the facility to do that sounds good but how will it work in practice? One of the points put forward to me by the credit unions in Galway and, I think, was put forward nationally was the idea of a tiered approach. Those credit unions which are bigger and which have better frameworks and better governance should be able to apply and those which are smaller and not as sturdy should be treated differently. Hopefully, this proposal being put forward will not be to say that two credit unions or one credit union would be able to do this but rather that a much more generous number and a broader sweep of credit unions, which meet defined, practical and pragmatic steps, will be able to exceed that threshold.
I want to lament a little. It is quite upsetting when one reads the Government amendment to the motion on credit unions, dealing with an issue that has been on the table for quite some time, that two of the engagements referenced happened in the same month we are debating in the Dáil a motion about a regulation that is imminent within the next five to six weeks. That is a wrong sign and it shows that political pressure from all sides of the House - it has been coming from myself and my party, and certainly from parties in the Opposition - had to get to such a stage that we would get that kind of engagement and such discussions going. That is lamentable. I am not sure what caused it. Whether it came from officialdom or the political side, it is wrong. Seeing it in the amendment to the motion disappoints me, as a supporter of the Government and as someone who has a strong interest and deep belief in the credit union movement.
The credit union movement must be clear about where it is going but from some of my engagements, I am not sure that distinct clarity is there as to where the credit union movement wants to go. It cannot become a bank, a voluntary bank or a building society. There is a difference between a credit union and a bank. That is something the members, the voluntary directors and voluntary participants all believe. A bit more work needs to be done on the credit union side in engaging with the members, public stakeholders and those who want to see it thrive as to exactly where it wants to go and perhaps that is not possible. Perhaps there needs to be flexibility, or direction needs to be sought. Certainly, the idea of debit cards and better banking facilities needs to be looked at but it needs to maintain something that is unique. The unique selling point, USP, of the credit union movement is that it is not a bank. It skirts that differentiation. If it offers the same services as a bank, then it is mimicking the model but how does one maintain that differentiation?
How credit union funds could be used to invest in social housing was discussed earlier. One aspect that can be pushed forward and used as a community development and social enterprise tool is the ability of credit unions to act like those in Galway and in other parts of the country. The credit union in Galway built a library, a Garda station and a community health office. It funded them in partnership with the Government and delivered fantastic facilities in one of the most challenged areas of Galway, in Ballybane. That centre is still standing and is still working. The library is also still there and is providing significant facilities. We should take that model and do everything we can with it. As for investing in social housing, what better use of members' funds could there be than to invest, in partnership with the State, in much-needed, community-needed good quality affordable housing? It is something their members need and their members' children need. The credit unions would get some return but it is likely to be far cheaper than what the commercial banks are willing to offer. Why not go down that route and develop it further?
Regardless of whether the motion is carried or lost, this debate will have very little effect. We have these debates every evening and they only involve our making statements. However, regardless of how the vote turns out tomorrow, I call for the promised consultation, engagement and bona fide interaction with the credit union movement and its stakeholders - via the Minister, the Registrar of Credit Unions or the consultative committee of credit unions - to be followed through on. While it is fine to speak the words and have the late engagement, if we are truly to live up to the words we will all say in the House tonight about our support of, belief in and strong hope for the future of the credit union movement, it will need buy-in from officialdom, the political process and those in the Registry of Credit Unions and the Central Bank. These are the independent people whose job is not to corral the movement but rather to help, develop, engage and produce a part of our financial sector that was, through all the bad times - and still is - the place people go for the few bob if their car is broken down and they cannot get to work or their children need something. It must be protected. The fact that the model has changed must also be recognised and worked with in order to develop.
Cuirim fáilte roimh an rún atá curtha síos ag an Teachta McGrath agus roimh na daoine atá inár gcuideachta anocht fá choinne an díospóireacht seo. Níl dabht ar bith ann gur ceist fíor-thábhachtach í an cheist seo. Aontaím le cuid mhór den méid a dúirt an Teachta Nolan fá dtaobh den dul chun cinn atá de dhíth fá choinne réiteach a fháil don fhadhb seo. Tá an fhadhb seo ag dul ar aghaidh ró-fhada agus aontaíonn go leor daoine sa Teach seo liom maidir leis sin. Tá daoine anseo atá ag tabhairt tacaíochta do na comhair creidmheasa le roinnt blianta anuas. Ach nuair a amharctar ar na fadhbanna móra a bhí ann le déileáil leo le cúpla bliain anuas, tá comhartha ceiste ann fá dtaobh den tacaíocht atá an Rialtas ag tabhairt don gluaiseacht seo.
Sinn Féin supports the motion. Representatives from the credit union movement are due to come before the Joint Committee on Finance, Public Expenditure and Reform this week. As elected representatives of our communities, we are aware of the incredible benefits the credit union movement brings to our society and economy. Deputy Nolan referred to a good example in his area, the Ballybane Enterprise Centre, which I have visited. I agree with him 100% on that matter. The centre is a template for what can happen in other areas regarding the investment in the social needs of the communities where credit unions are present.
In the programme for Government, the Labour Party and Fine Gael said they respected the ethos of the credit union movement and recognised that it is different from the banks. While that is a fine statement, it must be backed up by actions. The actions of the Government have not matched its words. In recent years, credit union offices have come under more regulatory pressure with more demands every year. Members of the finance committee know that Members across the political divide have had to battle very hard to take the rough and bad edges off previous legislation proposed by the Minister with the support of the Central Bank.
I support sensible and realistic regulation and would go much further than most in the House in the context of regulating certain financial services. Despite everything that has happened, a wealth management trust can advertise itself on its website as operating in a "lightly regulated environment". When I asked the Minister to comment on this, he said the company in question was not in breach of any regulations and he was satisfied. However, the pledge in the programme for Government to respect the ethos of the credit union movement and treat it differently from the banks has been discarded. It seems to be just another broken promise.
Across the State, there are 2.9 million members of the credit union movement and 352 credit unions. These members have more than €11 billion in savings, €3.5 billion in loans and more than €13 billion in total assets. My party firmly believes it is time the State worked with the credit union movement rather than against it to ensure these resources can be utilised more to help our economy to recover in a fair way. I commend the Irish League of Credit Unions on its Six Strategic Steps campaign.
The demands of the credit union movement are very sensible and responsible and are designed to benefit all. The €8 billion surplus funds held by the movement is stuck gathering very little interest in banks due to the limits in place. We must examine new ways to release some of the money so it can help build social housing for the 130,000 families in need of permanent roofs over their heads. The credit union’s proposal for a fund to channel this money to approved housing bodies must be seriously examined and could form part of the solution in a way that is consistent with public needs and the ethos of the movement. The Minister said he welcomed it and we have heard from the Opposition that it is a good idea. The Minister has pointed out that it has been possible to establish such a fund under the Act since 1997. It requires a more serious response. This is a major proposal coming from an entity that has a proven track record of helping communities. There is a social housing crisis. When we dealt with these issues at the finance committee when legislation was going through a number of years ago, we were telling the Minister the movement wanted to use its funds to invest in Ireland’s economy and benefit its members who owned the credit unions. Those avenues were not supported, and we are back here again seeking more than just a line in a Minister’s statement saying that, under the Act, if the majority of members at its AGM agree to set up a fund, it can be done. The Government must do more than just say the credit union movement can do this itself.
The recent section 43 report from the Department of Finance on the work of the Credit Union Restructuring Board, ReBo, showed much good work has been done. It also showed a great deal of the €250 million set aside to help credit unions merge is likely to be left in the pot when it is wound up. Given the efficiency and general good health of the credit union movement, this money, which has been saved, should be found to work with credit unions to see it reinvested in our communities. It was sent there for a certain purpose and it is not being used for that purpose. We should find a way to work with the credit unions to have it reinvested in our communities.
The Central Bank’s Consultation Paper 88, CP88, on the implementation of the remaining elements of the Credit Union and Co-operation with Overseas Regulators Act 2012 gave rise to a uniform reaction across the board from credit unions throughout the State and a similar reaction from political parties. People knew it was wrong. They had seen a number of problems with the Central Bank’s original proposals which were identified as being inappropriate. Chief among them was the proposal to cap credit union savings at €100,000. Much has been said about that particular proposal here tonight. I welcome the fact that, in reply to me previously, the Minister indicated that some leeway might be granted here by allowing existing savers to continue, while placing a cap on the newer customers gradually saving up to €100,000. It has been clarified again regarding the Minister’s motion. I argued for it in my party’s submission to the CP88 consultation process. We went further however, saying a review of the figure and an examination of whether a more flexible system can be accommodated is urgently needed.
Likewise, we raised a flag on the issue of reserves. It is in the interest of all that the credit union movement have the reserves to ensure confidence and growth. However, the CP88 proposal of a 10% reserve is way out of synch with the demands placed on other financial institutions, as everybody in the House knows. The Basel III capital requirements for banks are set at lower rates, while the EU is discussing legislation which would set a reserve of only 3% for some hedge funds operating in the State. The Government has signalled its opposition to the European Commission's proposal for a 3% reserve for hedge funds in the State as being harmful and unnecessary and is fighting the Commission on it. This seems to sum up the Government's approach to the credit unions. The Government says it recognises that credit unions are not like banks. I agree with that. The difference is, however, that the banks are more likely to break the rules and do serious damage to our economy and society.
Given the list of measures I have just outlined, it seems that the Government thinks credit unions are the real threat. Since I came into this Chamber, we have been dealing with a fundamental lack of understanding of the credit unions. I am not sure whether that can be attributed to the previous regulator, the registrar, the Central Bank, the officials in the Department of Finance or the Minister himself. We know there is support for the credit unions across the political divide. We are the credit unions. We are members of credit unions. We represent the people, and the people constitute that great movement which is the credit union movement.
Somebody needs to figure out where this is going wrong. In my view, there has been a concerted campaign against credit unions for a number of years. We need to stop it now. Efforts have been made to structure them into something they are not, to destroy their voluntary ethos and to shape them into something they will not and should not be. We need to get real about all of this. We need to open our eyes. We need to listen to our communities. We need to respect the work that is being done by the credit unions. We need to respect their professionalism and work with them on a way forward. The credit union movement has stood with the people through years of hardship. The Irish people have stood with the credit union movement. Now is the time to allow the movement to do even more in our communities and for our communities and to show ambition for the credit union movement.
I support this motion as a symbolic message of support for the credit union movement. More importantly, I support it as a statement of intent. This Government needs to put a stop to whatever is going on to drive the concerted campaign against the credit union movement. It might not be very visible, but it is happening nonetheless. The credit union movement is currently offering solutions to problems, as it has always done. The Minister should use the opportunity he has been given tonight to re-engage with the movement on the CP88 issues. This is where I differ from Deputy Nolan. There is something we can do in this House. The Minister should give a strong commitment that he will not commence the remaining elements of the Act until the full picture can be established.
I am delighted to speak on this issue, even if it is only for five minutes. I was a founding member of Manorhamilton and District Credit Union many years ago. I believe it is one of the biggest contributions I have made, along with other people, to the development of the community of north Leitrim. As Deputies can imagine, many people have been telling me their concerns about what is happening to an institution that we love so much. When I looked at the counter-motion proposed by the Government - I would not call it an amendment - I could not avoid the feeling that there is a measure of protecting the big commercial banks here. The Government might say that it likes the credit unions and the Minister might use nice words when he speaks about them, but their aim is to protect the big commercial banks.
I agree completely with various speakers on all sides of the House who have said they do not want the credit unions to look like banks or to operate as banks. It seems to me from the way we are shaping the regulations in this area that the next thing we will see is regional managers for credit unions. After that, we will be looking at a requirement to have the same sets of accounts as the commercial banks. At that stage, they will become mini commercial banks without the credit limits and many of the other services that the commercial banks have. It was not the credit unions that crashed and burned, almost destroying the State in the process, and left householders - fathers, mothers and families - wondering what happened their assets. It was the big banks that were responsible. They were being regulated by the same people who now say they know best about how the credit unions should operate. They do not know best. Those who know best about how the credit unions should operate are the communities that place their trust and their money with people they know.
I will set out the key difference between the credit unions and the commercial banks. The members of the credit union movement meet and talk to people they know. Those working in the credit unions know the people they are dealing with. Many families that would have been regarded as risks by the commercial banks and sent away on that basis have been supported by the credit unions over the years. Those families made good on that trust and repaid their loans. They have prospered as a result of being listened to by the credit unions. That is the difference between the credit unions and the commercial banks. We do not have shareholders who are getting a slice of the action. We do not have bank officials who are keen to oversell products because they are getting a slice of the action. We do not have officials encouraging people to take out loans for higher amounts than they actually need, or can afford to repay, so that they will get bonuses. Although we have none of those ills, the Government is insisting on pursuing a policy of putting tighter controls on credit unions and shaping them more and more like commercial banks.
I fear that everybody in this House will vote against the good motion that has been put before the House tonight. It is not perfect and some improvements could be made to it, but it is a good motion. It should get the Minister to pause and think of how to build on the strengths of the credit union movement, rather than looking at the similarities with the banks. He should imagine the strong role that the credit unions could play as this society develops over the years and decades ahead. The process of thinking and imagining should take precedence over looking at the model offered by the regulation of the commercial banks. If the Minister talks to the customers of the credit unions and those who run the credit unions, that discussion will result in a sound and secure continuing solution that is suitable for the Irish people. Such a solution has operated for decades and will continue to operate if it is not nobbled.
Ar dtús, ba mhaith liom aitheantas a thabhairt do na comhair creidmheasa ar fud na tíre a thugann deiseanna furasta do dhaoine airgead a shábháil agus a thacaíonn leo iasachtaí a fháil. I know from my own community, where East Wall Credit Union is based, and from my own membership of the ASTI credit union that credit unions have made it easy for people, especially young people, to save and borrow over the years. I refer, for example, to their user-friendly hours of opening. I would like to acknowledge the role of the volunteers in the hundreds of credit unions throughout the country.
I would also like to acknowledge that a reply I received from the Minister, Deputy Noonan, earlier this month was encouraging for credit unions as a funding source for the provision of social housing. In the reply, the Minister mentioned that "section 44 of the Credit Union Act 1997 provides that a credit union may establish a special fund to be used by the credit union for such social, cultural or charitable purposes ... where it is approved by a resolution passed by a majority of its members present and voting at a general meeting". I would like to know whether the credit unions are allowed to augment that with dormant account funds. It would require an amendment to the Dormant Accounts Acts, but I understand such a provision was recommended by the dormant accounts board in 2012.
The credit union movement was founded in the north inner city of Dublin. The early credit union movement had a strong ethos of social action. I suggest it now has a real possibility of being a main player when it comes to housing. For example, credit unions have an opportunity to get involved in microfinancing. I suggest that the representative organisations - the Irish League of Credit Unions and the Credit Union Development Association - should embrace the role of credit unions as social actors. I believe the credit unions want such a role. When one looks at their savings and assets, it is clear that massive potential exists in this regard.
I would like to speak about the €100,000 cap. I do not understand why someone getting a redundancy payment of just over €100,000 should not be allowed to put it into a credit union account. I suggest that preventing them from doing so undermines the credit unions.
I agree with those who have suggested to me that the Central Bank is crucifying the credit unions and that the restrictions imposed by the Central Bank come from a lack of understanding of the work of the credit unions, particularly in relation to their social ethos. There is no doubt that credit unions are seen by the public as fair, transparent and helpful institutions. They are customer-centred and have a personal touch, whereas the banks seem to be on a rampage of replacing everybody with a machine.
They also help people in much poorer circumstances in the way they are able to provide an alternative to loan sharks and illegal moneylending.
Born from a sense of community service, the credit union movement grew from its original three pioneers in the 1960s to the almost 2.9 million members it has today. When one considers that the UK credit union movement celebrated 1.6 million adult members yesterday, it shows the success of our credit unions. Through such growth in numbers the movement has maintained its sense of community service and it is still a vital social movement in Ireland many decades after its inception. Credit unions are vital financial networks but they can and want to do more for their members by expanding their remit to include a range of financial services and social needs such as micro credit lending, financing social housing and lending to small and micro businesses. With €13 billion in total assets, the movement's potential is huge and one would think the Government's approach to the sector would reflect this importance, but the Government is alarmingly complacent about the credit union sector's ambitions. The Government has barraged credit unions with a one-size-fits-all regulatory approach, hampering any efforts the movement is making to service its communities and members further. This fits in with Fine Gael's big finance policies which have prioritised a profit-driven financial sector over the not-for-profit community banking model credit unions provide. That is its policy and that is its ideology.
The CP88 consultation paper issued by the Central Bank sets out proposals for restrictive provisions to include a cap on savings, a 10% limit on credit unions' total loan book and a regulatory reserve ratio of not less than 10% of total assets. These are all very restrictive regulatory provisions that were not even the subject of consultation with the credit unions themselves before they were put out to public consultation. This is what the Minister and Fine Gael want - to limit credit unions' competitiveness with private sector financial providers. These regulations will keep credit unions in their place, under the Minister's thumb, and will keep them small and manageable. I urge the Minister to stop the implementation of CP88 and to meet credit unions to discuss their proposals to address the housing crisis. I also urge him to begin actively to encourage the sector to branch out into social needs while extending its remit to provide a range of financial services for its members.
The founders of the credit union movement recognised the root problem in society as lying in the scarce availability and poor management of money and resolved to identify a system that would allow people to gain more control over their finances. It is uncanny that, today, the Government's own poor management of money has led to a housing, health and jobs crisis, yet it is quick to restrict a movement that has proven time and again its own healthy management of money. The fact that there were fewer individual credit unions bailed out during the crisis than private banks should say enough about their value to society.