Catherine Connolly (Galway West, Independent)
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As the Deputy in possession when the debate adjourned is not present, I call Deputy Shortall.

Róisín Shortall (Dublin North West, Social Democrats)
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I welcome the opportunity to speak on this long-awaited legislation which the Social Democrats will support. I thank the Minister for providing the Opposition with a Bill briefing on Tuesday. It was very much appreciated.

I always find it very interesting to listen to debates and commentary around credit unions, particularly from Government Deputies. Like them, I have high regard for the credit union movement. These trusted, not-for-profit institutions are an integral part of our society. They represent the very best of our community spirit and espouse socially democratic principles, such as a shared commitment to the common good, solidarity and placing the benefit of the many over the privilege of the few. That is why I so often do a double-take when I hear members of this Government praise the credit union movement. I do not for a second doubt their sincerity but I struggle to reconcile their high esteem for a co-operative movement with their otherwise market-driven policies and beliefs. I only wish their belief in this alternative to the for-profit banking system extended to other policy areas such as housing and healthcare.

Returning to the issue at hand, the Social Democrats fully support measures which seek to expand the services of credit unions to put them on a sustainable footing for the future. Although some credit unions have been able to expand their services under the current legislative framework, there is a need to further increase access to current account facilities such as debit cards and online banking and expand mortgage and SME lending across the whole credit union network. Increasing access to these services is vital for so many communities, especially for those communities that require financial services for people on low, modest or middle incomes. Last year, during the debate on the Consumer Credit (Amendment) Bill, I spoke extensively about the need to increase access to small personal loans as an alternative to moneylenders, for example. While that legislation was a welcome step in the right direction, increased access to the It Makes Sense loan is needed to bridge the gap. I hope the referral and resource-sharing provisions of this Bill will assist in that regard because alternatives not only to moneylenders but also to the established for-profit banks are desperately needed. There is a worrying lack of competition in the sector and the recent reduction in the branch network of the pillar banks, most notably in rural Ireland, makes it increasingly difficult for the Government to argue that retail banking is meeting the needs of citizens or SMEs.

The Central Statistics Office, CSO, has found that the average distance to a bank, even prior to the departure of Ulster Bank, is now 11 km in rural areas and 2 km in urban areas, with over 900,000 people living more than 10 km away from a bank. This increasingly sparse provision of services and lack of regard in many ways for customers should come as no surprise. This is because retail banking is undoubtedly and unapologetically shareholder-driven, which is being seen increasingly in the banks' attitudes towards small customers and domestic customers of any kind. They are constantly seeking to cut costs and improve their bottom line.

The exit of Ulster Bank and KBC Bank, along with the dominance of the two or three remaining retail banks, raises serious questions for the future of banking in this country.

That is why a real and open debate on solutions to the crisis confronting Irish banking is so greatly needed. AIB and Bank of Ireland as dominant privately owned banks with a stranglehold over the Irish economy must be challenged. Successive governments over decades have promised to develop a third force in banking. People do not especially like the existing model. They feel tied into a system for which they do not have much of an appetite. Many people, including me, would switch very quickly if there was a real alternative. That is why it is so important that we go beyond what is proposed in this legislation.

The Social Democrats do not accept the approach advocated in last December's retail banking review in which the Department of Finance essentially clapped itself on the back and advocated a business-as-usual approach to banking policy. Conveniently that review found again that despite further deterioration of Ireland's financial sector since the 2018 review, there was still no case for the State to proactively support the development of an expanded public banking ecosystem. One of the main reasons cited for reaching this conclusion was the fear that any such proactivity on the part of the State could displace the credit unions. This is a bit of a straw man advanced by the Department to double down on what has been its laissez-faireattitude and hands-off approach to banking policy.

Hoping that credit unions will fill the gap for the shortcomings of the Government strategy of shoring up the pillar banks is effectively a fool's errand. This is because credit unions are not banks and they do not want to be banks. However, they want a greater level of proactivity from the State in establishing a vehicle in which they can co-operate, develop expertise and lend at scale beyond their existing range of services. Last November, following publication of the retail banking review, the chief executive of the Credit Union Development Association, CUDA, outlined the need for a wider public banking ecosystem. He said that a joint effort between the Government, State agencies, banks, credit unions, An Post and other providers of banking services is the only way forward. All of these entities must come together and agree who will provide cash services and other - sometimes loss-making - bank services in all of our communities.

While the Bill is certainly welcome, it does not address the need for the State to bring together State agencies, credit unions and An Post to provide the necessary community banking ecosystem that is standard in other modern European economies. Across Europe we see that concept and the principle in practice of conscientious ethical banking. Many of us would like to have that as a choice. Given the State's development and its history with the banking sector, we need to move to that kind of model because we need ethics and conscientiousness introduced into our banking system. There is not a lot of it there at the moment.

While the reformed credit union movement is part of the situation, a second tier of public banking with local knowledge between the level of the credit unions and the pillar banks is ultimately required to make a significant and positive difference for customers and SMEs. Some credit unions will not want to scale up and they should not be pressurised into doing so - I am not suggesting that is the intention. We should undoubtedly encourage and support credit unions which wish to expand their services but ultimately the gap in the market must be filled by a public community-owned model of banking.

Nearly two decades of policy drift in respect of public banking policy has not only seen credit unions' savings-to-loan ratios fall to nearly 25%, but has also seen an enormous service gap open up for communities and SMEs. This gap in the market was historically addressed by institutions set up by the State such as the ACC and the ICC. Recent economic history in Ireland has shown that the target clients of these institutions - agriculturally based and industrial SMEs - were served by retail banks during the boom years which ultimately led to the ACC and ICC being sold off to commercial banks. However, when the economy went bust, these SMEs found that their financial support was quickly withdrawn.

Therefore, it is clear that stability is needed in this market and that can only be provided by a public model of banking with a mandate to prioritise its customers' needs. That is why I am at such a loss to understand how another review of retail banking could endorse a more-of-the-same approach to banking. Whatever about the 2018 review, I really thought that following the withdrawal of Ulster Bank and KBC from the market, the 2022 review would have produced some new conclusions. Unfortunately, I was wrong in that expectation. It is as though the Department is oblivious to the very real challenges faced by customers, particularly in rural communities and SMEs.

There is a high level of dissatisfaction among the public about the quality of the service provided by banks. The first thing, of course, is the exorbitant profits that banks are returning at this point. Many people have a very strong sense that the banks are really only interested in big business customers. We see that across the board, for example in the shutting down of branches or the removal of cash machines. People going into a bank branch find it is not very customer focused and they are left waiting a long time standing in a queue. It is just impossible for customers to get to speak to someone in their local branch on the telephone and all calls are diverted to a central number where people are offered ten options. It is impossible through a centralised telephone system to get to speak to another human being.

It is very unfair. Banks are not interested in the general customer. They are doing exceptionally well and they are snubbing their noses at ordinary customers. That is especially the case for more vulnerable groups, such as those on lower incomes and older people who may find it difficult to engage with them. Of course, the backdrop to all of this is what happened in the crash and the price that every one of us is now paying for the bailout of the banks, with the reduction in people's quality of life and the fact that people have lost so much as a result of the decision to bail out the banks.

The headlines in today's newspapers reporting that AIB has agreed 1,900 big write-off deals since the crash are a complete and utter sickener to the public. These are big institutions that were supposed to provide financial services to the public as well as to business. We know where their priorities lie. They have been allowed to operate like that under legislation. They have also been allowed to operate without any kind of serious competition, which is one of the strong reasons there is a very clear appetite among the public for choice in banking. People stick with one of the pillar banks because they have no choice. They may have set up their account there 20 or 30 years ago and where else do they go? The credit unions are starting to do that and have done so in recent times.

People are shifting but we need to go even further than this legislation proposes. We need that choice across all communities. This is welcome but we need to go further.

IBEC has raised concerns about the significant gap facing indigenous firms serving the domestic market in terms of business supports, compared to exporting companies. This highlights the Government's seeming inability to recognise the importance of ensuring the real economy is functioning properly.

The latest credit demand survey for SMEs should also be a cause for concern. It has shown, once again, a lacklustre appetite for credit among Irish SMEs, with only 17% looking for finance. Over the years, the Department of Finance has been sanguine in accepting that SMEs do not look for finance because they have sufficient internal funds. However, that view ignores the consequences of the scarce appetite for credit, namely, lack of innovation and growth in the economy. These are some of the reasons I urge the Government to rethink its approach to banking overall. A public model of banking will not displace credit unions but complement them and, ultimately, better serve the public.

I return to the provisions of the Bill, which I welcome. Throughout the turbulence of the past two decades, the credit union movement has remained steadfast and this Bill will go some way to addressing years of policy neglect. While I believe the credit union movement’s longstanding request to expand its services could have been acted upon earlier, I appreciate the importance this Government has placed on reform, not least appointing a dedicated Minister of State with responsibility for credit unions.

A number of provisions in the Bill are designed to facilitate greater focus by the board of directors on strategic planning in credit unions, rather than operational issues. Many credit union directors have complained of the growing regulatory burden on volunteer boards in recent years without the commensurate rebalancing of responsibilities between the volunteer directors and management. I believe the reforms in this Bill will assist in addressing this imbalance.

The enabling of greater collaborative efforts among credit unions and their being able to take equity stakes in corporate entities to share resources and opportunities is a much-needed and welcome reform. According to the CUDA, this could effectively see their lending double, increasing from €5.5 billion to over €10 billion in the years ahead.

In relation to the common bond, this definition is the subject of legal regulation and confers on credit unions a key defining characteristic. The requirement in this Bill that credit unions publish a digital map or provide a description of their common bond on their website is welcome. Given the spate of credit union mergers in the past and particularly over the past decade, there is much confusion regarding the common bonds of the merged entities. This needs to be clarified. However, the relaxation of the common bond cannot go beyond the practicality of these administrative improvements. Any abandonment or significant dilution of the principle of the common bond would potentially be catastrophic for credit unions. While I support the slight relaxation provided for in the Bill to ensure access to service is not just a postcode lottery, I would have serious concerns about further liberalisation of the common bond. This unique characteristic of the credit union movement must be protected and strengthened, rather than chipped away at.

I support the provision for a potential increase in the interest rate cap to 2%. Many credit unions have long argued that retaining the ceiling at 1% reduces their competitiveness and fuels an unsustainably low loan-to-asset ratio.

Overall, I am happy to support this legislation and to see the Government honour the commitment in the programme for Government to review the policy framework for credit unions. However, I put the Department of Finance, this Government and any future government on notice that they are not off the hook yet. We will still need a State policy in respect of building a public banking system. This is the only way to achieve a proper customer-focused banking model at scale where the communities being served are the stakeholders of the bank. It is critical that we achieve that. We need the Government to be more active in supporting the rapid scaling-up of services offered by credit unions in local communities and providing the joined-up thinking demanded by the credit union movement. This legislation is a welcome step in the right direction but not the final step. I wish the Minister of State well in her new role and hope she continues to strengthen and support the credit union movement, while respecting the principles upon which it was founded.

Marc Ó Cathasaigh (Waterford, Green Party)
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I welcome the opportunity to speak on this Bill. I find myself in agreement with much of what Deputy Shortall has said. We have long been proponents in the Green Party of a public banking model. We have to realise that retail banking does a particular job and is structured in a particular way, but the model it follows is profit-driven, as I think the banks would acknowledge. It may not be the model we need in order to provide for communities as we should, or to make provision for SMEs in particular. This Bill helps to broaden our understanding of credit unions. It might move us towards a public banking model along the lines of the Sparkasse model in Germany, which would be welcome. Maybe our post office network has a role to play in that in the future.

Our retail banking model does what it does very well but there are areas it does not do well. SMEs are a good example. We have lost much expertise in terms of local knowledge and decision-making on loans being made at a local level. That was the backbone of much of the financial provision for SMEs in the past. SMEs are the backbone of the Irish economy and society. They employ over 1 million people and that represents two thirds of the total number of people employed in the enterprise sector in the State. We have 250,000 SMEs in Ireland. That is a huge number of institutions and small businesses in our communities. They are people we all know well. Maybe they do not have access to appropriate credit. There is clearly an unmet need in the provision of lending to SMEs in Ireland.

The review of retail banking, which was published at the end of last year, highlighted that the credit union sector is well placed to compete at scale, given the strength of its brand, its locations across the State and its capital and deposits. Credit unions, perhaps as part of a wider public banking model, could form the basis of much-needed additional SME lending. According to the 2019 Indecon report on public banking in Ireland:

Despite the overall levels of new lending there has been a decline in the application rates for bank finance by the SME sector. Application rates for bank finance were 35% in March 2014 and declined to 20% by September 2018.

That clearly shows a trend in the market. Since then, I welcome the new lending regulations introduced by the Central Bank, which increased credit unions’ capacity to provide up to approximately €1.1 billion. The Irish League of Credit Unions, ILCU, has long called for regulations to enable credit unions to increase their lending ability. Last year, it stated credit unions have been limited to just 3% of the mortgage market and less than 10% of the SME loan market by strict lending rules. I have mixed feelings about the mortgage sector. We should be cautious about how deeply we want credit unions to be invested in that market. It has shown volatility in the past.

The deputy CEO of the ILCU, David Malone, stated:

Specifically, mortgage and SME lending is limited to a combined maximum of 7.5% of total assets for most credit unions. For example, a credit union with assets of €70m and taking an average mortgage of €350,000, can only offer 15 mortgages under the current limits, exclusive of any SME lending. If they have SME lending then the number of mortgages they can offer reduces accordingly within the strict 7.5% lending limit.

The launch of the credit union approved housing body fund by the Central Bank in 2021 was positive. I hope we see it succeed in delivering much-needed housing. We all hope it will succeed in that regard. The ability of credit unions to lend in other cases is still restricted. We need to open this up to allow credit unions to prosper. The Bill does some of that. I will reference a specific example where I would love to see credit unions become involved, whatever about by reservations about mortgages. I would love to see them become involved in green mortgages, that is, the idea of providing low-cost loans for people to engage in energy retrofitting their homes. Credit unions are perfectly matched for this kind of activity, because one is talking about money within the community improving the housing stock within the community and, in fact, increasing the wealth within the community, as we send less and less money out of it for fossil fuels. One ends up with warmer, healthier and safer communities. It is not quite a peer-to-peer lending model, but it is the idea that we are sharing the wealth within our communities. The high tide lifts all boats. I am always conscious, in that phrase, that not everybody may have a boat, but let us leave it apply as it is.

We could get a mechanism in place for green mortgages, whereby we can de-risk the money for the people lending it in order that it can be offered out on loan at very low interest rates. I dearly wish to see us drive the interest down, as low as possible, in order that people can afford to take on and borrow that money and that the money they are saving on their energy bills goes a long way towards replacing the cost of borrowing.

We do not speak about it often, because of the context of the current cost-of-living crisis but, post Covid, we have a wall of savings. Many people in our society are to the pin of their collar in affording their energy costs, but many others are doing well. The CSO has reported that Irish households held approximately €150 billion in deposits last year. A great deal of that has been saved in credit unions, but a problem arises when the credit unions cannot lend this money, due to the lending restrictions that are in place. The minimum reserve ratios make it tough for credit unions to expand their lending. It is currently approximately 10%, higher than in other jurisdictions and much higher than it is for banks in Ireland. It does not make sense to treat small credit unions in the same way as larger credit unions. This is not a one size fits all. The largest of our credit unions has €500 million in assets.

I am not advocating for a one-size-fits-all approach to the credit unions. When equivalent rules for banks are based on risk, the principle of risk applying here should be applied to credit unions in the same way it is applied to banks. A co-operative model, which is what we see in the credit union, does not for one second mean we are stuck in the past. We have seen a move away from the co-operative movement throughout our society and not just in banking. We have seen many experiments in moving away from co-operative unions. We are going backwards. We are going back to the future. We realise the co-operative model has great strength and flexibility. We have seen that in the case of credit unions that are banding together to form shared entities, in order that they can improve the quality and range of offering for their members.

We know that recently hundreds of credit union members have been able to access current accounts and debit cards, after 16 credit unions came together to develop that offering and, in fact, credit unions have been able to do that at a lower cost than the retail banks. The bank charges are in and around €4, which is less than many of the retail or pillar banks will be able to offer. They should be encouraged, rather than restricted. There is a role in our post office network, as well. It might be a step beyond what we are looking at in this Bill, but we have an extremely valuable network there. We have trusted institutions and postmasters who are very well known within their communities.

The ILCU expressed concern at the exclusion, by the Central Bank, of many community-based credit unions from offering those debit card services to their members. We need that more and more, especially as the retail banks are beginning to step out of our small towns. Let us have the capacity and the ability for the credit unions to step into that space as the retrenchment happens. Credit unions are doing their best under current regulations, but they cannot do much more unless these are changed. They have shown considerable willingness and desire to change, which will form the basis of banking operations in many towns and villages throughout the country. It can be a starting point for the move to a public banking system that we in the Green Party have long espoused. That is where we should be going. The Bill takes several important steps to move us in that direction. I very much welcome the provisions.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Michael Fitzmaurice (Roscommon-Galway, Independent)
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This is the first time I have been in a debate with the Minister of State since her appointment. I wish her the best of luck in her new position.

In respect of the Bill, I note the representative bodies of the credit unions emailed every Deputy about the pieces that are of concern to them. I ask the Minister of State and her team to be proactive in addressing their concerns. I know there are plenty of credit unions around Dublin but many people may not realise the role they play down the country. My home town of Glenamaddy had a Bank of Ireland and an Ulster Bank, both of which are now gone. The credit union, through amalgamation, got bigger. St. Jarlath's Credit Union now has something like €115 million or €120 million in savings. It is a large credit union. It provides services, especially to our elderly people. When people go into a bank to make a lodgement, they are faced with machines. While some of our elderly people may be able to work those machines, many others have never engaged with them or the technology involved. There is no friendly face available in the bank. I always say the credit unions have taken the place that was occupied by the banks in the 1970s and 1980s. When you went into a bank during those decades, there was someone to talk to. St. Jarlath's Credit Union in Tuam has a spotter who can walk over to anyone who is uncomfortable with the technology and put them at ease. That is important to ensure people get their business done, or whatever.

As Deputy Harkin has highlighted, there are certain issues in respect of reserves. There are credit unions in Ballinasloe and Roscommon. Many amalgamations are going on, which gives credit unions more flexibility to offer better services because a larger pool of money has been put together. That is a good thing. However, we need to ensure we never lose the local identity of our credit unions. One day, a long time ago, a few local people got together when the facilities were not there. Some of the buildings were done up voluntarily. Those people pooled together to give a service to people in local areas. Some of them offered small sums of money to allow a family to keep going and put food on the table, or whatever. We should never forget that ethos. I keep drumming into the representatives of St. Jarlath's Credit Union that they should never forget that heritage. I am in favour of credit unions growing bigger to allow them a bigger pool of money and the ability to offer mortgages and more services. However, I fear what will happen down the road, in five, ten or 15 years' time. Perhaps at that stage, it will be decided that a particular credit union in a certain village is not doing enough. They could go down the road of the banks, which we do not want to see because of the community and voluntary ethos.

There is a lot of opportunity. Credit unions, in fairness to them, offered money for the housing crisis. They have a lot of money in reserve. One thing in respect of which they were being fleeced, and this should be addressed, was the clearing of houses for money. Unless they were able to work together, clearing houses for cheques or money was costing them a lot to clear. The banks had a lot of control, to put it simply. That was causing a problem for credit unions for a good while. On top of that, they got screwed when interest rates were very low. We all love low interest rates but the credit unions were paying the banks for money on deposit. That was why they had to restrict the amount of savings some people could have in credit unions. They could not afford to be paying out at one end while getting nothing in at the other end.

I understand that credit unions offer similar services to the Government-backed Strategic Banking Corporation of Ireland, SBCI, and all of those.

It is important that they can offer the same services. The two banks in Glenamaddy disappeared and, up the road from it in Dunmore, the Bank of Ireland branch was closed. We had to do a bit of pushing and had to keep at Mick Culkeen, John Doyle and John Murphy, telling them that we needed a bank link, but the credit union has now gone down that road and is providing that service. It put in four bank links in the last few months. These are the little services we need in rural areas. When Bank of Ireland, Ulster Bank, AIB and all of the other banks leave smaller areas, there will still be a farming community and a business community in many of those areas. They need a facility to borrow money. There is now the Cultivate loan, which has been very successful, but when farmers are buying a bit of land, doing sheds or whatever, the biggest problem for many of the credit unions is the restrictive ratio as to what they can give out, which Deputy Harkin has highlighted. I am not going to rehash everything but that is a big problem. We have to make sure credit unions are facilitated in providing many of the services banks provide. I am not talking about loans worth millions. I am talking about people who want a mortgage of €200,000 or €300,000 or farmers who want to buy 20, 30 or 40 acres of land or to put up a block of sheds. In many cases, such people are accommodated. I want to say that very clearly. However, if there are more and more people engaging with the thing, a small bit of flexibility will be needed.

I am rather critical of the Central Bank with regard to some of the things it has done to credit unions. As has been said, in 2011 and 2012, credit unions put aside €250 million. No one else did it for them. They were not like the banks, which the taxpayers had to bail out. Off the top of my head, I believe something like €25 million or €30 million of the whole lot was used but the rest of the money was kept. The Minister of State will be able to tell me what it was kept for. I believe it was kept to do something with the Central Bank or to get the credit unions into some new phase.

Credit unions are the only banking system in most towns down the country. The Minister of State knows, as do I and anybody who is involved in business or anything like that, that credit unions need facilities. Credit unions have moved towards cards. They did a great job and it is working well. Many credit unions are now open on Saturdays and some are even open on Sundays. The service they give to people is incredible. The other thing I love about them is that there is someone to say hello to you. There is not a machine looking at you and telling you to press a button. We need to focus on that. There is a weight on the shoulders of credit unions, which is pulling them back, and we need to take it off them. I am not saying we should go mad and not have any regulation at all but we need to give credit unions the opportunity to fight in the ring with the other banking institutions and to let them have a fair crack of the whip.

There is another issue and I do not know how we will solve it. With regard to the savings or moneys credit unions have, banks are able to transfer funds via the European Central Bank and so on and it does not cost them anything. The credit unions need a similar facility. I have already highlighted the low interest rates. They need a facility that does not screw them up and result in them having to charge people for holding their money. What they had to do last year and the year before did turn some people off. There is no point in saying it did not. There were limits of €40,000, €80,000 or whatever. Different credit unions had different rates. People then had to do the usual thing and go to the bank or whatever. That needs to be looked at.

I will not talk here all evening. I welcome anything that is proactive for credit unions. I ask the Minister of State to engage with the different representatives involved. I also urge the Central Bank to loosen up with the credit unions because it is nearly like they are the bold child. The bank keeps picking on them the whole time while the others can get away with murder. I do not believe in that. I want to see the credit unions thrive. With the way decisions are being made, they are the only banking system we will have in rural Ireland. There will be online banking for businesses and so on that want to use it but I am talking about the day-to-day people who use the credit unions for their full livelihood from beginning to end. They have car loans, tractor loans and all of the other different types of things with the credit unions. We should make things amenable and workable for them. I thank the Minister of State for listening.

Jennifer Carroll MacNeill (Dún Laoghaire, Fine Gael)
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I welcome the opportunity to bring this legislation to the House. I hope Deputies will not mind if I echo their many tributes to my predecessor, the Minister of State, Deputy Fleming, who was the first dedicated Minister of State for credit unions and who put enormous work into this Bill in collaboration with the credit union sector and the Department. I take this opportunity to again pay tribute to him. I also pay tribute to Deputy Harkin, who put forward a Private Members' Bill to improve credit unions generally. I am very open to discussing with her that Bill and how it sits with this legislation. Perhaps she would like to meet privately afterwards to go through in detail some of the policy ideas she has put forward and to engage on those and work together collaboratively. That is the real strength of the legislation to date and of the credit union movement more broadly. We would like to continue with that ethos and attitude at all stages in the House. That is certainly my approach.

I thank Deputies for their contributions. I have learned a great deal from the contributions in the House, from the different experiences Members have had with their credit unions, either individually or as elected Members, and from their perspectives on the value of credit unions to the economy and community. Deputy Hourigan said that finance is about society and she is absolutely right. The credit union plays a key role in that. I believe it was the Leas-Cheann Comhairle who said that a value could not be put on the credit union movement in Ireland. I echo those sentiments.

I have listened very carefully to Deputies throughout the three days of debate and I will take a few minutes to respond to some of the different issues that have been raised. I will address them in no particular order but rather in the way I have collated the different matters.

On collaboration and engagement with the sector, as Deputy Fitzmaurice has just said, this is very important. Deputy Harkin raised the question of the stakeholder round table. This has already begun. In fact, it is meeting at 3 p.m. As soon as I finish here, I will be putting on my runners to run down the road to get to that meeting. These meetings are held quarterly and happen regularly. I will be in attendance as often as possible. I have a particularly good excuse for not being there at the beginning today but that will not always be the case. In the two months I have been Minister of State, I have taken the opportunity to engage with the sector. This Bill is the product of that work and that really deep engagement with the credit union sector and the different representative groups. At every stage, every opportunity was given to the sector to put forward its views and proposals, which were all considered. Further amendments will be tabled on Committee Stage. Most will be technical in nature and designed to ensure that the proposals in the Bill, such as those relating to corporate credit unions, which I will come back to, and the ability to appoint a manager as a director, work as intended.

Many Deputies referenced the letter from the Irish League of Credit Unions, which saw a need for more amendments. We received that feedback last week. As recently as last week, we received a number of new amendments proposed by the sector to be considered. As always, we remain open at every stage to discussing such amendments and to seeing how and whether they improve the Bill or enhance the functionality of any part. We are completely open about that. Not every proposal is acceptable and not every proposal is going to work but it is important that they are talked through collaboratively to see what can be done.

As Deputies know, the Bill emanates from a review of the policy framework, an 18 month long review process carried out with all of the credit union stakeholders. That was completed in March 2022. The Leas-Cheann Comhairle asked about its publication. I have no difficulty in providing Deputies with an update on that, particularly before Committee Stage, or in meeting to discuss the details and outputs of the review in any way.

It was important that so many Deputies referenced the space that is created for citizens in communities right across Ireland, in rural Ireland but not uniquely in rural Ireland, where retail banks have moved out of the financial services landscape. Deputy Dillon, for example, referenced Bank of Ireland closing in Kiltimagh. I welcome that there is a strong credit union in Kiltimagh. Deputy Fitzmaurice referenced Glenamaddy. Deputy Shortall covered this in good detail. As Deputy Harkin said, if we did not have credit unions, we would look to invent them. The Deputy is absolutely right. Fortunately, we have the credit union movement. It is important to reflect on that as we consider the public banking space. As Deputy Ó Cathasaigh said, we need a public banking model. However, in many respects, I disagree with Deputy Shortall that we now need to go and create one. We need to give the credit unions every opportunity to work best first.

We are still a very small economy. We are small geographically. We need to have community banking, both geographically and locally, but also as an ethos. We have it actually in the credit union. We have the physical premises on the ground. We have the establishment of the ethos. We have the volunteers there. It has the finance to be able to do this. As a Government, we should be putting our efforts behind making that work as well as possible. As I said in my opening speech vis-à-visthe exponential growth of the fintech sector, we should be focusing our efforts on that. If, having reviewed that and having seen how that is working, there is more to be done, I am certainly open to that.

I come to the credit union movement new as a Minister of State. In my house growing up, my mother worked in a bank. Therefore, I opened a bank account, not a credit union account. That was merely an accident. However, my father was the first manager of the credit union in Tullamore. We are all connected to the credit union movement in many ways.

A number of Deputies spoke about the challenge many credit unions face in growing their lending. Linked to this was a perception about relaxing the capital requirements. Deputy Harkin referenced that here today. The capital requirements are there to protect the credit unions from unforeseen losses and to protect their members' savings. Under the Central Bank regulations, the minimum regulatory reserve to be maintained by all credit unions is 10%. That 10% reserve has to be set against the banks' requirement, which is 8.5%. In the round, it is not greatly higher than the bank requirement. I appreciate the point the Deputies are making but it is not that much higher.

Credit unions are generally well capitalised. They have a sector average of 16%. It is not as though everybody is at 11% and looking to try to change it. The sector is on average at 16%. I do not agree that it is as pressing a challenge as perhaps has been stated in the House. I would be looking at those credit unions that are closer to that and seeing where they are going and how they are getting on. It is not as pressing a challenge. It certainly is not as large a differential as might be the case with the banks. Obviously, the capital requirements do not impede or prevent the credit unions from lending.

Staying on the question of financial regulation and lending limits, the Central Bank lending regulations were reviewed, as Deputies will be aware, in 2019 following a full public consultation. Much extra flexibility was given to credit unions at that point. For example, as Deputies will be aware, those credit unions with assets of €40 million or less can only lend 7.5%, those with €40 million to €100 million of assets can lend 10% but those with over €100 million of assets, of which there are 67 in Ireland, can lend up to 15%, but they have to apply to the Central Bank to do so. However, only ten of the 67 have made that application. The additional flexibility has been there since 2019. Credit unions need time, I imagine, apart from anything else, to make this step to look for the higher lending limits, but it is already there. I would like to see more lending and more mortgages.

I acknowledge one of the issues that Deputy Troy raised regarding the requirement for a business plan for a loan, for example, for a van of €25,000. Indeed, the manager of Mullingar Credit Union raised that with me directly. Some time ago I raised that issue with the Central Bank as being one of too much interference. In the practicality of it, requiring a five-year business plan for a €25,000 loan for a van is excessive. However, it is this type of dialogue that we can have with stakeholder engagement, with the memorandum of understanding and with the enhanced engagement by the Central Bank. That seems like a practical problem that should be raised in that forum and that we can raise, and I would like to see more of that.

I would like to highlight the importance for the credit union sector of taking advantage of the opportunities that are provided in this Bill. The provisions in the Bill to refer members and for loan participation, to mention two examples, are important enablers for ensuring the sector can develop mortgages.

I also welcome Deputy Nash's proposal for reviewing the operation of the substantive parts of the Bill. It is something that I have raised with officials all along. If we give the credit unions the opportunity here to become more involved in the mortgage market and to work slightly differently to become that strong public or community banking force, and it is not taken, I am not sure that Ireland will have benefited. It is important to me to support the credit union sector but it is much more important to me that every citizen in Ireland has access to the type of banking and community banking services that we have all discussed here. It is important that we review and consider the operation of these parts. It is already the case that, as I said, the lending limits changed in 2019. Some of that opportunity was not taken.

Deputy Boyd Barrett and another Deputy yesterday raised the capacity to invest, for example, in approved housing bodies. That was permitted to be done up to €900 million for those regulated funds. To date only €13 million to €14 million - I stated yesterday "less than €20 million" - has been so invested. It is about taking the opportunities that are there. This Bill is an important further step in that regard and I would suggest that it is appropriate for this House to have an opportunity to consider how that works. Other things I suggest might be considered over time include the ministerial role in setting lending rates. Let us get this bit right and reflect on it as we go.

I would also like to respond to the questions that Deputies Mattie McGrath, Connolly and others raised in relation to corporate credit unions. The word "corporate" is only the word that was picked. It could be anything. It could be "collaborative". It is not really about corporatising credit unions. As Deputy Harkin said, it is simply a credit union whose members are other credit unions. That is basically it. You could call it anything. It is a corporate credit union whose members are the other credit unions. It is owned by the credit unions and its point is to be a collaborative vehicle to set up more collaboration in this sector.

We already have similar vehicles using slightly different legal structures, but they are the same. For example, Cultivate, which Deputy Ó Cathasaigh referenced, is a collaboration of credit unions that come together to provide agri-loans. The corporate credit union movement - I am happy to change the name if people do not like it but that is the point - is simply a collaborative venture so that you pool resources and access mortgage and other products, perhaps slightly differently.

So many Deputies talked about balance. There are many credit unions. For example, I met a group of credit unions in Tipperary, as Deputy Mattie McGrath, had referenced. One of them does not want to change and would like to stay in the space it is in. It is small and community driven. That is absolutely fine. Others would like to get rid of the common bond entirely and move in a completely different direction. What the Government is trying to do, what I am trying to do and what I hope this House is doing, and I have heard this call for balance again, is to reflect the wishes of both and to provide the opportunity for both to thrive, to retain the volunteer community-driven focus but also enable the professionalisation and growth for those who want to operate in a different way and at a different level. Those things do not step across each other in any way. Both are possible. What is important is that if you come in as a member, you have referral pathways to other credit unions and you are not limited or prejudiced by where you live and the common bond you are in because of the services your credit union happens or chooses to provide. This was described by Deputy Shortall as a postcode lottery. The referral pathways are important from the perspective of the citizen. They also enable credit unions to take different perspectives on what they wish to do. It is their members that drive that, and that is so important.

Indeed, this Bill is proactively protecting the volunteer ethos of credit unions. To that end, the Bill includes an acknowledgement and a recognition of the role of the sector in developing a volunteer-led co-operative movement. In other circumstances, I would say that is not the sort of thing that you put in legislation. That is a bit extra, but it recognises the importance of the credit union movement.

I recognise what Deputy Nash said. Stakeholder banking is what this is. Every credit union member, I believe, should be able to open a credit union current account and should be able to access a mortgage product. That is not happening at present and I would like to see that happening.

Credit unions give members, as Deputies Gould and Moynihan referenced, the ability to avoid moneylenders and they provide for death grants. That gives people dignity, peace of mind, respect, face-to-face inclusion and, as Deputy Hourigan mentioned, financial inclusion. They need to be protected. Protecting that balance is important, as is keeping the community focus that is at the heart of the credit union ethos.

As Deputy Bruton described yesterday, we have to be ambitious for the sector. As Deputy Higgins said, we have to be ambitious about productively using the assets that credit unions have. They have €20 billion of assets and they are only lending €5.5 billion and to my mind they should be lending at least double that. They should be lending that money for retrofits and using it more productively for their communities, as Deputy Ó Cathasaigh said. They should use those assets productively yet prudently and this Bill can strengthen that.

My general view of the Credit Union Act 1997 is that it is a strong one. It is a rather old Act and if Deputies, in coming to Committee Stage, were minded to look at what might be regarded as some of the more patriarchal language that has survived over the years, I am open to have a look at that also and at bringing it up to the best possible standard we can achieve together. I commend the Bill to the House.