Shane Ross (Independent)

I second the amendment to the motion. It is unfortunate for the proposers of this motion that when they put it down, it was bland and innocuous and probably meant to launch them on a crusade that identifies with a movement generally considered to be harmless, successful and socially beneficial. What happened yesterday and today was tough on them, with events in Mitchelstown particularly unfortunate for Senator Boyle, being that it is his bailiwick. It was, however, useful for the sake of the debate.

There is a politically acceptable view of credit unions: they are good, they are involved in social finance, they are not banks in the classic sense and they operate in a way that helps those who do not or cannot have bank accounts. Senator O'Toole is right, in some ways they are the classic sub-prime lenders in that they lend to people banks will not lend to because they might be a greater risk, they lend smaller amounts of money and take fewer risks while doing a certain amount of social good, lending at lower rates and offering higher rates for savings.

It was a pity, therefore, that the bombshell broke in the newspapers this week that at least one credit union was in big trouble. We then had the usual obfuscating, with everyone issuing statements saying the credit unions are fine and that there are only one or two things wrong and they will be remedied in the next few days so everything will be okay, to reassure those involved and make sure there is not a run on the credit union. I do not know if there was a run on the credit union in Mitchelstown but if I had read The Irish Times yesterday, I would have taken my money out and suggest others would have done the same.

Credit unions are not well regulated. Traditionally they are a strange species in that they were founded by a laudable person who is generally respected and they have not been regulated because no one wants to use a big stick on those who appear to be doing good in the community, which they are doubtless doing. The problem there is that they are frequently seen by others as an accident waiting to happen and sometimes they are an accident that has happened. It is helpful that Senator O'Toole in the amendment has starkly spelled out, at great length — perhaps he took pleasure in that when drafting it — the problems that exist for credit unions.

The fact that almost a third of Irish credit unions had first quarter losses on an annualised basis of between €100,000 and €1.2 million is quite worrying. That they have liquidity problems, with many unable to pay dividends, is a flashing amber light. That makes one ask if Mitchelstown is a problem today, what will happen tomorrow? We are offered reassuring statements from the Financial Regulator and others, stating there are only ten out of 400 credit unions in trouble. That is quite a lot in such a situation and it is only ten out of 400 that have been discovered.

Credit unions have always been a murky, uninvestigated world. I do not mean that in a sinister sense, I mean it in the sense that they have not been regulated in any strict way. The same is true of the banks, although the formalities for regulating the banks were particularly stringent. They were not, however, applied. What worries me most about this motion and the state of the credit unions is that the Financial Regulator has his paws on these institutions. To read about these problems in the last two days and then find out the institution that monitors them is the same institution that has been completely discredited in its monitoring of the banks makes me wonder if they have done anything at all to monitor credit unions.

The Financial Regulator had a real problem with the banks. It had a light touch, was principles-based and had targets for inspections but it did not live up to those principles or carry out those inspections. It fell far short of its own extraordinarily modest targets. One must wonder if putting the Financial Regulator in charge of the credit unions offers any protection. I suggest it does not and what happens in cases like this is identical to what happened in the banks: someone discovered what happened, in this case through a letter being leaked to The Irish Times, the Financial Regulator discovers it itself, says it must investigate, claims it will set things right and that it will not happen again. As a result we must question if the credit unions are really being regulated properly at all. I doubt that.

I do not know much about the subject but I am aware that some years ago there was a crisis that the tax liable on depositors was getting special treatment or a blind eye was being turned to those who had deposits, particularly on the DIRT issue. There was a difficulty that was never properly resolved as to whether people were paying tax gross or net, if they had to declare it and if the credit unions were declaring it. Social finance is a magnificent idea but it must be subject to regulation that is as stringent, if not more so, as that of the banks. It has been the subject of a large number of accidents and appears to be utterly disorganised in its regulation. Whereas the aspirations in the motion are laudable, the amendment spells out the truth, which is that there is an enormous need for a far more exacting and forensic examination of these particular groups.