John Paul Phelan (Fine Gael)

I thank Senator McFadden for sharing time. I welcome the Minister of State to the House. I also welcome the opportunity to say a few words on the motion.

I find myself in a similar position to Senators McFadden and Norris in that I do not have a problem with the Green Party motion, as worded. However, it has been overtaken by events and what we have learned in recent days. Credit unions, including in Thomastown, New Ross and St. Canice's in Kilkenny, are successful and important institutions in the community I represent. They have done a great deal by providing finance to people who are not in a position to secure a loan from a bank. The credit union movement deserves great credit for providing funding to meet social requirements, as noted by Senator Norris, and cover the costs of home extensions or new cars.

There is a danger that the infection which has entered the banking system in recent years will spread to the credit union movement. The revelations from Mitchelstown resulted in a mini-run on the town's credit union. We must ensure this is not replicated across the country because credit unions are found in virtually every village in Ireland. In many cases, they are the only financial institution in the locality. If disaster befalls credit unions, many people with small savings will be badly affected. We must ensure the necessary legislation is in place to protect the small savings of ordinary people who have worked hard throughout their lives to build up the credit union movement across the country.

Senator Hanafin listed a number of companies which started from a small base. Virtually every company started small. Nearly every Irish brand started in someone's house or when a small group of people came together. Microfinance is a laudable idea and the Government has taken some welcome steps in this area in recent years. The launch in 2007 of the foundation to which the Minister of State referred, which had funding of €25 million from the banking sector to distribute, was one such initiative. I note that only €5.4 million of this funding has been drawn down in a number of micro-credit loans in the two years since the fund was established. While there may be a perfectly legitimate reason for this, I am not aware of it. Perhaps Senator Boyle will explain.

The notion, as expressed by Senator Hanafin, that banks will not renegotiate contracts with people who find themselves unable to meet their mortgage repayments is wrong. Contracts are renegotiated every day of the week and the reality for the 355,000 people who are on the dole, many of whom were made unemployed in the past couple of months, is that they will have to renegotiate with banks and the banks will have to renegotiate with them. It will not be much good for a bank to reclaim a property which may be worth half the original loan it provided to the mortgage holder. If that were to happen wholesale across the country, banks would be forced to renegotiate the contracts. However, given that other types of contract are renegotiated daily, I do not see the reason mortgage contracts could not be renegotiated.

The Government motion and the amendment tabled by Senator O'Toole do not clash. In light of the events of recent days, we should move to reassure people that their savings, specifically those held by credit unions, are safe. I hope we will soon have a further opportunity to introduce the necessary legislation and regulation.

The public has little confidence in the Financial Regulator. The Government is considering the possibility of amalgamating the Central Bank and the Financial Regulator and discussions on the issue are ongoing. Legislation to give effect to this proposal should be introduced in the immediate future. I join those from outside the House who have called on the Government to seek expertise from outside the country. For anyone looking in, it is clear that finance in Ireland is a small club. Developments in the past ten years have shown the incestuous side of the industry. I would welcome a fresh view from outside the Republic of Ireland on the regulation of the financial sector.

We must learn lessons from the past. I have just finished reading a book on the collapse of the Stock Market in 1929. At that time, financial institutions were not offered protection and small banks across the United States were put out of business. The credit unions are in a similar position today. I hope they will not be put out of business. We still have time to make legislative provision to help secure these institutions and the savings they hold.