Kathryn Reilly (Sinn Fein)

The issue of financial regulation - of ensuring the probity of financial institutions - goes to the core of the economic issues faced in the State. Failures of financial regulation have played out on a macroeconomic level and have had a direct impact on local communities and the local economy, with businesses failing to get access to credit and mortgage holders struggling to meet payments. We all accept there is a need to ensure probity and fitting regulation of financial institutions. I am pleased the Minister took on board amendments reflecting the concerns regarding credit union regulation raised by my colleagues in the Dáil. The Minister and his departmental officials must be commended for this.

Recent decisions by the regulator have reduced the lending facilities of a large number of credit unions and these decisions undermine the ability of credit unions to make good the common bond between their members, which is the very basis of the credit union movement. The imposition of these restrictions is a blunt instrument that will be felt by the credit union members throughout the State.

Credit unions are not banks and they operate on a sustainable, not for profit basis and provide inexpensive credit to those most in need. Decision making is at ground level and lending is based on saving history, reflecting the trust between members. Liquidity across the credit union movement is approximately 40% and, while there may be difficulties with individual credit unions, as a body the credit unions remain relatively healthy. The target for intervention should be the credit unions that require some form of temporary financial injection or restructuring because of the economic downturn.

With respect to the scale of the crisis being faced by some of the credit unions in the credit union movement, the Minister previously said that recapitalisation would require between €500 million and €1 billion. Is that still the understanding? The credit union movement suggests that figure is only a percentage of the true figure. The interim report of the Commission on Credit Unions was released on Friday and I look forward to the development of legislation to deal with deposit protection, resolution, stabilisation, liquidity and the regulation and governance of credit unions. I remain concerned that the actions of the regulator may pre-empt the findings of the commission. This move may suit the conventional model of bank lending but may fail to reflect the model of credit union lending and the flexibility credit unions require.

My party has a problem with this legislation and what it represents. The recapitalisation of the banking sector has ended up servicing bad loans and paying off investors and bondholders. It has not resulted, and will not result, in a return to lending to home owners or local businesses that need credit. While Sinn Féin recognises the need for a resolution Bill to deal with failing banks, we do not have confidence in or agree with the model that is being introduced today. We feel that what is being proposed allows the Minister for Finance to pour more money into restructuring the banking sector, providing another potential blank cheque for banking and credit institutions. How can we expect those institutions to behave responsibly if we have already agreed to pick up the costs of the banking sector? How can we expect them to act in the interests of savers if we underwrite their risks and lending practices?

For years we were told that bankers and developers were risk takers and that they were drivers of economic growth and creators of wealth. However, while they did take risks, it was ultimately with our money, and while they did create wealth, it was only for a privileged few. We believe the model for bank resolution should place responsibility on the banking sector for clearing up its own mess. The days of "too big to fail" are over, as are the days of taxpayers picking up the bill. The banking sector continues to make profits and, in some cases, pay exorbitant bonuses. Now the institutions need to start putting aside funds to use in the event of failure so that they can pay for themselves.

The Government has said it has no choice but to follow the plans laid down by the previous Administration. In particular, the Labour Party made much of its opposition to the bank guarantee scheme-----