Tom Shehan (Fine Gael)

I welcome the Minister of State, Deputy Brian Hayes. He indicated in his opening statement that Part 3 of the Bill provides for the establishment of a fund, to be known as the credit institutions resolution fund, which will provide capital for a bridge bank. Will this bridge bank effectively be the NAMA of credit unions? One wonders whether there is a need for such a body. It is my understanding that even prior to the introduction of this legislation in both Houses, negotiations are ongoing between stronger and weaker credit unions in regard to resolution. What does the Minister of State envisage as the specific function of the bridge bank? Will he comment on the reference to financial incentives that are to be reimbursed to the Minister? I do not expect that the €500 million to €1 billion earmarked for credit unions will be required.

At a meeting I had with the Registrar of Credit Unions, Mr. O'Brien, some days ago, he used the term "mother ship" to describe a situation where it is envisaged that larger credit unions will take over perhaps three or four smaller unions in a particular area, resulting in a spoke-type structure. My concern is that the funding provided under this Bill will act as a financial incentive to these mother ships to swallow up smaller credit unions and thus threaten the local decision-making capacity that is a fundamental part of their service to communities. The Minister of State indicated that Part 5 will provide the Central Bank with the ability "subject to meeting the prescribed circumstances, to transfer the assets and liabilities of a relevant institution to a third party". Does this imply that weaker credit unions will have to go through the bridge bank before they are assigned a mother ship to look after them?

Sections 91 and 92 provide that the Central Bank may direct a financial institution that is experiencing difficulties to set out a recovery plan. As I said, my understanding is that negotiations are already taking place between stronger credit unions and some of the 27 weaker ones. Under these provisions, the recovery plan must set out actions to be taken to facilitate an institution's survival and recovery. Will the Minister of State indicate how many such recovery plans are under discussion in the credit union sector? Bearing in mind that this legislation is not yet in place, is that tool already being utilised by the Department to reinvigorate or save some of the 27 credit unions that are in difficulty?

The ECB has noted some concerns regarding certain provisions in the Bill. For example, section 12 requires authorised credit institutions to contribute to the credit institutions resolution fund at a level to be determined by the Minister. Different contribution rates may be applicable to different institutions depending on the varying degrees of risk. Contributions may be made to the fund by the Minister for Finance, for which he is entitled to be reimbursed, but the Central Bank itself cannot contribute to the fund. From where will the Minister get the money to contribute to the fund? The ECB opinion on the Bill criticises the method of calculation in respect of the contributions that certain institutions will be required to make.

In regard to transfer orders, the Bill provides that the financial incentive may be paid by the Minister, on the Cental Bank's request, to a transferee. In the case of credit unions, it is the large mother ships to which the funding will transfer. Will all of this be based on the financial incentive? Regarding the transfer of assets and liabilities to the bridge bank, the Central Bank must, as far as possible, have carried out a competitive process to ascertain the market value. This is another issue on which the ECB has queried the proposed mechanism of evaluation.

Section 67 defines the function of special managers, who will comprise an elite group. Special management has the effect of suspending the rights and powers of shareholders and members. General meetings will only be convened at the direction of the special manager. That is all the power that is being given to the special manager. The person will, in the opinion of the Central Bank, have the requisite knowledge, expertise and experience of the financial services sector to be a special manager of the relevant credit institution. I wonder if they would be former bank managers?

The restriction on judicial reviews and appeals is heavy handed and is using a sledge hammer to crack a nut. With the consent of the Central Bank, the special manager can remove any person from the position of director, secretary or other officer or any person in the employment executive or consultancy, without notice, and possibly with immediate effect while persons affected can claim damages. Why is this type of legislation being created where there is a gap which enables people to claim damages for the loss of employment? I have already mentioned the recovery plan. Has it been implemented, or has the bullet been taken without the recovery plan being put in place?

On the issue of the rights of appeal, even the heading, "restriction on judicial review and the limit on appeals" is worrying. Also the issue of the property rights of shareholders could be dealt with in a more delicate manner.