Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank Senators for their contributions to the Second Stage debate on this very important legislation. I reassure colleagues that the Government has a very open mind and is taking a constructive approach to progressing the legislation in such a way that we will put in place the best possible framework for the credit union movement.

Senator Quinn made an extremely striking point when he stated that one of the outcomes of the financial crisis will inevitably be that people will view banking, saving and prudential risk in a different way than they might have done ten years ago. I agree with the Senator in this regard. The credit union movement which, in view of the enormous losses that have taken place in the banking sector, is coming through the crisis relatively unscathed. There will, as a result, be enormous opportunities for credit unions to exploit in the future, particularly when people reconsider the their banking requirements and those of their communities. I am aware of the comments made by the former US President, Mr. Bill Clinton, when commenting on the opportunities that exist in the context of community banking. There is a need for a new ethos and such an ethos has always been articulated by the credit union movement. I am interested, for example, in the Islamic financing model, which looks at the question of prudential risk in a completely different way. Investment in public infrastructure is a key element of this model. We must always be prepared to learn from other such models. The community banking model - in this country we refer to it as the credit union model - will provide an opportunity to place the credit union movement on a more firm footing in the coming years and it will also allow people to make different decisions in respect of their finances.

I wish to recognise the role played in this area by a very distinguished former Senator, Mr. Joe O'Toole, who was a member of the original commission and who is currently a member of ReBo.

He and the other members of the commission played a crucial role by working on the 60 or so original recommendations to ensure they were fit for purpose and reflect the mainstream view of credit unions. The credit union movement is not just one homogeneous group but reflects the community with big and small credit unions in urban and rural Ireland. We are trying to reflect all of that in legislation on the financial requirements in the years ahead.

The criteria we used are based on three pillars. We must respect the mandate of the credit union movement, which is a not for profit organisation. That is individual and unique and accounts for the success of the movement. As Senators said in the course of their contributions, we must recognise the volunteer ethos, which is at the heart of the Irish credit union movement. The point forcefully put by many Senators is that we do not want to see unintended consequences as a result of the legislation. Senator Ó Domhnaill made the point on the impact such legislation had in Australia. We need to learn from that experience. We must ensure that at the heart of this legislation is respect and understanding for the volunteer ethos. The third pillar on which the legislation is built is the community focus. Local knowledge is the one difference between the credit union movement and the banks. As I have said repeatedly, the banks should get to know and understand their customer base and know their requirements. They need to get into the heart of the community again and do the things that bank managers did 30 years ago and understand the risk. That knowledge is already there in the credit union movement. The community focus ensures the knowledge transfer, which is really important if the credit union movement is to go forward.

I congratulate and thank the commission for their work. They were open and inclusive and attempted to bring together the various strands of the credit union movement and produce a report that is capable of being implemented. The Bill delivers on the 60 recommendations of the commission on the credit unions. It clearly demonstrates the Government's commitment to the early implementation of this report. There is no point in having recommendations and not following up on them. The legislation before the House reflects the consensus majority view expressed in the recommendations.

I will now deal with the issues raised by Members. Senator Gilroy referred to section 10 and the reference to lending to a credit union being unenforceable if it is in breach of limits. There is nothing new in this. This was in the 1997 legislation on credit unions. My understanding is that the Credit Union Act 1997 places the onus on the third party entity lending money to the credit union. The onus is on the third party entity to ensure that it is not lending to credit unions above and beyond the limits that have already been set by the Central Bank. That is a measure to protect credit unions and to ensure that the onus is on the entity lending them the money not to do something over and above the limits that have already been set by the Central Bank. That is a prudential provision in the 1997 legislation and is simply reinforced in section 10. Senator Gilroy referred also to the definition of shares. Shares in a credit union do not compute to the definition of a share in a company or limited company. Every single euro that a member has on deposit in a credit union is equivalent to a share. Shares in the credit union refer to savings and depositors. It is not like having shares in a company.

Senator Reilly raised the question of shared branching. This came up on both Committee and Report Stages in the Dáil. A report on shared branching is being prepared by the credit union advisory committee and the Minister, Deputy Noonan informed the lower House that by the end of the second quarter of next year he expects to be in possession of that report. He is open to the idea but his view is that it is probably premature to legislate for it in the current Bill. If new legislation is required, he will consider it. He cannot do this outside of the commission recommendations and that is the reason for a specific piece of work to be done. The matter is being followed up. We will see the outcome of that report. It was not dealt with in the commission report. We must ask why and whether it was regarded as a major issue by the Irish League of Credit Unions and the credit unions generally. We will be in a better position by the middle of next year to come to a view on shared branching. I thank Senator Reilly for raising it.

Senator Sheahan asked for a number of amendments to be considered on the question of public investment projects. He will be glad to learn that we will bring forward an amendment capturing what is a public investment project and the Minister gave an assurance that he will bring in such an amendment on Committee Stage. There was very detailed discussion on this. It would be a good thing to encourage credit unions to invest in public infrastructure projects, where it yields a public good from it. We will bring forward an amendment on Committee Stage to reflect that.

He also raised the bond issue. The Minister is open to considering this, however this was not a major issue of concern among the credit unions when engaging with the commission. We need greater clarity from the credit unions about how that would work, but the Minister is open to the issue if a consensus view were to emerge. It has not been raised. I know it was raised in this House by Deputy Sheahan and in the Dáil by colleagues, but it has not come up as a major issue of concern among credit union members. The Minister has no difficulty looking at it if there is broad support for it.

At the start I was asked to set out the areas in which we propose to table Committee Stage amendments. The first is a change in the definition of financial service legislation for clarification purposes. Many Senators raised this question. We are exploring with the Attorney General as to how to provide a better definition. A credit union is a credit union and is not a bank and it should not be outside the scope of the Parliamentary Counsel to reflect that in the definition. It must also be said that credit unions themselves have managed outside that definition to obtain new functions in the past decade and a half in areas, which one would regard as exclusively in the financial services area. Credit unions have become insurance mediators and provide products through insurance. Credit union have involved themselves in the Investment Intermediaries Act 1995. Credit unions have an application in terms of the European Communities (Payment Services) Regulations 2009, which is the deposit guarantee scheme. Defining their role in such exacting terms as to exclude them from things they want to do would not be in their interest.

We are working with the Attorney General to provide a better definition for credit unions. This was a view expressed by all Senators. The second area in which we intend to bring forward amendments includes the question of changes to the exclusions from the board of oversight committee. The Minister for Finance has heard the views of colleagues and will bring forward amendments to reflect the majority view.

The third area covers the extension of term limits from nine years to 12 years out of 15, an issue raised by many Senators. The Minister stated in the other House that he would bring forward an amendment in that regard.

The fourth area includes the specific reference to investment in Government supported projects. I referred to this issue in reply to Senator Tom Sheahan.

The fifth area is ReBo running costs which are to be funded from the credit union fund rather than the Exchequer. Credit unions will obtain the benefit of this restructuring. ReBo is the overarching body which will be staffed by good people with a knowledge of the credit union movement. The provision of a levy is not a new idea and I take the Senator's point that the credit unions are paying for this. The ¤500 million is not an open-ended loan and the money will come back. It is not like the ¤64 billion we have had to put into the banks, although it is the Government's mission to get some of this money back at some point in the future. What is sauce for the goose is sauce for the gander and the Senator's observation is fair.

Senator Thomas Byrne asked why we were bringing forward changes on Committee Stage in respect of the IOSCO, the International Organisation of Securities Commission, - the memorandum to which I referred - to allow the Central Bank to sign an international co-operation agreement. This is an urgent matter and the detail will be dealt with on Committee Stage. We are using this opportunity to allow the House to give its views before the end of the year.

The issue of shared services was raised with reference to the role of the new restructuring board, ReBo. This is a small country, but the credit union movement is a varied sector owing to its size and nature. Costs can be cut by the use of shared services and if expertise is shared regionally and nationally. The new credit union movement will have many credit unions attached as spokes in a national movement. They can learn from each other and share services between them. This is essential, both for the Government which has to restructure and share HR and financial services and also for the proper functioning of the credit union movement. We cannot allow this to be used as an excuse for allowing small credit unions to fall off the face of the earth. There should not be unintended consequences as a result of this legislation. The Bill should not provide means by which smaller credit unions would find that they no longer had a mandate. We have to be careful to ensure this will not happen. The credit union restructuring board has been established with Mr. McVeigh as a very experienced chairman. Former Senator Joe O'Toole and others are on the board. This will help the restructuring plan such that the future viability of credit unions will not be in doubt and in order that people will have absolute confidence in their ability to continue their good work in the community.

I look forward to working with Senators next week, although I do not mean to presume that is when the House will decide to deal with Committee Stage. However, I assure Senators of the good intent of the Government to ensure we will have robust legislation to provide for the best possible standards for the credit union movement. I hope the Bill will be regarded as another essential development in the credit union movement which has done such good work in this country.