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

Amendment No. 7 relates to shared branching, which involves credit unions providing front-of-house services to each others' members. Shared branching is an activity that operates primarily in the credit union system of the United States. It was not considered by the Commission on Credit Unions and does not form part of the commission's final report. Moreover, in the public consultation process shared branching was not a key issue in the submissions received from credit unions or other stakeholders, nor did it emerge from the survey returns from the credit unions.

In simple terms, shared branching would allow one credit union member to use the service of another credit union. For this facility to work securely, it is important that certain procedures are put in place beforehand. First, a settlement system is needed as a person could withdraw his or her savings several times from different credit unions if safeguards were not in place to prevent such a practice. Second, an underwriting process is needed to establish proper assessment of ability to repay at the credit union issuing the loan on behalf of the member's home credit union. It would also need to be made clear who would be held responsible should a loan go into arrears. Would it be the member's credit union or the credit union which issued the loan? Third, an accompanying prudential framework would be needed to ensure, for example, that proper liquidity management practices are in place to guard against large, unpredictable withdrawals at small credit unions which are connected to larger credit unions. Furthermore, shared branching raises fundamental questions about the common bond, notwithstanding the commission's recommendations that the common bond remain unchanged.

The fact that shared branching apparently operates successfully in other jurisdiction indicates that it is certainly worth considering. I consider that it would be premature to enshrine shared branching in legislation in the absence of the supporting infrastructure and prudential framework developed in consultation with all the relevant credit union stakeholders and the Central Bank. The Minister has written to the Credit Union Advisory Committee to ask it to examine this issue and to report back to him by the end of the second quarter of next year. I think I also mentioned this on Second Stage. The committee's report will involve an assessment of the current appetite for shared branching among credit unions and their members, an analysis of the framework requirements to support shared branching, an exploration of various alternatives and approaches drawing on international experience and best practice, and the recommendations of the Credit Union Advisory Committee, including any legislative changes required. The report is to be an open process involving consultation with other credit union stakeholders, including credit union representatives and the Central Bank. We do not propose to accept amendment No. 7, which has also been our position in the other House, but the Minister has asked for this report to be laid before him by the second quarter of next year. If there is an appetite for a wider application of this model, which I know is used in other jurisdictions, we can consider it in due course, but it is not appropriate to do so in the context of the current legislation.