Wednesday, 7 May 2014
Friendly Societies and Industrial and Provident Societies (Miscellaneous Provisions) Bill 2013: Committee Stage
Last week at a meeting of the finance committee I tried to raise the kind of rules mentioned by the Minister of State. A representative of one bank indicated it was currently giving 90% loans on properties and lending up to 4.7 times income. The correct ratios should be 2.5 times income for 80% loans. In introducing a Bill in this House I indicated that such a system operates in Denmark. I can see a housing bubble developing again if banks continue to offer 90% loans while offering to pay stamp duty. As the Governor of the Central Bank mentioned, we do not have laws against reckless lending, unfortunately, and he would probably like macro-prudential rules. We sent our thoughts on the Bill to Brussels and the officials from the Department of Finance probably intervened in meetings rather than going a more direct route.
If there were rules, the three friendly societies interested in this and the 44 which might become interested could devise sensible rules for lending. In the configuration of Irish banking and the need for all forms of credit - other than bailing out banks - we will need new financial architecture anyway. I would not like to rule out the friendly societies from being part of this. As with the previous section, I will not formally oppose it. I will consider what can be done on Report Stage. It is probably not as major a point as the previous issue, which restricted any new friendly society. Somebody will be required to lend responsibly in the society after the incredible damage done by reckless lending, which has yet to be punished and see proper regulation. There may be possible benefits from the work of friendly societies, and I am impressed by what the Public Service Friendly Society sent me. We need a wider view of the new financial architecture. Friendly societies extending loans under some kind of supervision as mentioned by the Minister of State, could be a beneficial act, so we should not shut it off. I may discuss this with the Minister of State before the next State.