Seán Sherlock (Cork East, Labour) | Oireachtas source

Section 6, which the Senators are proposing to amend, places restrictions on existing societies establishing a loan fund, as provided for in section 46 of the principal Friendly Societies Act 1896 where they do not already have such a fund in place. The change will not have an impact on existing societies that have a fund in place. This amounts to three societies at present. The rationale behind the change, as mentioned on Committee Stage and on Second Stage, is that such activity where it is operated by any other body, is subject to prudential supervision by the Central Bank. There is no prudential supervision by any public authority in the case of a friendly society. While the number of friendly societies operating a loan fund is very small, it is not in the interests of the members of friendly societies that new funds be permitted to be established without appropriate prudential supervision. I hope that addresses the essential spirit of the overarching point made by Senator Sean Barrett.

In section 6, our aim is to prevent friendly societies - apart from the small number already engaged in such activity - from operating a loan fund that is not subject to prudential supervision. The exception provided is to allow any application that may be in hand, where an application to register a rule change has been passed by the society and lodged with the registrar by the operative date, to progress under the current rules so that it will not disadvantaged an existing society. Given the general lack of interest, even among existing societies, in operating in the area, an influx of society seeking to establish loan funds is not anticipated.

The Senator's proposal is worded to amend section 6 and to require that "the formation of a separate loan fund" should receive authorisation under the Central Bank and Financial Services Act 2003. This is not a workable amendment because the Act authorises the carrying on of the financial activity itself, namely, the granting of loans, not formation of the fund. On that basis, I do not propose to accept the amendment.