Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

I thank all of the Senators who have contributed to the debate. Any of them who has heard me speak about credit unions knows of my long-standing regard for them. The credit union in Gorey has helped or funded every business there, from medical practices to farmers and retailers. That has been the case less in the past two decades, but, as Senator Kieran O'Donnell said, the best of businesses traded because they had an extra credit line from the credit union. I know that to be 100% the case in Gorey and have no doubt that the same is true for every other credit union throughout the country. It is important, however, to be prudent. I would not like to see credit unions getting involved in the private construction sector which is volatile. I was involved in the banking inquiry for two years, with Senator Kieran O'Donnell and others. The banking sector in Ireland collapsed because the construction sector was over-leveraged, particularly in the commercial real estate market. Private guarantees were given that were not enforceable or enforced. The mechanism is available to some of the credit unions to participate with the approved housing bodies which are State-funded to construct social housing, about which I am pleased. The regulations were changed only six weeks ago. There is now up to €700 million available to tier 3 approved housing bodies through a regulated vehicle which can be established by any private body, including credit unions.

Some matters are appealable to the Irish Financial Services Appeals Tribunal. The regulator is the Central Bank of Ireland. However, not all matters can be appealed to the tribunal because the appeals body becomes the regulator, which is not possible.

More could be done on the issue of SME lending. The figure I have is approximately €100 million, which is low. However, one has to be careful because I am almost 100% certain that in the 1990s, when there was much less money in the country, hundreds of millions of euro were lent to SMEs. There was not €100 million lent in Gorey, but a lot of money was lent there to the SME sector. There is almost €17 billion available. The credit unions are not pleased at having to provide that fund for very low yield investors because they get practically nothing back, which is not a good use of their funds. They would like to have a much higher yield and return, which is understandable. The money has to be protected. People have money on deposit and it must be returnable.

The area about which I am conflicted and on which Senators Kieran O'Donnell, James Reilly and Tony Lawlor touched is the knowledge base of credit unions. The people behind the counter in a credit union know the people who pay back the money. While we are moving towards online systems and faceless banking - a term people do not like – credit unions know the people who pay back their loans. I know for certain, going back to the 1990s, that there were lots of guys who did not meet the criteria, but they still got loans which were repaid because they were good for them. That is not how the system works today, but moving away from people who know each other and whose word is their bond is the wrong direction to take. However, that is a matter for the regulated entity.

The section 35 process has started and there will be consultation with the Central Bank during the year. I cannot say when it will finish, but I hope it will be soon. The Minister for Finance is playing and will continue to play a constructive role in support of credit unions. I will support him in that regard. He is continuing to progress, develop and find ways of doing business to better serve members. There is a balance to be struck. He will continue his engagement with the credit union movement through the well established Credit Union Advisory Committee, CUAC, to ensure the safety of members' savings, support credit unions, broaden the range of services for members and safeguard the credit union sector. Thankfully, there was not a €1 billion hole in the books of the credit union movement, but there was a concern about this at one stage. It showed that the credit unions were more prudent than anticipated, which is good.

I think I have touched on most of the issues raised. I strongly support the credit unions and hope we can get to a place where they will be more satisfied than they are now, but that does not mean that there should be light touch regulation, something I think the Acting Chairman mentioned. It does not work because eventually somebody becomes way too clever and damages the entire sector. When there is almost €17 billion on deposit, it has to be protected or eventually somebody will do something silly. The credit union sector is prudent and careful and has come through the crisis much better than most others. The Minister for Finance and I support it fully, but the era of light touch regulation is over. There will be regulation. We want to make sure it will be prudent and strike the correct balance.