Paul Gavan (Sinn Fein) | Oireachtas source

It is always good to see the Minister of State; I thank him for coming in. The credit union sector is one which we associate with local communities across Ireland. Indeed, it is very important to recognise at the outset what they are. They are financial co-operatives. I think there is a bigger conversation to be had regarding how we develop the co-operative sector. In that regard, I recommend that the Minister of State takes some time to look at the Sinn Féin policy document, Ownership Matters, that we produced a few years ago. It provides a blueprint on how to develop the co-operative sector. I know there are plans for legislation from this Government. We look forward to seeing them in the coming months.

Credit unions understand what strengthens a community. They are known for their great customer service. In fact, they claimed the top spot last year, and have been in pole position for the past seven years, for the best customer experience in Ireland at the CX Impact awards. Credit unions have had the highest scores across the six pillars of customer experience, that is, personalisation, integrity, expectations, time and effort, empathy and resolution.That will not come as a surprise to anyone who deals with credit unions, as I have done all my life and continue to through my local credit union in Castleconnell, County Limerick. One in every two people in Ireland has a credit union account. People trust credit unions. It is notable how visible credit unions are in their communities in comparison with commercial banks, especially when we see commercial banks closing down branches in towns and cities across the country, which has such a negative impact on communities and customers. Communities need their credit unions to thrive. There is so much unlocked potential there.

We need to look at how we can do more to unleash the potential of credit unions. That begins by addressing the issue of under-lending. The Sunday Independentquoted the Minister of State as saying credit unions should "fill the gap" left by the departures of Ulster Bank and KBC from the Irish market and start lending more mortgages. For more than two years, we have been hearing Government Ministers tell us how great the credit union movement is and how they see a real role for the credit union movement. However, the movement keeps telling us that it is being starved out of existence. Credit unions have already gone through massive consolidation over the last few years. They now have the scale to compete, but the Central Bank regulations are putting them to a competitive disadvantage relative to the banks. Credit unions can only lend 7.5% of their total assets for mortgages. A credit union with assets of €70 million, taking an average mortgage of €350,000, can only offer 15 mortgages under the current limits. This means that they are more or less locked out of the largest credit market in the country, the mortgage market. A special higher limit of 15% can be applied for, but only two credit unions have applied and been successful. The reason for that is that it is a waste of time, because they still will not be permitted the scale to compete.

Credit unions have €14 billion that could be used to compete in the mortgage market, but they are only allowed to use €1.5 billion. The mortgage market is worth €100 billion, meaning that credit unions can only go after a share of 1.5% of the market. That is peanuts.Moreover, banks only need to have 5% capital reserves for mortgages. The credit unions have to have 12.5% - more than double. It was not the credit unions that brought this country to its knees, it was the banks. However, the credit unions are being placed at a competitive disadvantage.

Last week, the Minister for Finance stated that work on the review of the policy framework for the credit union sector is "well advanced and we intend to issue proposals emanating from the Review for consultation shortly". Will this work? Unless the Government is willing to rewrite the legislation, then such a policy framework is likely to fail. One of the commitments in the programme for Government was to enable the credit union movement to become "a key provider of community banking in the country". We are getting further and further away from that happening.

In conclusion, I have a few questions for the Minister of State. One of the commitments in the programme for Government was to enable the credit union movement to become "a key provider of community banking in the country". Does the Minister of State acknowledge that this Government, which is almost at is halfway mark, has yet to honour that commitment at a time when we have some of the highest mortgage costs, house prices and rents on record?

I am aware that there is a policy framework review ongoing. Does the Minister of State accept that unless the Government makes the necessary regulatory changes, credit unions will not be able to significantly increase their footprint in the mortgage market? Credit unions have €14 billion ready to enter the mortgage market. The mortgage market is worth around €100 billion. However, credit unions are only allowed to use €1.5 billion, so they can only go after 1.5% of the market. What is the Government's plan to change that situation?Banks only need to have 5% capital reserves for mortgages while credit unions have to have 12.5%, which is more than double. Does the Minister of State accept this places them at a competitive disadvantage relative to the banks, despite the banks being the ones who got the country into difficulty during the financial crisis?

The review is welcome, as is the impending legislation, but it strikes me there is likely to be a lack of ambition here. Without those regulatory changes, the fundamental problems that emasculate the credit union movement will not change, so we need to see more ambition. I hope in his response the Minister of State will indicate this ambition exists.