Simon Coveney (Cork South Central, Fine Gael)
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Question 87: To ask the Minister for Finance his plans to amend the Credit Union Act and regulations which have hampered their development. [39136/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Credit Union Act, 1997 provides the legal framework for the regulation of credit unions. The Act was designed to provide the credit union movement with a regulatory structure that reflects and promotes the particular ethos and philosophy of the credit union movement, its strong tradition of volunteer service and the core objective of providing opportunities for saving and lending for members of credit unions.

The approach to regulation embodied in the Credit Union, 1997 Act has served the credit union movement well by providing clarity and certainty to individual credit unions, their Directors and members. It has helped support the continued stability of the credit union movement and safeguard the members' savings during a period of rapid growth.

As Minister for Finance, my role is to ensure that the legal framework for credit unions continues to be appropriate for the effective operation and supervision of credit unions. In recent months, I have introduced a regulation to increase the amount of money that members can deposit with a credit union. Furthermore, following extensive consultations with the representative bodies of credit unions and drawing on the advice of the Credit Union Advisory Committee — the statutory expert advisory body on credit union matters — the Registrar of Credit Unions recently issued guidelines on a revised investment framework for prudent and responsible investment by credit unions.

Other developments include the establishment of a review group chaired by my Department to examine the limits on longer-term lending in Section 35 of the Credit Union Act, and the agreement by the Financial Regulator to examine proposals for reform of the Savings Protection Scheme for credit unions.

As the Deputy may be aware the case for modernising the regulatory framework for credit unions has been raised by both the Registrar of Credit Unions and the representative bodies for credit unions. It is important that there is a clear shared understanding on how a new regulatory framework would operate, before moving to develop specific proposals. In this context, I wrote to the Chair of the Financial Regulator earlier this year recommending that the Financial Regulator engages with the credit union movement, in the first instance, to identify common ground in relation to a set of principles that could guide the development of an updated regulatory framework for credit unions. The Chair of the Financial Regulator has indicated the Authority's willingness to move forward on this basis.

Gay Mitchell (Dublin South Central, Fine Gael)
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Question 88: To ask the Minister for Finance if he is satisfied that as interest rates rise, the financial institutions are not taking the opportunity to increase their margins. [39167/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have no statutory function in setting the interest rates offered by credit institutions — they are based on commercial criteria in the light of market conditions. Since 1992, the Irish banking market has been open to competition from credit institutions authorised in any EU/EEA Member State. Hence, new entrants to the market from abroad are competing with domestic banks for business in, for example, the market for personal deposits.

The September 2005 Competition Authority report on banking focused on two markets — personal current accounts and SME lending. It suggested measures aimed at promoting more active competition, but found no evidence of deliberate anti-competitive actions by banks. The Authority recommended action to make switching of accounts easier, and this is now in place.

The Financial Integration Monitor, published by the European Commission to assess major trends in the pan-European market, indicates that the cross border competition inherent in the single market has contributed to convergence in interest rates, which is particularly evident in relation to the highly competitive mortgage market in Ireland.

My function as the Minister for Finance is to provide an appropriate and robust legislative framework for regulation of the financial services sector. I am satisfied that, since the establishment of the Financial Regulator and the Financial Services Ombudsman, with a particular focus on the consumer, we have such a framework in place.

The Financial Regulator has drawn attention to the need for consumers to choose the right type of loan for their needs. The Consumer Credit Act, 1995, obliges credit providers to include specific information on the cost of all credit agreements. Furthermore, the Financial Regulator's Consumer Protection Code requires that financial service providers, in all their dealings with customers, act fairly and honestly in the best interests of customers and make full disclosure of all relevant material information, including all charges.