I move: "That the Bill be now read a Second Time."
This is the first Bill specifically devoted to credit unions for more than 30 years. Its purpose is to provide a statutory framework for the development and growth of the credit union movement and to enable credit unions to provide an enhanced range of services to their members. I acknowledge the general welcome given to the Bill by the Irish League of Credit Unions. The league is the representative body which has guided and overseen the development of the credit union movement since its foundation, a role it has carried out and continues to fulfil with diligence and integrity. The achievement of the league in presiding over and guiding the extraordinary growth of the credit union movement is truly remarkable.
In its journal, the league described the Bill's highlights as including "provision for more flexibility on withdrawing shares and deposits, for allowing people under 16 to join credit unions, for loans to be made for periods longer than five years, for a credit union to participate in a savings protection scheme, for statutory fraud/dishonesty insurance, and to allow credit unions provide "additional services' ". I will deal later with some of those matters and address important concerns also articulated by the league. I am very pleased to present this important Bill to the House. It is the culmination of a great deal of work. The need for the new Credit Union Bill is due entirely to the tremendous success which credit unions continue to enjoy in meeting the financial needs of their members. Other financial institutions have indicated to me that they will want to press on me their views on this Bill. They are welcome to do so. They should, however, acknowledge that their track record of meeting the needs serviced so well by the credit unions has been one largely of disinterest. I would like to sketch in brief the background of credit union development which has given rise to this new Bill.
Credit unions are now such an integral part of Irish society that it is hard to believe they were unknown in Ireland some 40 years ago. It was only in 1958 that the first credit union was formed here, and by the following year there were three credit unions comprising 200 members with a modest sum of £415 in members' shareholdings. As financial co-operatives, these initial credit unions were formed under the Industrial and Provident Societies Acts, 1893 to 1913, but such was their success and growth in the succeeding years that it quickly became apparent that they needed a separate statutory base. This led to the enactment of the Credit Union Act, 1966, which remains to this day the principal legislation governing credit unions. The 1966 Act deals with the basics of credit union establishment, organisation, operations and supervision. It outlines the conditions for the registration of a credit union by the Registrar of Friendly Societies and sets out the qualifications for membership of a credit union. It provides for the rules of a credit union to be approved by and registered with the registrar and establishes the general provisions relating to a member's shares and deposits in the credit union.
The Act allows the credit union to borrow money and to make loans available to its members, subject to certain conditions. It deals with the powers, functions, duties and constitution of the credit union's board of directors and its supervisory committee and establishes the manner in which they report to the credit union's membership and are subject to the members in general meeting. The Act also provides for the keeping of books of account by credit unions and for their audit, and it established the Credit Union Advisory Committee which has been a source of independent advice on credit union affairs to successive Governments for some time. It will be clear from this outline of the 1966 Act that many of its general features are being retained in its successor some 30 years later.
With the support of the statutory recognition afforded by the 1966 Act, the number of credit unions grew from the three existing in 1959 to 336 by 1969. The number of credit union members reached 169,000 in that year, and shareholdings exceeded £7 million for the first time. In a little more than ten years, credit unions had become firmly established in Ireland.
The next legislative landmark was the Industrial and Provident Societies Act, 1978, Part III of which dealt exclusively with credit unions and specifically with providing updated powers of supervision for the Registrar of Friendly Societies. This became necessary because of the continuing success of the credit union movement in expanding the number of credit unions, its overall membership and the savings base. Part III of the 1978 Act was a response to the fact that the 1966 Act provided the registrar with little or no powers to exercise any meaningful role in supervising a credit union once it had been established. For the first time, the 1978 Act gave the registrar the power to inspect and investigate a credit union's affairs and, where necessary, to direct a credit union to suspend the acceptance of shares, deposits, loans and payments in certain specified circumstances. It also enabled the registrar to call a special general meeting of a credit union and to appoint a person as one of its directors. Many of these provisions are replicated in the new Credit Union Bill before the House. Throughout this period credit unions continued to grow and prosper, and by the end of the 1980s there were more than 500 credit unions throughout the island of Ireland. In addition, credit union membership passed the one million mark and the value of shareholdings amounted to some £650 million. It was at this time that a general consensus began to emerge within the credit union movement that a new and wide-ranging stand-alone Credit Union Bill was required. A working party comprising representatives of my Department, the Registrar of Friendly Societies, the Credit Union Advisory Committee and the Irish League of Credit Unions was convened to identify the parameters for this new legislation. The Bill before the House is consistent with heads agreed on the basis of the working party's conclusions. If it was felt that legislative change was required in the late 1980s, it is even more urgent in the second half of the 1990s.
Many credit unions are now offering services to their members that were never envisaged in the original legislation, and there is clearly a need to provide a proper statutory basis for current credit union operations as well as establishing a framework for the future development of the credit union movement in the years ahead. With a sum of the order of £2 billion currently invested in the 434 credit unions based in the State, and notwithstanding the record of credit unions and the league in protecting members' savings, there is also a need to update the supervisory powers of the Registrar of Friendly Societies since the last legislative change in 1978.
The purpose of this Credit Union Bill, therefore, is to consolidate all existing credit union legislation and to provide an updated framework for the development and regulation of the credit union movement in the future. Unlike the 1966 Act, which continued to rely on provisions in the Industrial and Provident Societies Acts as far back as 1893, this Bill for the first time constitutes a stand-alone measure for credit unions. It repeals the 1966 Credit Union Act in its entirety as well as those parts of the Industrial and Provident Societies Acts which formerly dealt with credit unions.
There are many positive features to the Bill. First, the Bill supports and protects the essential ethos of the credit union movement. Credit unions are non-profit-making financial co-operatives; they are mutual organisations and they exist only to serve their members and their members' community. They provide a mechanism for redeploying the savings of credit union members to benefit and support the financial needs of other members of their community. This has been achieved down the years through a largely volunteer and part-time workforce in the best traditions of community self-help. All members of the movement, whether or not they are actively working in their credit union, are helping their community by investing their savings in that community.
A second positive feature of the Bill is that it provides a framework for the development by credit unions of additional services beyond traditional savings and loans. A number of credit unions are now selling insurance products and providing foreign exchange, and there is an increasing desire on the part of credit unions to exploit the opportunities afforded by technology for the development, for example, of an ATM network. The provision of this framework in the Bill addresses a long-standing demand of credit unions which are anxious to provide improvements in service and a greater range of services for their members. Many credit unions have shown commendable initiative in starting to provide some additional services on a pilot basis, but credit unions in general are very conscious that a lot of work lies ahead in bringing their services up to date.
Third, the Bill adopts new limits for shares, deposits and loans. For example, it accords greater scope for credit union members to increase their shareholding in their credit union. A new ceiling of £20,000 is included. This represents a substantial increase on the current limit of £6,000 per credit union member which has been in place from the mid-1980s and provides considerable scope for credit unions to continue to grow their own resources. These new resources will help provide an enhanced capital base which will allow them to expand and improve the range of services which they offer to their members.
The Bill before the House places a similar limit on the amount of deposits which may be held by each member and on the amount of a loan which any credit union member may receive. A positive change in the area of loans is the removal of the maximum loan period of five years contained in the 1966 Act. The new Bill enables up to 20 per cent of credit union loan funds to extend beyond five years and up to 10 per cent of loan funds to cover periods exceeding ten years. Credit unions, therefore, are being enabled to extend their services into medium and longer-term lending in a controlled manner.
I am aware that the financial limits for shares, deposits and loans have attracted a lot of attention since the Bill was published. While I am anxious to hear the views of the House in this area, it is only proper that at the outset of our consideration of the Bill, I outline the basis for the limits chosen. First, the strength of the credit union movement is in catering for the personal financial needs of its members. Credit unions are not commercial, for-profit banks and they are not building societies. I do not believe that they should become banks or building societies. It is my view and that of the Government that credit unions, in remaining faithful to their members, should not seek to diversify their activity into corporate or other commercial business. One effective means of achieving this is to cap the amount of shares, deposits and loans applying to individual members of a credit union.
Limits were a feature of the Credit Union Act, 1966, and its associated regulations, and in including limits in the Bill the Government is doing no more than maintaining an existing principle, one which I believe has broad support within the credit union movement as a whole. I would also stress that banks and building societies are not free of controls either. They too are supervised and regulated, and deposit and lending policies are also controlled by the Central Bank. All financial institutions must be so controlled in the interests of savers, society and the integrity of the monetary system. In this sense, there is nothing unique about the regime for credit unions. It is part of the wider, necessary supervisory and regulatory system.