Mary Upton
Question:199 Dr. Upton asked the Minister for Finance his views on correspondence (details supplied) in relation to the regulation of the services provided by credit unions. [25843/02]
Written Answers. - Credit Union Services.
The McDowell group, when examining the range of financial service providers to be overseen by a single regulatory authority, agreed that all financial providers should, in principle, be dealt with by a SRA and that a compelling case would have to be made for the exclusion of any provider from its remit.
The group recommended that the existing functions of the Registrar of Friendly Societies in relation to credit unions be brought into the SRA. Its report stated that supervision of the credit unions by the SRA should be done in a way that would recognise and be supportive of:
The uniqueness of credit unions and would give comfort that their voluntary character would not be threatened by the establishment of the SRA while still addressing the appropriate regulatory and consumer protection requirements that arise.
Credit unions have been regulated under separate legislation from financial institutions, vis-à-vis the Credit Union Act, 1997. The Central Bank and Financial Services Authority of Ireland Bill, 2002, provides that this will continue to be the case. The functions of the Registrar of Friendly Societies under the Credit Union Act will be carried out by a registrar of credit unions within the overall framework of the proposed new regulatory authority, but the basis of that regulation will continue to be the Credit Union Act, 1997. I have no intentions of changing this basic position. There is nothing in the Bill which requires credit unions to be treated like commercial financial institutions, such as banks.
I have signalled my intention to propose amendments on Committee Stage of the Central Bank and Financial Services Authority of Ireland Bill, 2002, which would alter the reporting relationship of the registrar of credit unions, to bring the position more fully within the framework of the Irish Financial Services Regulatory Authority. The reporting relationship of the registrar would be similar to that proposed for the consumer director.
The new chief executive designate and the acting secretary to the interim Irish Financial Services Regulatory Authority wrote recently to the ILCU in relation to the manner in which they intend that credit unions should be regulated. They stated the following: the members of the interim IFSRA recognise and understand the important role that the credit union movement plays in this country; they recognise both the size and reach of the movement, its not for profit and voluntary nature and its broad support amongst the communities, which it serves; they recognise that credit unions have different functions and objectives to commercial financial institutions – such as banks and building societies – and that the regulation of the credit union movement must be appropriate to those functions and objectives; they highlight that, for this reason, the Government, in making clear its acceptance of all these principles, is proposing a separate statutory post of registrar of credit unions who will work under the requirements and protections of the Credit Union Act; and the IFSRA wants to work positively with the ILCU and they are open to discussing the valuable role that the ILCU's field officers play in assisting league members. The IFSRA's only concern with the legislation as currently drafted is the accountability of the registrar of credit unions.
The supervision of credit unions by the new regulatory authority should not be viewed as a threat to the movement but rather as a development that will work to the advantage of the credit union movement and member/customers of credit unions.
My concern as Minister for Finance is that credit unions should be properly regulated, consistent with their role and nature and within a proper framework. The amendments I propose impact on the accountability of the position of registrar of credit unions, not on the powers of the registrar/IFSRA in relation to the regulation of credit unions which remain the same. It would be remiss of me not to have looked again at this issue if, as was the case, the body of people who it is proposed will regulate the financial sector had expressed concerns about the structure within which the regulation will take place.
The autonomous position of the registrar also required to be re-examined in the context of views received from the European Central Bank. I am required by the treaty to consult the ECB on certain financial legislation. The amendments I am proposing will address the issues raised by the ECB.
I fully support the credit union movement. I believe that the position of a statutory registrar of credit unions within the regulatory authority will ensure the strong voluntary and community ethos of the movement continues.