Written Answers. - Credit Unions.
Finian McGrath
Question:
263
Mr. F. McGrath
asked the
Minister for Finance
if he will change his decision to alter the special position engaged by the credit unions in the original IFSRA (details supplied); and if he will make a statement on the matter.
[27162/02]
I refer the Deputy to my reply to Questions Nos. 133, 134 and 142 of 11 December 2002, as follows:
As the Deputy may be aware, the McDowell Group recommended that the existing functions of the Registrar of Friendly Societies, in relation to credit unions, should be brought into the Single Regulatory Authority, SRA, proposed by the Group and that a statutory position of Registrar of Credit Unions should be established within the SRA. Finally, the Group recommended that the 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".
In October 2000, my officials informed me that the Legislative Committee of the Irish League of Credit Unions, ILCU, had asked if we would open consultations with them concerning how we would envisage credit unions being regulated within a single regulatory authority. My officials indicated to me that they intended to respond to the request by outlining to the ILCU how we would envisage the McDowell proposal for a statutory Registrar of Credit Unions might operate. I was happy for my officials to talk to the League on this basis and there were three meetings between then and May 2001.
In the course of those meetings, my officials outlined proposals on how the Registrar would be dealt with in the proposed legislation. I should point out that no agreement was drawn up with the League regarding the provisions to be included in the Central Bank and Financial Services Authority of Ireland Bill, 2002. However, I do accept that the League had an expectation as to the provisions that would be in the Bill, based on these meetings. The Bill, as published, reflected what they had been told.
I should say that credit unions have been regulated under separate legislation from the financial institutions, viz. the Credit Union Act 1997. The Bill 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 Regulatory Authority, but the basis of that regulation will continue to be the Credit Union Act, 1997. I have no intention of changing this basic position.
However, both the interim Irish Financial Services Regulatory Authority, which I established in April 2002 to manage the transition to the new regulatory arrangements, and the Governor of the Central Bank, expressed reservations regarding the reporting arrangements for the Registrar of Credit Unions within the proposed Regulatory Authority. Separately, the European Central Bank had expressed reservations about the autonomous position of the Registrar within the overall structure. In the context of these concerns, I felt obliged to look again at the provisions in relation to the Registrar.
I have, therefore, signalled my intention to propose amendments at Committee Stage of the Bill, 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; as the Bill is published, the Registrar is not subject to the control or direction of the Regulatory Authority in carrying out or exercising the Registrar's responsibilities or powers with respect to the registration of credit unions or the supervision of their affairs or activities and the proposed amendments are designed to correct this.
The changes I am proposing allow for the credit unions continuing to be regulated separately and distinctly under the Credit Union Act, 1997. Indeed correspondence between the interim IFSRA and the ILCU has confirmed that this is the case.
In that regard, I understand that the new chief executive-designate and the acting secretary to the interim Irish Financial Services Regulatory Authority, IFSRA, have written recently to the Irish League of Credit Unions in relation to the manner in which they intend that credit unions should be regulated: 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 move ment, its not-for-profit and voluntary nature and its broad support among 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; the IFSRA wants to work positively with the ILCU. In this regard, it has stated that it is open to discussing the valuable role that the ILCU's field officers play in assisting league members; and the IFSRA's only concern with the legislation as currently drafted is the accountability of the registrar of credit unions.
I would like to stress that 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."
The Deputy might like to be aware that both I and officials of my Department have recently met credit union representatives in this regard. I would hope to be in a position to explain the outcome of these discussions when the matter comes before the Finance and Public Services committee of Dáil Éireann in the near future.
