Amendment No. 5 is out of order.
Central Bank Reform Bill 2010: Report Stage (Resumed) and Final Stages
I move amendment No. 6:
In page 10, between lines 18 and 19, to insert the following:
"4.—The Governor of the Central Bank and the Head of Financial Regulation shall present to the Houses of the Oireachtas an appraisal of the Recommendations of the Statutory Commission of Investigation on the Banking system within 3 months of such Commission completing its work.".
The Government is in the process of commissioning an investigation into the banking system. The amendment proposes that the Governor of the Central Bank and head of financial regulation present to the Houses of the Oireachtas the commission's report within three months of it completing its work. The Fine Gael Party tabled a reasoned amendment on Committee Stage as we opposed the legislation in a number of areas. One of my party's problems with the Bill was that a proper investigation was not being carried out into the root causes of the banking failure to make key people accountable for errors made.
We need to know the appropriate response to dealing with the banking crisis we had. We had two excellent reports, the Regling and Watson report and the Honohan report, which are leading on to a commission of inquiry. We feel this legislation should have been done on foot of the commission of investigation into banking being concluded. There should be an appraisal of that investigation by the Governor of the Central Bank and the head of financial regulation. Furthermore the ECB issued an opinion on the heads of this legislation on 7 April, calling for the independence of the governor and the commission to be sacrosanct in terms of the Bill. That was subsequently followed up by a further ECB opinion dated 17 June, stating that these issues, the independence of the Governor of the Central Bank and the commission regarding European System of Central Banks-related tasks had not been catered for in the legislation.
This legislation is being rushed through. It is poor legislation. We asked for additional time. This amendment would allow for a proper commission of inquiry following the great work done by Professor Honohan, Mr. Regling and Mr. Watson. We would then be able to introduce legislation taking into account the ECB opinion of 17 June and the commission of investigation into the banking sector. That legislation would then address the issues and have relevance.
I support the Fine Gael amendment. The Minister for Finance promised the Dáil that he would consult the Oireachtas Joint Committee on Finance and the Public Service on the commission of inquiry. We have had a number of meetings with the Minister which have proved fruitless so far because the Minister basically wants to exclude all forms of inquiry into political performance and into the performance of the Department of Finance from the provisions of the inquiry. Professor Honohan offered an alternative, which I supported and I believe other parties were considering favourably, which was that the Honohan process would recommence as a series of inquiries into each bank and failed institution.
We need to bear in mind that in the world records of banking, Anglo Irish Bank's loss of €18.5 billion has emerged as the biggest banking loss in the world last year. The guarantee was supposed to be the tidiest little guarantee that would cost us nothing and we would have the fastest turnaround. We were supposed to be the first into recession and the first out. It was all a load of poppycock. Professor Honohan sensibly argued for a second stage of his inquiry into each of the banks analysing the role of the Department of Finance and the other agencies in leading the banks to their doom. If we had that, and as the Fine Gael amendment suggests, a timely report published, we would be in a position to have closure by reporting to this House, being accountable and moving on. In that context I support the Fine Gael amendment.
We must accept that we are very far behind other developed countries' response to review of regulatory practices in their respective areas of responsibility. In the neighbouring island, the Turner review was completed and presented in March 2009. We have just had the two reports in recent weeks. It is critical to have ongoing direct oversight and knowledge of the implementation of recommendations contained in any and all of these reviews. Deputy O'Donnell's amendment makes eminent sense and clearly indicates to those who have been tasked with these undertakings and those who are responsible for their implementation that the Houses of the Oireachtas intend to continue to maintain a direct interest in and awareness of what is happening. We need to do that. It is the critical final guarantor for people to have democratically accountable voices which clearly have been missing from the entire process of regulation and oversight of the financial institutions going back over decades.
The two reports into the banking crisis present an expert analysis and assessment of the issues and findings. The conclusions of the reports provide the basis for the preparation of the terms of reference for a statutory commission of investigation. As the Minister for Finance outlined in his recent letter to the Chairman of the Oireachtas Joint Committee on Finance and the Public Service, he has invited the views of the committee on the terms of reference of the commission of investigation. He has asked the committee to respond by 15 September. I know Deputy Burton made a point about consultation with the Minister. It is important to note that he has given until that date for that to be concluded. He has also stated clearly that he is happy to make himself available to the committee to answer any questions it might have and that documents prepared in the crisis management period will be made available to the committee.
Given that the terms of reference have not yet been agreed it obviously would be premature to accept the amendment. However, when the second piece of legislation is introduced in the autumn it would be timely to consider the points made by Deputy O'Donnell and to look further into the issue then. However, I am not in a position to accept the amendment now.
I move amendment No. 7:
In page 10, line 43, after "Bank" to insert the following:
"save as is deemed necessary to secure the more effective oversight of the financial sector".
This amendment relates to staff moving. The integrity of the effective oversight of the financial sector is paramount. Section 10(5) states:
Other than the holder of a statutory office that ceases to exist because of amendments to the Act of 1942 by this Act, nothing in this Act affects the terms and conditions of the employment of any officer or employee of the Bank.
We agree with that provision. However, the amendment seeks to add the term "save as is deemed necessary to secure the more effective oversight of the financial sector". It is critical that we strike a balance. While absolutely respecting the terms and conditions of employment of any employee, it is critical that we have proper and effective oversight of the financial sector.
Notwithstanding Deputy O'Donnell's views, as a former Minister of State with responsibility for labour affairs, I would be very concerned at the impact of the amendment were it to be accepted. As Deputies will be aware, section 5 is a standard saver provision to safeguard the terms and conditions of employees under the new unified structure. To be fair, Deputy O'Donnell has indicated he supports that. However, the amendment seems to propose a sweeping power to dis-apply the employee protections in section 5 on grounds that are anything but clear to me and which would be open to wide-ranging interpretation were the amendment to come into force. At a minimum, accepting the amendment would place a doubt over the security of employment, and terms and conditions of those currently working for the Financial Regulator and the Central Bank without consultation with staff interests and without regard to broader considerations of fairness. In those circumstances I simply could not accept the amendment.
I thank the Minister for his comments. We are seeking to strike a balance.
It is critical we respect the terms and conditions of employment for employees and we must equally strike a balance with the effective oversight of the financial sector.
I move amendment No. 9:
In page 12, between lines 2 and 3, to insert the following:
"(9) Within one year of the enactment of this Act, and each year thereafter, the Agency shall publish an assessment of the performance of the Commission in protecting consumer interests through its regulations, orders, codes of practice and other activities.".
With regard to the allocation of functions between the commission and the National Consumer Agency, we think it is extremely important that within one year of this Bill's enactment, and each year thereafter, the agency should "publish an assessment of the performance of the commission in protecting consumer interests through its regulations, orders, codes of practice and other activities".
There are two agencies in effect, the commission and the National Consumer Agency, and from an oversight perspective it is critical that we are absolutely certain consumer interests are protected within the commission and the Central Bank. It is a reasonable amendment seeking to protect the interests of consumers, and any assessment of the performance of the commission by an agency with expertise in the area of consumer interests is to be welcomed. I look forward to the Minister supporting the amendment.
I will speak to the amendment on behalf of the Labour Party. One of the risks with any change in the Central Bank structure is that while we get over the mistakes made and which led to the crash, on the other side we could create corresponding mistakes because of a lack of balance in the legislation. The critical change element in the legislation is that the focus has moved almost entirely and understandably to the prudential regulation of banks as institutions. That means policy in the Central Bank and the new regulator will be geared towards trying to make banks profitable again, which will inevitably come at a cost to the consumer.
As I have stated in previous discussions on the Bill, the Department of Finance does not appear to understand that consumers of banking services are not just people like me, individual consumers and families, because in this country they also include small and medium businesses, which are the backbone of employment around the country. Consumer interests will not be protected and there will be no barrier between companies and the banks with rip-off fees or charges for financial products. The previous banking model heavily incentivised bank managers and staff to turn into selling agents of bank products on commissions and bonus payments. There is nothing in this legislation that will in any way temper the banks in future from continuing with this.
The Minister is suggesting that legislation in the autumn may change this but the banks will have a field day in upping their charges to whatever level they feel is sustainable in order to get their profits back. That is the approach of the Department of Finance. We should remember that we want banks to work but we do not want banks making excessive profits and ripping off consumers, which is why it is very important for serious attention to be paid in the legislation to consumers who are individual customers and small and medium enterprises.
This is not a worry for the multinationals in Ireland because, by and large, they are not dependent on local Irish banks in Ireland for their main financing structure. They may use local bank services or the Irish Financial Services Centre for treasury operations but in the main they are not stuck in the Irish market as are Irish small and medium companies and indigenous companies. In the Minister's eagerness to correct the mistakes of the past he is sleepwalking into allowing consumers, including businesses, to be completely ripped off without any protection against excessive bank charges.
I am a former member of the finance and public service committee and I remember proposing during my five years of service on the committee that it should pay particular attention to the charging practices of the various banking institutions. We prepared and published a report on this and Deputies Bruton, Burton, others and I were very much involved in the exercise. I can consider the position all these years later as a former employee of one of these banking institutions of 12 years duration. As a customer today, knowledgeable of the experiences of my community and the wider business environment in particular, I can see the position is worse than it was when we set about the preparation of that report.
Despite all the bailout efforts for banking institutions, practices are mushrooming within the banking sector in particular that are geared towards ripping off the Seán and Mary citizen customer. It is an outrage that they are continuing to get away with it and there is no serious check on these practices that every day further burden already hard-pressed ordinary and decent citizens across the State.
It is long past time that a serious engagement should take place and the banking institutions brought to heel. Such an effort is not contained in this Bill in the way that it should be, although I will not object to its final passage. There is significant need for a wake-up call on the Government's part as to what is actually happening on the high street with regard to the conduct of the banking institutions vis-à-vis their respective customers. People have been left in an invidious position as we move more to a cashless society, and people are absolutely trapped in the diktat of these profit-driven entities and those who lie faceless behind them.
There is a serious confidence deficit now in the ordinary consumer vis-à-vis the banking institutions. This proposal, in a small but welcome way, would help to assuage some of those fears as there would at least be an annual review of the extent of the consumer protection model at the heart of the regulatory system now being developed. Without consumer protection at the core and a central pillar of the approach to new regulation within financial institutions, the current serious lack of confidence on the part of ordinary people will deepen in the time ahead. I commend the amendment from Deputies O’Donnell and Burton and I hope the Minister might have a more positive response than those given heretofore.
It seems there is a considerable level of agreement in focusing on prudential regulation. Across all sides of the House there is concern about the protection of consumers. What is at issue is the best means by which one ought to bring this about in the context of this legislation.
It is important to remember that under the Bill responsibility for providing consumers with financial information and education is being transferred to the National Consumer Agency, along with associated staff. The Government has decided the National Consumer Agency is best fitted to support consumers of financial services and products by providing information and education in line with the agency's overall responsibilities to consumers. The supervision and regulation of products, markets and institutions from a consumer perspective remains with the bank, and it is common sense and logical for it to operate as such.
It would appear to me to be inappropriate to assign to the National Consumer Agency, which is the agency responsible for information and education, the role of reporting on the Central Bank's performance of its statutory functions, functions which are clearly outside the remit of the NCA.
The Bill makes separate provision for a consumer advisory group. Amendments made to the Bill on Committee Stage will further develop the role of this group. It must be acknowledged that Opposition spokespersons and others had an input in this regard. Provision is also made for the Central Bank to provide to the Oireachtas an annual statement of its regulatory performance and to discuss that statement before an Oireachtas committee, if requested to do so. In my view this is the ideal location in which all of this ought to be dealt with in an open and transparent manner. We are all committed to addressing it in such a way. In the circumstances, this amendment would be entirely counterproductive and I do not propose to accept it.
I wish to press the amendment.
Amendment No. 10 in Deputy Burton's name arises out of committee proceedings. Amendments Nos. 34, 47 and 48 are related. With the agreement of the House, amendments Nos. 10, 34, 47 and 48 may be taken together. I call Deputy Burton to move her amendment.
I beg the indulgence of the Leas-Cheann Comhairle and that of the House to ask that amendments Nos. 53, 54 and 55 be included for discussion with amendment No. 10 as they also relate to the role of credit unions.
Perhaps the Minister will repeat the amendment numbers.
Amendments Nos. 53, 54 and 55 are also grouped and appear to me to relate to credit unions.
Perhaps the Leas-Cheann Comhairle will advise of the full list of amendments it is proposed to take together.
For clarity, it is now proposed that amendments Nos. 10, 34, 47, 48 and 53 to 55, inclusive, be taken together. Is that agreed? Agreed.
I move amendment No. 10:
In page 13, after line 43, to insert the following:
"14.—(1) The Bank shall establish and maintain a consultative panel to be called the Credit Unions Consultative Panel (in this section referred to as "the Panel").
(2) As soon as practicable after establishing the Panel, the Bank shall publish in Iris Oifigiúil a notice to the effect that the Panel has been established and the date on which the establishment took effect.
(3) The Panel is to consist of not fewer than 5, and not more than 20, members.
(4) The members of the Panel are to be appointed by the Minister for Finance after consulting those organisations that, in the opinion of the Minister for Finance, represent the interests of—
(a) credit unions, and
(b) credit union members.
(5) In appointing persons as members to the Panel, the Minister shall ensure as far as possible that those persons have knowledge or experience of or as consumers of services provided by credit unions.
(6) A person is not eligible to be appointed as a member of the Panel if the person—
(a) is a member of either House of the Oireachtas or is, with the person’s consent, nominated as a candidate for election as such a member, or
(b) is a member of the European Parliament or is, with the person’s consent, nominated as a candidate for election as such a member or to fill a vacancy in the membership of that Parliament, or
(c) is a member of a local authority or is, with the person’s consent, nominated as a candidate for election as such a member.
(7) A member of the Panel holds office for such period, not exceeding 5 years, as is specified in the member's document of appointment, unless the member ceases to hold office.
(8) A member is eligible for reappointment at the end of a period of office.
(9) The Minister shall appoint one of the members of the Panel to be chairperson of the Panel.
(10) The functions of the Panel are as follows:
(a) to monitor the performance by the Bank of its functions and responsibilities in relation to credit unions;
(b) to provide the Bank with comments with respect to the performance of its functions and responsibilities in relation to credit unions;
(c) to provide the Bank with comments and suggestions with respect to the performance of credit unions;
(d) to provide the Bank with suggestions for initiatives that, in the Panel’s opinion, the Bank should take with respect to the performance of its functions and responsibilities in relation to credit unions;
(e) to provide the Bank with comments on the impact that the conditions and restrictions imposed by the Bank on credit unions have on the competitiveness of credit unions;
(f) to provide the Bank with comments with respect to changing trends within credit unions that have implications for the functions and responsibilities of the Bank;
(g) when the Bank so requests, to comment on a policy document or regulatory document, or a proposed policy document or proposed regulatory document, prepared by the Bank in relation to credit unions.
(11) The Bank shall provide the Panel with such administrative services (including technical and legal advice), and such funds, as the Bank believes are necessary to enable the Panel to perform its functions.
(12) The Bank shall arrange for an officer or employee of the Bank nominated by it to attend a meeting of the Panel whenever the chairperson of the Panel asks the Bank to do so.
(13) Within 3 months after the end of each financial year, or within such extended period as the Bank allows, the Panel shall prepare an annual report that provides details of its activities during that year.
(14) The Bank shall arrange for publication of the annual report of the Panel.
(15) The Bank shall also arrange for publication of—
(a) comments made by the Panel to the Bank in accordance with this section, and
(b) any statement of reasons given by the Bank in response to any such comments, and
(c) reports of meetings of the Panel, and
(d) any other report produced or commissioned by the Panel, and
(e) the rules of procedure of the Panel.
(16) Before making or issuing a policy document or a regulatory document in relation to or affecting credit unions, the Bank shall consult the Panel, unless the Bank believes that the document must be made or issued without delay. In that case, the Bank shall consult the Panel as soon as possible after the document is made or issued.
(17) In making or issuing a policy document or regulatory document in relation to or affecting credit unions, the Bank shall take into account the advice (if any) provided by the Panel on any aspect of the document. If the Bank declines to give effect to any particular advice provided by the Panel, it shall provide the Panel with a written statement setting out its reasons for declining to give effect to the advice and shall, if the Panel so requires, publish the statement.
(18) If the Bank makes or issues a policy document or regulatory document, a failure to comply with subsection (15) or (16) in relation to the document does not of itself invalidate the document.
(19) The chairperson of the Panel shall attend a meeting of the relevant Joint Committee of the Oireachtas whenever that Committee requires the chairperson to do so.
(20) When attending a meeting of the relevant Joint Committee of the Oireachtas, the chairperson of the Panel shall provide that Committee with such information as it reasonably requires about matters with which the Panel is or has been concerned.
(21) In this section, "relevant Joint Committee of the Oireachtas" means a Joint Committee of the Oireachtas to which the Oireachtas has assigned the role of examining matters relating to the operation of the Bank.".
These amendments deal directly with credit unions in Ireland and, in an important and significant way, with the future of the credit union movement in this country in terms of how it is to be regulated, assisted and enhanced in its important role in Irish society in respect of industrial credit unions for people at work in various occupations and, in particular, local credit unions which provide a service not alone to people who consciously choose to bank with credit unions but, more important, people and communities that no longer have access to banking services because they do not offer enough profit to the commercial banks.
The purpose of amendment No. 10, which I urge the Government to accept, is to put on a statutory footing in this important legislation, which seeks to regulate the financial services sector and to avoid the mistakes made in the past, the credit union movement, not as an add-on in the Schedules to the Bill to be regulated at the behest of the Central Bank, but by way of recognised position within the legal framework of the legislation. This would allow for the establishment of a credit union panel. Amendment No. 10 is detailed and sets out what the Labour Party has in mind.
The panel will have the power to consult organisations which in the view of the Minister for Finance represent credit unions and, more important, credit union members who at this time have between €11 billion and €13 billion in savings. People are currently saving more because they are terrified to spend. The credit union movement is strong in terms of savings. The Labour Party supports strong regulation of the credit union movement, as does the movement. It is important that people's savings are fully protected. We want to see introduced a code of regulation which includes the credit union movement.
On the night of the guarantee scheme the bankers were called in.
Mr. Seán FitzPatrick was called up to Farmleigh. It was not necessary to call in to Farmleigh or the Department of Finance the directors of credit unions because they were not indulging in massive speculation and the ruination of their financial institutions. Why will Fianna Fáil not in this legislation give due recognition in an orderly and structured way to the credit union movement? Other countries do this.
A consumer panel is a panel made up of people with an interest and expertise in finance, credit unions and credit union members. This will ensure continuous dialogue between the Central Bank, the Regulator, the credit unions and those who represent and are members of them in terms of obtaining the best possible outcome and regulation of the credit union movement in Ireland, thus allowing it to respond to the challenging conditions of the times and putting it in a position to upgrade, improve and change structures to respond to changing times. This is what we want. We also want consultation built in and for the people at the top of the Central Bank and Financial Regulatory Authority to give due recognition to issues other than profit in banking, which as I stated earlier is well considered in this Bill.
Part of the function of this Bill is to try to make the banks profitable. The function of the guarantee scheme was to plug the hole in the banks' balance sheets. Anglo Irish Bank has so far cost us €22 billion. What is wrong with Fianna Fáil Members that they cannot get into their head that the interests of the credit union movement should be fully recognised in this legislation? Amendment No. 10 is a modest, careful and cautious proposal which would allow credit unions to have a statutory function in this Bill. During discussion on Committee Stage the Minister said that the proposal I put forward on behalf of the Labour Party was a good one. I note that he has responded by way of amendment No. 34 which seeks to give the bank the power to, if it so wishes, establish an advisory group in respect of credit unions. It is at the disposal of the Governor of the Central Bank to establish such an advisory group which will have no statutory function. We are proposing that we, once and for all, in reshaping financial review and regulation structures in Ireland, recognise the credit union movement.
We are all aware of the reports made to committees in regard to the bad debts or bad debt potential of approximately five credit unions, which we understand to be for the most part small local area credit unions. Amendment No. 55, a Labour Party amendment, provides specifically that the Central Bank will be in a position to facilitate the voluntary merger of credit unions in the State in the interests of improve financial stability and management of the credit union sector. The amendment provides for a resolution mechanism which would assist the Financial Regulator in dealing with, as stated by him in committee, the one or two credit unions about which he is concerned. Our amendment is a sensible response to the concerns that were expressed. The State should facilitate small area credit unions that may wish to merge. This legislation should allow that to happen. If the Central Bank and the Financial Regulator deem it appropriate, it should be facilitated in a positive way. Deputies from all parties, including Fianna Fáil, are familiar with the problems encountered by people in many communities, including my constituency, in the run up to Christmas. They have to go to credit unions, to registered money lenders, who charge huge rates of interest, or to informal money lenders, who charge mega interest rates. The Central Bank is not above considering the need for social banking. As this form of business is worth between €11 billion and €13 billion, it should not be dismissed out of hand. I hope the Minister, Deputy Killeen, can respond positively on behalf of Fianna Fáil to the Labour Party's moderate and modest amendments, which would uphold and strengthen this country's credit union movement and enable it to grow. We should not allow the credit union sector to be wiped out, which is the aspiration of certain commercial banks. They would like an additional €11 billion or €13 billion to be lodged into their accounts, and let the credit unions go on the hunt.
I support amendment No. 10, which has been proposed by Deputy Burton on behalf of the Labour Party. It is very worthwhile. In the short time available to me, I would like to refer specifically to amendment No. 53. I thank the Minister, Deputy Killeen, for allowing some additional amendments to be discussed as part of this group. The amendments before the House go to the heart of the issue with the credit union movement. The Joint Committee on Economic and Regulatory Affairs and the Joint Committee on Finance and the Public Service have had lengthy debates with the various bodies in the credit union sector. I understand the credit union movement, having met the Minister on a number of occasions, has reached a general consensus on the amendment to be made to section 35 of the Credit Union Act 1997. However, we are going into the unknown with the introduction of the new section 35A, which will give the regulator wide-ranging powers with regard to credit unions, ineffect.
A number of factors need to be emphasised in this regard. We all want sound and strong regulation of the credit union movement. That is also the aim of the movement itself. We want to protect the interests of deposit holders. We need to ensure we do not throw out the baby with the bath water, however. The taxpayer has bailed out the large banks. The €22 billion that has been put into Anglo Irish Bank has gone down the toilet. Money has been also put into the other banks. I do not know of a red cent that has been put into the credit union movement. There is a concern that the credit unions' deposit base will be ravaged by the banks. The credit union movement is based on lending the money the credit unions have on deposit. They do not go to the wholesale markets to borrow the money they lend. The banks that have taken such risks have wasted the hard-earned money of taxpayers.
The community-based credit union movement works by taking deposits as part of a saving culture, lending that money back into the community and making interest from the money it lends in order to pay a dividend. If credit unions cannot pay a dividend, they will not attract deposits. In such circumstances, the deposits will go instead to the banks, which are keen to raid the credit unions in any event, and the credit union movement will not be able to provide vital services to small people throughout this country. As a chartered accountant who worked as a sole practitioner for many years, I assure the House that many of my clients would have gone out of business in the 1990s if it had not been for the credit union movement. They could not get overdraft facilities from the banks. On Monday mornings, they used to go to their local credit union to get a bank draft before continuing to their local bank to lodge the draft and thereby stay in business. We owe the credit union movement something, but we owe the banks nothing.
Last night, I asked the Minister, Deputy Killeen, whether the Minister for Finance met the credit union movement before amendment No. 53 was tabled on Report Stage. I have not yet received an answer. I want to hear an answer. The credit union movement has worked with the Minister. We have had various meetings with the Minister. I have drawn up an amendment on behalf of the Fine Gael Party, but it does not appear to be on the list of Report Stage amendments. I will ensure it is tabled in the Seanad. The amendment will provide that the new section proposed in amendment No. 53, which combines sections 35 and 35A, "shall not come into effect" until an order for its commencement is laid before both Houses of the Oireachtas and an assessment of its impact on the credit union movement is undertaken and published.
Members should ensure their mobile phones are completely powered off.
The bottom line is that the credit union movement is entitled to have proper consultation with the Minister and to be assured that any regulation governing them is based on sound criteria. That is why we have proposed that an impact assessment should be carried out. We wanted a review to take place as part of the Government commission of inquiry before this legislation was introduced. As late as a week ago, the European Central Bank expressed its opinion that the independence of the Governor of the Central Bank and the commission is not being taken care of in this Bill. This legislation is being rushed. The credit union movement is entitled to a fair hearing, but it has not got it. The Minister for Finance has given it the run-around. That is not good enough.
There are credit unions in every parish, village, city and community in the country. Along with the GAA and the rugby and soccer organisations, the credit union movement represents the heart and soul of Ireland. The credit union is the small person's bank. The Government is about to guillotine the legislation it is foisting on the credit union movement. I am glad the Minister, Deputy Killeen, is allowing us to discuss amendment No. 53 with this group of amendments. I thank him for that. This measure will put the cart before the horse. There needs to be a proper impact study on the effect this regulation will have on the credit union sector, which we want to be sound. The great majority of credit unions are in a sound financial position. The many credit unions in the Minister of State's constituency of Clare are doing phenomenal work. I am familiar with the work that credit unions do for people in Limerick city and the surrounding rural areas. I hope the Minister for Finance will give us some comfort by accepting the amendment we will propose in the Seanad and thereby ensure the credit union movement is viable, strong and regulated in a way that does not choke it to death. If it is not able to survive, the banks we are currently bailing out will benefit. That would not be good enough.
I wish to say at the outset that there should be no mistake about it — the regulation of credit unions has not failed. As providers of financial services to communities, they are distinct and, in particular, socially focused. I hate to think what situation countless thousands of citizens and businesses would be in if they were unable to avail of the credit union network and disposition we currently enjoy. While the current situation is bad, it would be infinitely worse without the credit unions. I do not doubt that in such circumstances, the dole queues, the number of people on the emigrant boats and the extent of the poverty that is evident up and down the length and breadth of this State would be multiplied. Their role has been phenomenal and deserves to be acknowledged and given full credit.
It is important that the measures being introduced to — fix is hardly the right word — address and substantially improve the regulation of the banking sector do not adversely impact on the operations and success of the credit union movement. That would be an unacceptable outworking or by-product of what is contained in this legislation.
Sinn Féin agree wholeheartedly with amendment No. 10, as presented by Deputy Burton, which provides for the establishment of a credit unions consultative panel to represent and safeguard the interests of credit unions and, very importantly, the interests of the members of credit unions, because credit unions are all about their memberships.
One of the concerns validly expressed by the credit union movement is that the current consultative process in the sector is not adequate. It has been said to me and, I am sure, to other Deputies, that the advisory panels should be confined to the specific areas of review and not broadened out across the industry as a whole, as has so often happened. For example, the current practice of representatives of banks commenting, at panel level, on regulatory issues relating to credit unions is wholly inappropriate and should be brought to a stop. It is not the banks' business. If they minded their own business it would suit them better. That is one of the critical areas that needs to be kept in the back of our minds as we consider this matter.
The credit unions have played a phenomenal and unsung role, particularly in the past two or three years but also for decades before. In the past number of years they have helped families and small businesses to survive through this outrageously difficult financial situation, which was not brought about by any of those people or contributed to by the credit union movement throughout the country. It is a national movement.
I strongly support amendment No. 10 and I join with the earlier voices in urging the Minister and the Government to accept it in its entirety.
I support the amendments. The record of credit unions is superb. The situation in the movement is so different from what happened in other areas. Banks failed, the regulators failed but credit unions have not failed. We know there have been problems in some credit unions. In my own local credit union in Monaghan town there was a problem but the credit union officers dealt with it. When they found there was a difficulty they got in and, thankfully, have restored confidence in the credit union. I remember the day I left this House in a panic and hurried to Monaghan to check out the situation but I found that everything was covered and above board. No one lost a cent.
The record of the credit union structure and how it works is extraordinary. If the Minister proceeds with some of the proposed regulations he will make it impossible for those structures to continue to work. Many people would be out of business were it not for the credit unions. Many small companies had to go to credit unions, not only this year but in many previous years, to ensure they could continue in business. Banks simply refused them. These are the banks that this House supported. We gave €22.5 billion to Anglo Irish Bank and that money has, without question, gone down the tube.
The Bill contains credit union regulations that are totally unjustifiable and unworkable. For example, if two members of a family have jobs but one of them loses his or her job, it might make sense for them to extend the term of their loan. Even if they never missed a payment in their lives, that loan will be classified, under this legislation, as being impaired. They will be unable to get further credit for any other reason and they may be forced to resort to money lenders. What does this House allow money lenders to do? We allow them to charge up to 188% interest. What does that do for any individual who is in some slight trouble?
It is important to have regulation. I am not against it. However, it must be sensible and realistic. I hope the Minister will reconsider these amendments. As far back as December 2009, the Minister for Finance agreed to review credit unions and promised that nothing would be done until the review was completed. What has happened to that commitment? We want to make sure that credit unions are sustainable, and not money lenders. The availability of credit is vital.
I know from my clinics, as I am sure the Minister also knows, that little or no money is being given out by the main banks. If it is it is under terms that people cannot accept because to do so would put their families at risk. Credit unions allow companies to survive. I beg the Minister to ensure that sensible regulations are introduced and those that are nonsensical are withdrawn for the time being. Let us allow time for proper structures to be put in place.
I support the group of amendments, particularly amendment No. 53, in the name of Deputy Kieran O'Donnell and amendment No. 10, in the name of Deputy Joan Burton.
Despite the consultation that has, supposedly, taken place, the Minister and the Government seem to have ignored the opinions and concerns of credit unions and their members throughout the country. Does the Minister for Defence fully endorse, in his heart, the recommendations made in the Bill?
I come from a rural county in the west where the credit union network is the most extensive of all and where the banks now have very little interest in helping small business and ordinary people who work hard. This effort to strangle the credit unions and to deny them the freedom they have had is most unfortunate. An initiative was recently created by the credit unions and advertised in the public press. They proposed, in the absence of the banks, to help small businesses and give them access to funding. The funding was restricted yet it was not made available by the banks. The banks, through the regulator and the registrar of the credit union movement, told credit unions, individually, they could not embark on that type of lending because the banks claimed they were making credit available. They are not. Instead, they make proposals and give approvals but these approvals fall far short of the requirements of small businesses.
The Minister of State is propping up the banks and giving them greater leverage to kill off credit unions. Essentially, the Minister of State is driving people who urgently need small loans into the hands of moneylenders. That is the reality. Do we want that situation to develop once again? We thought we had eradicated it. Through the credit union network in the country many people have structured their financial requirements in times of need but now there is a return to a situation where moneylenders will be knocking on doors once more. I did not believe the Minister of State would take up the initiative to lead us in that direction.
A number of Deputies still wish to speak and I am anxious to allow adequate time for the Minister to reply. I ask Members to bear that in mind.
I, too, strongly support this amendment. The credit union movement is an integral part of community life in Ireland, particularly in my constituency, County Clare. I am sure my colleague, the Minister of State, Deputy Killeen, has met deputations from County Clare credit unions in his constituency office. Since Friday, when this latest bombshell was dropped, they have been in touch with me.
The credit union movement has been conned on this matter by Fianna Fáil and the Minister for Finance. They were duped and told, "We're going to sort this out. Don't kick up a racket — we'll look after the credit union movement". They have not done so and this Bill is where it counts. I appeal to the Minister of State to look favourably on the credit union movement, the wonderful work it does and the flexibility it can offer its members. When people encounter difficulties loans can be rescheduled. The country is now in a very difficult situation. People are under huge financial stress and the flexibility the credit union movement can offer its members was never more needed.
The new proposals would bring about considerable oversight of credit unions in terms of regulation. The credit union movement is not broken so there is no need to fix it or tamper with it. I strongly support this amendment.
I will not go over old ground but it is important to put on the record that this amendment makes sense. As a rural Deputy and as a Member of the Cabinet, the Minister of State, Deputy Killeen, has an obligation to take this issue seriously at a time when there is international as well as national debate about how the banking sector should go forward. Obviously, the unregulated international banking sector is not the way forward and as we cannot go back to the socialist-type models we must look at something in between. We have an in-between, a fundamentally democratic institution in the shape of the credit union, made up of local people in their local parishes, holding regular annual general meetings — factors fundamental to creating a mix between capitalism and socialism.
The Minister may smile. There are experts in studios, whether at the BBC, CNN, UTV or RTE, sitting around tables saying we need a mix between socialism and capitalism. The mix is there, right in front of the Minister's nose — the credit union model. I cite my local parish which has had a turnover of €30 million since 1992, with 3,000 members. This is staring at us straight in the face. I ask the Minister to accept these amendments because it makes sense to do so. I ask him not to make an umbrella regulation for all these individual, independent and different local institutions. A credit union institution in one part of County Donegal is different from one in another part of the county, never mind from others in County Cork or in the Minister's constituency of County Clare. They are unique and fundamentally democratic and they are the solution for forward looking banking sector reform.
I support these amendments, particularly Nos. 10 and 55, which are in the name of my colleague, Deputy Burton. The danger is that because of the catastrophe which has befallen us due to blind-eye regulation we will now swing 180 degrees the other way. The amendments introduced by the Minister, Nos. 35a and b, were an afterthought. Somebody said, “We are restructuring regulation dealing with reform in the Central Bank and the regulator — my God, this is our chance to include the credit unions”. Notwithstanding that a strategic review of credit unions is under way the opportunity was taken to include the credit unions in this fashion. The danger is that unless this is very carefully calibrated it could undermine the very ethos of the credit union movement. If one takes for example the matter of the provisions that might be imposed in respect of additional provisioning, that could obviate the payment of dividends at the year end, an essential part of what the credit union movement is about.
One might consider the terms used in the Bill about a "class" of credit unions and the capacity of the regulator to intervene in terms of a class of credit unions. As I understand it, a class of credit unions refers to any common characteristic that might exist. For example, a particular job-based credit union might have got into difficulty because it was over-generous in lending to people who otherwise might have been caught up in property speculation or something of the kind. Instead they went to their credit unions to raise moneys, not overtly for property and, as a result, the union ran into difficulty. The entire class of credit union, as I understand it, would be affected by the intervention of the regulator. These issues were not discussed with the people who know most about them. There is a real danger that the very ethos of the credit union movement will be undermined.
Deputy Burton's amendment No. 10 has, at least, the great merit of providing expertise from the people who know most to advise the bank about how it should proceed. It is a reasoned amendment that sets out in considerable detail what might be done. Regarding amendment No. 55, it was said to me that the Credit Union Act I introduced in 1997 makes provision for mergers and so on. Again, that can be an immensely sensitive issue. One might consider small — in the geographic sense — credit unions where in modern conditions some mergers or synergies may be apparent. Deputy Burton's amendment proposes an improvement in terms of how it would facilitate the voluntary merger of credit unions.
We are constrained for time and that is a shame, given the significance of this Bill and given the disaster that has befallen the country. This is worse than the Famine in some ways, yet the Government is rushing the Bill through the House and is giving entirely inadequate time to deal with it. I ask the Minister to take on board the amendments being proffered here, because the credit union movement is something precious and we need to calibrate carefully any changes to the regulatory environment.
It is clear from the contact that all of us have had from people representing credit unions over the past few weeks that they are not happy with the amendment proposed by the Minister. It will impose a whole new system of control on credit unions in what they feel is a completely unreasonable way. It will prevent credit unions allowing members to restructure their loans in a reasonable way. They are concerned that because of this imposition, they will not be able to operate on an individual basis to resolve individual problems. This is the kernel of the problem. The representatives of the credit unions feel that the long-term micromanagement of credit unions by the regulator or the registrar for credit unions under section 35A and section 35B, which are now present under the new section 2C , will certainly change the way credit unions are operating in this country.
Of the 2.5 million credit union members in this country, the average loan is less than €9,000, so we are looking at institutions that are very different from banks here. I appeal to the Minister, as a pragmatist, to accept the Labour Party and Fine Gael amendments in order to resolve the problem for credit unions and to allay their concerns about this Bill.
A Leas-Cheann Comhairle, I want to thank you for allowing the inclusion of all seven amendments that relate to the credit unions and I acknowledge the agreement of my colleagues on that. I am glad that everybody who wanted to make a contribution on this particular matter has had the opportunity to do so.
It is important to respond to one of the questions raised by Deputy O'Donnell about the meetings between the Minister for Finance with the credit union representative bodies. I understand that he engaged in detailed discussions with them on section 35 at two separate meetings in May and June. The Minister also met members of the Oireachtas Joint Committee on Economic and Regulatory Affairs. Having reflected on the views expressed, the Minister is introducing eight measures that will significantly amend the section 35 proposals.
The measures include the obligation on the Central Bank to establish an advisory group on credit unions, which is the subject of amendment No. 34, and there are seven other measures. The proposed sections 35A and 35B in the Bill are deleted. The easing of section 35 lending limits is now directly linked with the necessary balancing provisions in a cohesive framework within section 35. A specific statement is introduced in section 35(2)(c), meaning that the Central Bank may give notice to credit unions about lending requirements only where it considers it necessary for the adequate protection of members’ savings. A further new provision means that in applying requirements in respect of lending by credit unions, the Central Bank must have regard to the lending framework provided for in section 35.
Wider powers, originally intended for the Central Bank, in respect of loans and classes of loans under section 35A(1) have been dropped. Wider powers to enable the Central Bank to impose requirements other than by making rules under section 35A(3) have also been dropped. The systems controls and reporting requirements, originally provided for in section 35A(1)(f) are now specifically tied into the lending requirements in the section.
Taken together, the measures represent a significant package of changes that will establish a lending framework through which the registrar of credit unions can give notice of requirements arising under the relaxation of lending limits provided for in section 35 in a prudent, balanced and proportionate manner, but no more than that. Reasonable conditions and generous transitional arrangements will also apply.
Amendments Nos. 53 and 54 go a considerable way towards meeting the reasonable concerns of credit unions. At the same time, there is an irreducible minimum level of protection which depositors, credit union members and the general public are entitled to expect. Overall, the measures being brought here provide for this level of protection.
In regard to amendment No. 55, as the Minister for Finance pointed out, Part 9 of the Credit Union Act 1997 deals with the amalgamations and transfers of engagements. Deputy Rabbitte made a fair point about the manner in which that ought to be considered. It is adequately dealt with in the legislation of that time, even if he is inclined to feel that it might be usefully amended at this stage. Section 128 also provides that any two or more credit unions may amalgamate by forming a credit union as their successor. Each is required to agree with the rules of the new credit union and approval is necessary from the Central Bank.
There is agreement on all sides of the House that the credit union movement plays a very important——
On a point of order, if the Minister is not accepting my amendment No. 10, I want to give notice that I want to call a vote on it.
The Minister is entitled to reply and if we run up to 1 p.m. I must put the concluding motion.
On a point of order, I would like to move it now if the Minister will not accept it.
I am afraid not. The Minister is in possession and is entitled to reply.
Then if we vote at 1 p.m., it will be on this amendment.
Very good. The Minister might have regard to that in his own contribution.
I am doing my best to respond to the points made by various Deputies and to speak on the seven amendments that are the subject of this particular part of the debate. I did not interrupt any of the speakers from the other side and everybody who wished to make a contribution was able to do so, which is the way we ought to do business.
It seems that Deputy Burton's amendment seeks to provide for the establishment of a credit union consultative panel and she sets out in considerable detail the structure, form and arrangements involved. Even though I disagree quite strongly with elements of it, I commend her for the amount of work that went into it. On issues such as this, people in this House often make off the cuff remarks that are entirely ill-considered and do not address the specific element of the Bill under consideration. I want to acknowledge that Deputy Burton's amendment does that, notwithstanding the fact that I disagree with elements of it.
The Deputy's amendment seeks to impose on the bank a legal obligation to consult the proposed panel before making or issuing a policy document or a regulatory document, except in urgent circumstances.
My concern is that the amendment seeks to reverse the clear intention in the legislation to dissolve the two existing consultative panels. That is key to the difficulty I have with amendment No. 10. It is important to bear in mind that dissolving the panels will establish unequivocally the separation of the bank's governance and accountability structures and the organisation and operational independence of the bank from the regulated providers of financial services.
While I agree with the points made by many Members on, as Deputy Ó Caoláin said, the social aspect of the services provided by the credit union movement, in circumstances where this legislation seeks to address the enormous difficulties outlined by several speakers last night, today and on Second and Committee Stages, it would be folly to undermine the central tenet of what it is setting about, which is to dismantle the existing panels and their effect.
Deputy Burton's amendment would seem to compromise the bank's integrity by making the regulatory functions of the bank in respect of credit unions subservient and accountable to a panel representing the interests of the regulated entities. In many respects, the Regling and Watson report and Professor Honohan's report point to the difficulties that arose in the banking sector when this exact provision was in place. The Deputy's amendment flies in the face of the conclusions of those reports. I know that Deputy Burton would draw a very clear distinction between the role, size and make-up of the credit unions and the other elements of the banking sector but in this legislation it is important we address the entirety of what has caused the difficulty.
I am loth to interrupt the Minister but I must now put the following question, in accordance with an order of the Dáil of this day, on No. 21, the Central Bank Reform Bill 2010 — Fourth and Fifth Stages: "That the amendments set down by the Minister for Finance and not disposed of, are hereby made to the Bill; Fourth Stage is hereby completed; and the Bill is hereby passed." Is that agreed?
On a point of order, I regret the Minister did not allow time for amendment No. 10 to be voted on and for that reason we will not support the proposal that the remaining amendments be made to the Bill.
I wasted the least amount of time.
I did not say the Minister wasted time.
This question is on the overall Bill?
It is on the overall Bill.
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