I move: "That the Bill be now read a Second Time."
I am very pleased to have the opportunity to present the Credit Union (Amendment) Bill 2021. This Bill proposes to amend the objects of credit unions in order to allow them to extend the range of services they can provide to their members without a long list of permissions and processes, as is currently required by the Central Bank. As it stands, the list of services that any credit union can provide without that special permission is enumerated in the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016. This list includes services like the provision of standing orders, direct debits, money transfers, etc. The list dates from 2004. It was amended in 2006 to allow for the introduction of personal retirement savings accounts, PRSAs, and in 2016 to allow for insurance services to be provided on an introduction basis. However, this list is out of date and it does not take into account the massive changes in the nature and provision of financial services since 2004. If an individual credit union wants to provide additional services outside of this narrow and outdated list, it must apply on an individual basis to the Central Bank. The level of red tape, bureaucracy and permissions required is stopping many credit unions from applying. This, in essence, means that many credit unions are not permitted to reach their full potential on behalf of their members and consumers.
I emphasise that I am not asking for special treatment in this context. I am asking for equal treatment with other financial institutions. Credit unions would have to operate fully and wholly in compliance with all the relevant legislation that is already in place governing the financial services they might wish to offer to their members. Whether an individual credit union can offer a regulated service to its members should not be at the sole discretion of the Central Bank. Sometimes the impression is given that credit unions, because of their voluntary and community nature, lack the necessary expertise to extend their range of services. I refer, for example, to the provision of debit cards to credit union customers. The reality is that systems for the provision of debit cards are already in place. This expertise is held centrally by the card companies and by the credit unions' payment providers. These payment providers are already in place. They are already regulated and authorised by the Central Bank. They look after compliance and individual credit unions have to do small amounts locally. In effect, credit unions would be piggybacking on the tried, trusted and regulated systems already in place in order to extend their range of services. That is a reasonable ask.
This Bill also seeks to provide for the establishment of a credit union policy committee. This is not a new idea as the template is already in place with the Credit Union Advisory Committee, CUAC, which is already set up to advise the Minister for Finance on credit union matters. I am proposing a policy committee that would review the impact of Central Bank policy on credit unions and provide feedback to the Central Bank on the impact of its policy decisions. This committee would have a formal consultative role with the Central Bank and the Central Bank would be expected to have regard to its deliberations. This would in no way compromise the independence of the Central Bank, just as CUAC does not compromise the Minister's decision-making process. Rather, it would provide an independent and informed perspective to the Central Bank on the broader impact of its policy and oversight process. Its role would be consultative but it would be very valuable. The committee I propose would be set up by the Minister and would include members with expertise and experience in the credit union sector.
This Bill would also provide for a number of miscellaneous matters relating to credit unions. First, the Central Bank would need to obtain the Minister's consent when prescribing the minimum regulatory reserve requirements for credit unions. Currently, the Central Bank prescribes the minimum regulatory reserve ratio and it has set it at 10% of the assets of the credit union. It is worth mentioning that the 10% reserve required for credit unions is much higher than what is required for high street banks in Ireland. Given our relatively recent banking crash and its hugely negative impact on citizens, small businesses and our economy, I am not convinced by the logic of requiring much higher reserves from credit unions than from banks. It is also important to note that we are out of kilter with the reserves required for credit unions in countries like the US, Canada and Australia, where the credit union movement is very strong. However, my personal view is one thing. The essential point here is not the level of regulatory reserve required for credit unions by the Central Bank but that the Minister of State must give his consent to the figure proposed by the Central Bank. There is precedent here. For example, when the Central Bank decides on the industry levels to be applied in order to fund its activities, the Minister has to give consent. I do not believe that compromises the independence of the Central Bank in any way.
This Bill also proposes that when amending a common bond, the Central Bank shall have regard to the common bond of other credit unions and ensure there is no overlap. The common bond in credit unions is a factor that unites the members of the credit union together. The principle of the common bond is that it enables members to know and trust each other. It also provides a certain level of solidarity and support and its unique nature should not be compromised.
The Bill also proposes that the Central Bank will administer the system of regulation and supervision of credit unions in an appropriate and proportionate way, with a view to the protection of the community and volunteer ethos of credit unions. This is crucial because this is what distinguishes credit unions from other financial institutions.
The context of my proposals today is important. The truth is it is no accident that credit unions are time and again ranked as Ireland's most trusted organisations. This is because they are not-for-profit, community-based, volunteer-led organisations that are owned by their members. I have said it many times before: if we were trying to design a financial institution to act as a counterpoint to the profit-driven, investor-led model of public banking, we would invent credit unions. Thankfully, we do not have to do that. However, we cannot sit back and watch as the sustainability of credit unions is left uncertain. We as legislators need to act and my amendment to the Credit Union Act is part of that process.
To say that the viability of the credit union movement is threatened is a strong statement, but after 20 years of listening to and visiting credit union members and staff in my former 15-county European constituency, I have serious concerns about the medium- to longer-term sustainability of many credit unions, as they struggle to serve and remain part of their communities.
I have received a number of emails from credit unions throughout the country in recent times and many of their heartfelt statements support my contention that, at best, the future sustainability of many credit unions is not guaranteed and, at worst, is under threat. One credit union has informed me of some of the regulatory risks facing the sector:
We are a small credit union and there is the feeling and impression that the Central Bank wants us to merge into a bigger credit union. This has been the impression given to us at various PRISM visits and while the Central Bank does not openly acknowledge this, they do not refute it. Some of these engagements have been less than civil and this has quite an impact on a credit union's motivation and enthusiasm to provide a financial service to the local community.
Another credit union has told me:
There is a teacher-student relationship between the Central Bank and credit unions. We are effectively micromanaged by the Central Bank as they set out what needs to be included in almost all of our specific policies and there is no room for negotiation. The Central Bank implements regulation and provides guidance without any first-hand experience of the time, labour and resources required to implement the bureaucratic burden and there is no impact assessment of the regulation undertaken.
This is one of the main reasons I propose the setting up of the credit union policy committee. Another credit union has suggested:
The quantity and cost of regulation leads credit unions to question if they are sustainable going forward. There has been a push for change in the regulation, but this has been met with stiff resistance. Board succession has become one of the main risks facing credit unions as the Central Bank continues to pile pressure on boards without considering how they are demoralising and altering the culture of credit unions.
The Minister and I know that once this is gone, it is impossible to replace. I have quoted strong words, but I have heard similar strong words in the offices of credit unions throughout the country for many years and they are not an exaggeration. They are the words of a hugely valuable and important part of the financial sector in this country. Credit unions are, in many cases, the glue that supports many individuals and communities and helps to keep them together.
When the financial crash started in 2008, our banks failed us and burdened the citizens of this State with huge levels of debt. A very small percentage of credit unions found themselves in trouble, but they did not cost the State anything. Today, credit unions remain as a bulwark against the exclusively profit-driven, investor-led model of financial institutions. While such institutions have an important role, we need that balance, counterpoint and opportunity for a community, volunteer-led, not-for-profit financial institution to serve local communities and individuals.
I represent a constituency that has 13 credit unions serving their local communities. They are an invaluable asset and it is time we, as legislators, stepped up to the mark and fully recognised their value and importance in the financial life of our communities. I expect many, if not all, Members to support the role of credit unions in the provision of financial services, but supporting institutions such as the credit unions requires more than fine words and praiseworthy phrases and a general feeling of overall support.
We, as legislators, have a responsibility to legislate to ensure the viability of small, medium and large credit unions. It is easy to say we support the credit unions, but we only support them if proportionate and appropriate legislation is in place. In that context, I commend this Bill to the House.