Dáil Éireann díospóireacht -
Tuesday, 10 Dec 2002

Vol. 559 No. 1

Written Answers. - Financial Services Regulation.

John Deasy

Ceist:

133 Mr. Deasy asked the Minister for Finance his proposals to ensure that the new financial regulatory authority, IFSRA, will regulate the credit unions in a way which recognises them as a not for profit organisation; if it is his intention that they should be regulated in the same manner as other lending institutions; and if he will make a statement on the matter. [25669/02]

Minister for Finance (Mr. McCreevy)

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.

As the Deputy may be aware, credit unions have not been regulated in the same way as banks. They have been regulated under separate legislation, viz. 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 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.

However, I have signalled my intention to propose amendments on 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.

I understand that the new chief executivedesignate and the acting secretary to the interim Irish Financial Services Regulatory Authority, 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 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 their acceptance of all these principles, are proposing a separate statutory post of registrar of credit unions who will work under the requirements and protections of the Credit Union Act. IFSRA wants to work positively with the ILCU. In this regard, they have stated that they are open to discussing the valuable role that the ILCUs field officers play in assisting league members. IFSRAs only concern with the legislation as currently drafted is the accountability of the registrar of credit unions.

In conclusion, 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.

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 am proposing 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.

I should say that 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.