Deputy Finian McGrath is sharing time with Deputies Mick Wallace, Michael Fitzmaurice, Richard Boyd Barrett and Maureen O'Sullivan.
Credit Unions: Motion (Resumed) [Private Members]
The following motion was moved by Deputy Michael McGrath on Tuesday, 23 June 2015:
"That Dáil Éireann:
agrees that:
— the Government has no clear policy to support the strategic growth and development of credit unions in Ireland;
notes that:
— the credit union movement is critical to the economic and social well-being of communities all over Ireland with almost 3 million members and nearly 400 offices nationally;
— the sector, offering primarily savings and loan services, employs 4,000 people and has almost 10,000 volunteers;
— credit unions have survived the crisis well with just 1% of credit unions needing State funding support since the financial crisis began;
— the not-for-profit and independent nature of credit unions is vital to the success of the sector;
— in other jurisdictions, the role and function of credit unions is clearly set out at a national policy level and credit unions have been able to develop and grow the products and services that they offer members; and
— with the necessary infrastructure development and support, credit unions could develop into a vibrant, not-for-profit and competitive alternative within the financial services sector in Ireland;
is concerned that:
— the sector is overburdened with restrictive limitations which are disproportionate to the nature of its lending and this is stifling the growth potential of credit unions;
— 35% of all credit unions have been operating with lending restrictions for a period of five years or more;
— current Government policies do not support credit unions developing additional products and services and not a single credit union has received approval for additional services since the banking crisis began;
— the approval process for credit unions seeking to engage in services such as debit cards is unclear;
— transfers of engagements and mergers seem to be the only solution being progressed at the moment with no clear view as to what the long-term positioning of these larger credit unions will be;
— section 35 of the Credit Union Act 1997 restricts the percentage of a credit union's loan book that can extend beyond a ten-year term, thereby restricting credit unions from engaging in any meaningful long-term lending, including mortgages;
— section 35 of the Credit Union Act 1997 further restricts a credit union from lending to any members for a period of one year who have altered their repayments, while no such restrictions apply to the banking sector, thereby placing credit unions at a disadvantage;
— mortgage customers in arrears are effectively forced to rely exclusively on banks or moneylenders for credit;
— recent legislative changes have had the effect of further disadvantaging credit unions and given a competitive advantage to the banking sector;
— the Personal Insolvency Act 2012 has had a disproportionately negative impact on credit unions vis-à-vis other financial institutions;
— the reclassification of credit union funds under Basel III rules has given banks a competitive advantage in attracting deposits;
— the European Bank Recovery and Resolution Directive, transposed into Irish Law in December 2014, offers no protection to credit unions;
— the proposed legislation in the most recent consultation paper, Consultation on Regulations for Credit Unions, on commencement of the remaining sections of the 2012 Act, CP88, issued by the Central Bank of Ireland, CBI, further diminishes the competitive position of credit unions;
— the proposed cap on savings has potential to cause reputational damage to credit unions, will drive funds from the credit union sector into the banking sector and distort competition between the banking and credit union sectors for new deposits;
— the proposed liquidity requirements for less than eight days will diminish any potential for earnings on those deposits for credit unions; and
— the combined effect of all of these factors, which are outside the credit unions' control, could seriously impair the credit unions' ability to grow and flourish and will ultimately lead to the weakening of the sector;
and calls for:
— the Minister for Finance to bring forward a White Paper on the role of the credit union sector within the broader financial services sector in Ireland;
— the establishment of an industry-led forum with representation from all stakeholders that examines the future growth potential of credit unions in Ireland;
— investment in infrastructure development within the sector that will facilitate the growth and development of products and services offered by credit unions;
— a review of section 35 of the Credit Union Act 1997 relating to restrictions on rescheduled loans and term limits on lending;
— a review of the process for the approval of additional services;
— financial impact analysis to be conducted on the extent of losses incurred by credit unions arising from the Personal Insolvency Act 2012;
— an examination of the Personal Insolvency Act 2012 by the Competition and Consumer Protection Commission;
— financial impact analysis to be conducted on any proposed future regulatory changes or additional guidance to ensure that such changes will not damage the sector's income potential;
— appropriate and timely consideration to be given to the impact on the credit union sector of decisions at a European level that affect them; and
— the CBI, in its consumer protection role, to engage directly with credit unions to establish the impact the current legislative and regulatory restrictions are having on communities."
Debate resumed on amendment No. 1:
To delete all words after “Dáil Éireann” and substitute the following:
“notes that:
— the Government has a clear policy to support the strategic growth and development of credit unions in Ireland as set out in the report of the Commission on Credit Unions and recommendations;
— the safety of members' savings and the security of the credit union sector as a whole are priorities for this Government. The Government recognises the important role of credit unions as a volunteer co-operative movement in this country and also the importance of getting lending going in the economy;
— the credit union movement is critical to the economic and social well-being of communities all over Ireland with almost 3 million members and nearly 400 offices nationally;
— the sector, offering primarily savings and loan services, employs 4,000 people and has almost 10,000 volunteers;
— credit unions have survived the crisis well with just 1% of credit unions needing State funding support since the financial crisis began;
— the not-for-profit and independent nature of credit unions is vital to the success of the sector;
— this Government has:
— put in place a number of measures to ensure that credit unions can continue to provide vital services to their members and to ensure the stability of the sector into the future;
— established the Commission on Credit Unions, which reviewed the future of the credit union movement and made recommendations in relation to the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect members’ savings and financial stability; and
— accepted fully the report of the Commission on Credit Unions and its recommendations;
— the Commission on Credit Unions participants agreed to the recommendations and that the membership of the commission included members of the credit union representative bodies and other stakeholders;
— over 60 recommendations from the report of the Commission on Credit Unions have been implemented in the Credit Union and Co-operation with Overseas Regulators Act 2012;
— the Government established the Credit Union Restructuring Board, ReBo, which, to date, has assisted with 20 mergers involving a total of 48 credit unions; a further 121 credit unions are currently being assisted in ongoing merger projects and ReBo has met with 338 individual credit union boards since coming into operation;
— the Minister for Finance will conduct a review of ReBo this year to determine whether ReBo has completed the performance of its function;
— the Government:
— established the Credit Union Fund (Stabilisation) Levy Regulations 2014 to support credit unions that are undercapitalised but otherwise viable;
— has made available €250 million for voluntary restructuring of credit unions facilitated by ReBo. In line with recommendations of the Commission on Credit Unions, restructuring is being carried out on a voluntary, incentivised and time-bound basis; and
— has made available €250 million for resolution purposes. To date, the resources of the Credit Institutions Resolution Fund have been utilised to fund the resolution of four credit unions;
— in negotiating the bank recovery and resolution directive, BRRD, a decision was made to apply the directive only to credit institutions which were within the scope of the capital requirements directive, CRD. This was done in order to ensure that excessive demands were not placed on small credit institutions such as credit unions. If BRRD were to be applied to credit unions there would be a considerable cost in the form of yearly contributions. There would also be considerable additional requirements in relation to recovery and resolution planning which would take up a disproportionate amount of resources. Credit unions continue to be covered under the domestic resolution regime. The contributions associated with this are less than would be charged under BRRD;
— the Personal Insolvency Act 2012 applies only to a debtor who is proved to be insolvent. Credit unions and other creditors remain entitled to all other legal means of enforcing debts due to them, including bankruptcy, which is in practice the main alternative option for creditors holding unsecured debts. The Personal Insolvency Act 2012 seeks to provide an additional avenue for creditors and an insolvent debtor to reach agreement out of court on resolving unsustainable debts. This provides an opportunity for unsecured creditors to recover more of the debt due, than would be available to them via bankruptcy or other legal avenues for enforcement, by avoiding the need for enforcement, legal and court costs;
— the current Credit Union Advisory Committee, CUAC, was established in September 2014 for a period of three years to advise the Minister for Finance regarding the improvement of the management of credit unions, the protection of the interests of members and any other matters the Minister may seek the advice of the committee on;
— the CUAC has met with all credit union representative bodies and other stakeholders since it was established; and
— the CUAC has carried out a survey of credit unions which will provide up to date information on the sector in terms of demographics and financial characteristics.”
- Minister for Finance
I thank the Acting Chairman for the opportunity to speak on this very important Private Members' debate on credit unions and their role in Irish society. I must declare a vested interest in this issue, as I was one of the founder members of the Irish National Teachers' Organisation, INTO, credit union, of which I am very proud. I rate very highly the credit union movement, which has played an important part in the strategic growth and development of the country. It can also play a major part in the recovery following the economic crash and the disastrous decisions by some senior bankers. The credit union movement has over 3 million members and nearly 400 local offices. It also employs in the region of 4,000 people and has almost 10,000 volunteers. That is why it is such a significant player, with just 1% of credit unions needing State funding or support since the financial crisis began.
I can see a major positive role for the credit unions as they could develop into a vibrant not-for-profit and competitive alternative within the financial services. I also support the principle of public banking. We have long viewed the German savings bank model as a natural evolutionary step for Irish credit unions. Both share common principles and key objectives, such as transforming local savings into prudent and beneficial local lending; promoting saving; financial inclusion and co-operation between co-operatives; and serving the financial needs of local communities responsibly with democratic governance. Public banking and how it may best complement and advance Ireland's credit unions is very important. I am confident that regulatory obstacles can be overcome with the expertise and capacity of many ideas and proposals coming from Germany.
Public savings banks can greatly advance social and economic justice. I call on the Minister for Finance to bring forward a White Paper on the role of the credit union sector within the broader financial sectors in Ireland, to review section 35 of the Credit Union Act 1997 and to review the process for the approval of additional services.
Unlike Deputy Finian McGrath, I cannot claim to have set up a credit union but my father did, in the Wellingtonbridge area of County Wexford many years ago. Most of us agree that credit unions have been of great service to many people. I do not think anyone could disagree. They are definitely worth preserving and need greater freedom to operate. Restrictions are placed on them and it is unlikely we will see a neoliberal Government like the current one or the last one give them a real chance to compete with the large banks. I believe there is a bias there. The banks are wary of the credit unions because they could replace a lot of profitable work for the banks.
Post offices provided a wonderful service and it is to the detriment of society that we have allowed so many of them to close. I fear that we might ever allow credit unions to fall in any way short of strong Government support. There is a real co-operative nature to credit unions: a huge volunteer element is involved with them. They tick all the boxes for an organisation that brings positivity to society. The more underprivileged areas are more dependent on credit unions and post offices than are the built-up areas.
I thank Deputy Halligan for giving me the speaking time. In rural Ireland, the credit unions are the new financial institution, even though they have been around for years. After the economic crash, the banks, which the people had bailed out, gave the two fingers to the smaller rural towns. There to pick up the slack were the credit unions.
In the credit union in every small village there is a person who will smile at the customers and talk to them, not a machine they have to press buttons on. We have gone to a stage where, when elderly people, some of them in their 80s, go into a bank, they are being shown by staff how to press buttons. There is no one-to-one service like there was one time. The credit unions will help those old people and look after them.
The Minister must facilitate the credit unions to be full members of the Irish payment system. People who are in business or doing any type of work need a system that allows direct debits, debit cards and, if at all possible, chequebook accounts. The credit unions will now have to be the new banks. The Minister needs to do this. From what I understand, he was bullied into a situation by the banks a few years ago whereby this facility was not allowed. I spoke to a credit union today in Glenamaddy which, if it was to get this clearance system for itself, would have to pay €25,000, which is unviable. This is the least the Minister can do. We need basic payment access.
In our area, in a 10 km radius, the credit union brought out a 5% loan for improvements on farms and houses. It has injected €1 million into a small area and created employment. Sadly, the Government seems not to want to give the credit unions the scope. If rural Ireland is to be revitalised - we hear all the parties and everyone going on about it - giving the credit unions access is the first link in the chain.
It is a topsy-turvy, upside down world in many ways. Nowhere is that more the case than in our attitude to banking. The commercial, for-profit banking sector dragged the country, Europe and much of the global economy to its knees because of its ruthless pursuit of profit. We bailed the banks out to the tune of the best part of €100 billion. Despite that, we continue to give them vetoes and to operate a so-called arm's length principle; even when we own the banks, we do not interfere in any way with what they do. They are doing things that are obviously detrimental when they refuse loans to people to whom they should have given them, and lend to others who should not be given loans. Meanwhile, the credit union sector had no hand or part in the financial crash, is not for profit, and has a democratic structure and a mandate which concerns the interests of the community and society.
They are asking to contribute in a positive way to the economy, the community and our society, yet they have restrictions imposed on them. What sort of set of priorities is that? Have we learned nothing from the financial crash? Have we not learned that we need a completely different banking and credit model? In so far as any model of what that might look like exists, it is the credit unions. We should be bending over backwards to consult with them.
When the credit union Bill was coming through, the credit unions were virtually pleading with the Minister and saying that they had money they would like to invest in social housing. Did the Minister ever go to meet them and discuss that? We have a massive social housing crisis and the credit unions are saying they want to put money into social housing, yet the Government can say it has no money for social housing.
While the first credit union was located on the south side of Dublin, there were two north side connections I want to mention, the first being the talk given by Seamus MacEoin in Gardiner Street, and the other involving Nora Herlihy, who allowed her house in Phibsborough to be used for the first meeting of the Irish Credit Union League, the precursor of the Irish League of Credit Unions. Both were recognised when President de Valera invited them to Áras an Uachtaráin when he was signing the Credit Union Act in 1966.
Credit unions have been invaluable for all our communities. I know the ones in Dublin central, East Wall, North Wall, Cabra, Phibsborough and Aughrim Street, as well as the one of which I am a member, the ASTI credit union. They came under enormous pressure due to developments in the financial sector. The philosophy of one Minister for Finance was, "When I have it, I spend it," which was absolutely contrary to the tradition of prudence and caution associated with the credit unions.
The stakeholder forum is of particular merit, but I would like it to be remembered that credit union members paying up to 8.99% interest on loans are also stakeholders. The credit unions are a viable alternative to moneylenders, both legal and illegal. Two other people who paid for their sacrifice and their integrity in trying to hold onto the credit unions were Phil Ryan and Jim O'Crowley, who lost their jobs after taking part in the "Seven Day" programme.
The other aspect of credit unions is their social finance policy. They see that as crucial and as part of the ethos of their operation, which encompasses their not-for-profit status, their co-operative nature, their position within the communities and the potential they have going forward.
I understand Deputies Mary Mitchell O'Connor, Paul Connaughton, Noel Harrington, Martin Heydon, John O'Mahony, Eamonn Maloney, Dan Neville, Patrick O'Donovan, Sean Sherlock and Michelle Mulherin are sharing time.
I welcome the opportunity to discuss the significant role of credit unions throughout Ireland. What Fianna Fáil has put forward is a motion that in reality has no clear policy, unless "clear policy" means going back to the days of unsustainable lending and borrowing. Credit unions provide a unique and local service that we are all familiar with, and the Government certainly recognises and supports that role. As the Minister said last night, within months of coming into government in 2011, we quickly established the Commission on Credit Unions to review and strengthen their role. However, what did Fianna Fáil do in previous Governments? Was it looking out for their sustainability and the interests of credit union members when it led this country into recession?
In my constituency of Dun Laoghaire, we have a number of successful local credit unions, including Shankill-Sallynoggin and Dún Laoghaire-Glasthule. At the heart of each of these branches is their volunteer ethos and community focus. The familiarity and feeling of support is unique to credit unions and their not-for-profit mandate has ensured that credit union members' interests have always been their priority. Credit unions know their members, their credit risk and their background. As a former principal of a school, I remember credit union representatives visiting the school and educating young schoolchildren about the merits of saving and wise money management.
In some cases, the credit union would be more accessible to some communities than even their local bank or post office. They offer an array of services, which I know is greatly welcomed by many of my constituents, particularly elderly people. However, the role of the credit union must be differentiated from the banks. We cannot have a repeat of the past, with some credit unions acting like banks, over-lending and running themselves and other credit unions into great difficulty. We cannot go back to easy lending and unsustainable borrowing.
The Government recognises the vital importance of the credit union to the local community and has allocated €500 million to protect branches in difficulty. I welcome the continued innovation and diversification of the role and services offered by credit unions, so long as a prudent approach is taken that will continue to maintain the sector's stability while protecting the savings of its members.
I am grateful for the opportunity to speak on the motion. From listening to some of the Technical Group contributions, one would almost get the impression we announced the closure of 400 credit unions today, which is simply not the case. The motion in front of us is about the last four years and the role of credit unions into the future. There is no doubt this Government put an emphasis on protecting the credit union structure in what were extremely difficult times. There is now a situation in which ReBo, whose representatives some of us met today, has €250 million at its disposal in trying to help credit unions that may be in financial difficulty to merge in order to create a stronger unity in the years ahead. With regard to the commission that was set up in 2012, I believe 60 of its recommendations have been implemented thus far. Therefore, to say the Government has not had an interest in the credit union movement is incorrect.
The role credit unions play in all of our communities has been clearly stated. This is not just a rural issue and many towns and cities have a very active and vibrant credit union movement. This is where students go to get their college loans and others go to get their first car loans or loans for small works on their houses. The reason the credit union is of such fundamental importance is that it is operated on a local basis by local people. We cannot underestimate the role volunteers have played in the credit unions to date and will play into the future.
That is where the conversation must move on to - namely, what is the future for the credit unions? We now see a situation, particularly in small towns and villages of rural Ireland, where the mainline banks have moved out without thinking twice about it. We need to put in place proper financial organisations and we already have the vehicle to do that - the credit unions. What they want now is a bit of ambition being shown on their behalf in order to allow them to do more.
There are concerns about the level of regulation. A small number of credit unions got into trouble during the financial crisis, and we should not pretend otherwise. However, regulations and structures were introduced, and some credit unions needed more help than others. What we are now talking about is how we move the credit unions onwards. One idea is more collaboration with the other institutions in our towns and villages, for example, with the post office network. Another is to allow more ATM current accounts. These are the ways in which we will drive the credit union movement forward and make it more relevant to people in our communities, particularly young people. Many elderly people also want these services but they want more offered with them.
There is a very bright future for the credit union movement. However, instead of looking at the past four years, during which I believe the Government has done everything it can to protect the credit union movement, let us talk about the next five to ten years and how we will bolster the credit unions and encourage more people to use their services. We would be better off doing that than some of the nonsense we have heard so far.
I welcome the opportunity to speak on the motion. I compliment the work the credit unions have been doing throughout the country over the last 50 or more years in supporting their communities.
The intent behind the motion is curious. We know what the problems are. Many credit unions, through the Irish League of Credit Unions, have been very clear about how they would see their role going forward. However, I do not see any part of the motion in which Fianna Fáil suggests abolishing the regulatory authority, changing the regulations or banning the restrictions on credit unions that have been badly affected by the crash, which affected every financial institution in this country. It cannot say that legally and it cannot say it politically, not while there is a banking crisis and while there are issues about the impact of light-touch regulation.
It will focus on the policy and attack the Government for the perceived lack of policy surrounding credit unions in the future. It ignores the fact that the Government has a clear policy and strategy on credit unions. It has set up a commission on credit unions and established the restructuring board, ReBo. It has published the Credit Union and Co-operation with Overseas Regulator Act 2012. It has introduced the stabilisation support scheme and a fund of almost €500 million to support the credit union movement which many credit unions have utilised.
I refer to four credit unions that have found themselves in critical trouble, three of which have used the fund successfully and were transferred to other credit unions and one of which was liquidated. That which was liquidated was one of which I was a member. It was based seven doors away from mine and the trail of destruction that could have been left behind after its liquidation does not bear thinking about. There were job losses, a loss of prestige and status and a loss to the credit union movement and the town, but, thankfully, the depositors, due to a fluke involving the €100,000 guarantee, did not lose their money. Things had to be worked out through the assistance of another credit union.
In any other business I am a keen supporter of as little regulation as possible. Most businesses want to be left alone. However, where citizens' money is concerned we have to have appropriate regulation and appeals mechanisms. It is worth noting that credit unions are being released from restrictions very regularly and it is to be hoped that will continue towards the end of this year. The closing date for appeals is 30 September. The regulations are appropriate and necessary for now. It is to be hoped they will change as credit unions appeal them and become capitalised. We heard from ReBo that credit unions are adequately capitalised.
The motion does not address that or look to the future. Rather, it has cynical, opportunistic and hypocritical wording and attacks the Government for something it did not do. It does not consider what the credit union movement wants.
I would like to speak in favour of the credit union movement and the great work it does. It has 3 million members, nearly 400 offices, employs 4,000 people and 10,000 volunteers. The statistics speak for themselves. It is a movement that was established for the people, by the people. The founders of the credit union movement in the 1950s recognised the major difficulties and lack of confidence caused by mismanagement and a lack of money. They resolved to identify a system that would allow people to gain more control over their finances. Now, almost 60 years on, the same principles apply. There still remains a major need for credit unions in this country and that is why Government policy, which is to support the strategic growth and development of credit unions in Ireland, as set out in the recommendations in the report of the commission on credit unions, is so important.
I welcome the League of Credit Unions document, Six Strategic Steps Towards 2016, and look forward to working with the sector to address its concerns and realise its goals. Just as important as protecting the credit unions is the need to protect members' interests, that is, members who trust the credit union movement with their savings. I speak from bitter experience, as many of my constituents in Newbridge endured a few horrendous years with the loss of a credit union.
I remind the House of some of the issues that emerged from the lending practices there. Some €2.8 million of an individual loan of €3.2 million, which was well in excess of the Credit Union Act restriction, remained outstanding at the time of transfer to PTSB. Over 51% of loans exceeded the five year duration, as opposed to the maximum of 20% set out in the Act. Some 18.5% of loans exceeded ten years, compared to the maximum of 10% permitted. The average loan size in Newbridge Credit Union was €17,281, compared to an average credit union loan of €7,764. There were 26 loans with an average value of €550,000 which were seriously distressed. These figures illustrate that the credit union was operating in a very different way to a normal credit union. It was the exception, rather than the rule, but the bitter experience we had proves that we need regulation.
Fianna Fáil's motion is a bit rich. It accuses those of us in government of not protecting the credit union movement when it was its period of light touch regulation that inflicted the damage on Newbridge and put members' money at risk. It was this Government that stepped in and protected every last cent of the savings of members of Newbridge Credit Union. It was this Government which introduced changes which will ensure that what happened in Newbridge can never happen again.
Some €250 million is available for the voluntary restructuring of credit unions facilitated by ReBo, some €250 million has been made available for resolution purposes and, to date, resources from the credit institutions resolution fund have been utilised to fund the resolution of four credit unions. Like our extensive post office network, our credit unions are a fantastic resource and have an important role to play in providing the necessary small loans that people cannot always access elsewhere. I welcome the announcement this week and look forward to working with the credit union movement to ensure the lending and role it plays in communities continue
I welcome the opportunity to speak on the motion. I acknowledge the important role credit unions have played in rural and urban communities the length and breadth of the land. I have seen at first hand the benefits of my local credit union to the community. Credit unions were set up many years ago to ensure that people who needed to borrow or save money could do so and to keep money circulating within communities.
The financial services they provide involve a bottom-up approach. They have a personal touch that has been missing in the banks in recent years. They have convenient opening hours and open at weekends and so on, which suits local communities. They have a volunteer ethos and provide 4,000 jobs and sponsorships and educate young people in financial affairs in schools at an early age. There are many benefits. They have been of great assistance in providing small loans and kept thousands of families throughout the country out of the hands of sharks and moneylenders.
I do not want to get into political point-scoring because it does not do anyone any good. There are two extremes in terms of the motion and the counter-motion. On the one hand there is a proposal to get rid of all regulation and on the other there is a proposal to make the rules so stringent they cannot operate. There is a middle ground and there should be a meeting of minds. I studied the League of Credit Unions submission on the transposition of the deposit guarantee directive and the fact that member states have some discretion. All of the different factors should be considered. Consultation is taking place and Ministers are receiving advice.
I read a contribution to the debate yesterday which welcomed approaches and positive suggestions. Rather than Members shouting at each across the floor, it should be possible to come to a consensus on this. I note that in the initial discussions on the other great financial institutions in our villages and town, that is, post offices, some efforts are being made to bring them together or share services, which I welcome. I look forward to a positive outcome and for credit unions to continue to provide a great service the length and breadth of the country.
I do not want to go back over the arguments that have been advanced about the merits of the credit union movement because they are very well known to us. Also well known to us is the intervention of the current Government during the difficulties a small number of credit unions ran into.
I am concerned about the protection of the unique ethos of the credit union movement. I have some reason to fear for the future. Of course there must be regulation, and after the lessons we have so painfully learned that is clear, but I question the appropriateness of credit unions being regulated by the Central Bank at all, notwithstanding the separate arrangement that is there.
I am not sure the Central Bank understands the culture of the credit union movement. I do not wish to make any comment on the new regulator. When Matthew Elderfield was in the position, it seemed to me he did a good job in terms of his wider remit. However, somebody coming from the insurance industry in Bermuda does not know anything about the credit union movement in Ireland. They are different. Credit unions are indigenous to local parishes and communities in a way that is unique.
I recall when I brought in the Credit Union Act in 1997, it had broad support across the House. There was, however, pressure from outside for me to facilitate credit unions to be able to make mortgage finance available. I resisted that but I regret very much that a small number of unions managed or contrived to get around that. As a result, they found themselves in difficulty and brought down on the backs of the general credit union movement more restrictive regulation than would have otherwise been the case.
That ought not in any way to reflect on the small unions across the country without which the fabric of the local community would be undermined. Our society works on credit. Those of us in this House and those outside who earn a moderate income can buy a washing machine, a car or a television based on their ability to get credit. People on the bottom of the ladder find it very difficult to get credit, however. I brought the Consumer Credit Act through this House in 1995 which outlawed illegal moneylending. There are still many people in poor communities dependent on moneylenders, however. The possibility of the credit union movement being used to address that issue is absolutely essential. We should look again at the question of ensuring that above all we protect the ethos of the credit union movement.
I welcome the opportunity to discuss this motion on credit unions. We all know how well the credit unions work and serve our communities. I must declare I am a member of the Cois Sionna credit union in Limerick. Credit unions play an important role in ensuring people who are not attracted to the banks, or to whom the banks may not be attracted, get an opportunity to better their lives and their conditions. As Deputy Rabbitte said, the credit unions give them an opportunity to obtain credit when otherwise they would not. They are an integral part of communities across the country. We have seen the growth of the credit union movement since the 1950s and its contribution to society.
It is important credit union savers' money be safe and secure. For that reason, there must be some level of regulation. It cannot interfere, however, with the ethos of the credit union movement which is voluntary. Many credit unions have become large with significant financial assets. There has to be a level of regulation for that. The Government recognises the importance of the credit union movement and set aside €500 million to support credit unions in difficulties. Up to €250 million was made available to the Credit Union Restructuring Board. Of this, only €20 million has so far been taken up. We must look at how we can use the balance to develop the credit union movement. This investment would be of no extra cost because the full cost of restructuring has not been taken up.
I too am a member of a credit union, the Desmond credit union in Newcastle West. I know the work that is done at local level by the credit union movement. I do not disagree with Deputy Rabbitte on the ethos of the credit union movement. Deputies Heydon and Harrington had painful experiences of what happens when things go wrong in a credit union. This demonstrates the benefits of regulation. No Member would want to see the experiences of west Cork and south Kildare being repeated in any area.
This sector has significant potential. The overall assets in the sector come to approximately €14 billion. The amount available to lend is more considerable than what has been reported, and is approximately €9 billion. This is not a small sector but has massive potential. At the Committee of Public Accounts and the communications committee on the future of the post office network, I have pointed out credit unions are an opportunity to provide financial services hubs, particularly in communities in which banks are closing and post office services are being eroded. However, for a credit union to provide postal services or social welfare payments will require a change to existing legislation. This week the Government launched a pilot scheme for the micro-loan initiative. In areas where there is an obvious lack of basic financial services but a strong credit union movement, I would like to see the Government looking at the possibility, even for a short fixed period, of developing a hub network for financial services with credit unions.
The Government has had to step in on several unfortunate and painful occasions to deal with credit unions in trouble. The Government’s record in protecting the credit unions and their members’ assets has been very clear. Those credit unions which ran into difficulties are small in number but there are opportunities for improvement. The thrust of the motion, politicised as it is, goes against the grain of what we are trying to achieve with regulation. Every night we see television news reports, to which Deputy Michael McGrath is no stranger, on a group of Members below in the Leinster House basement trawling over five years of a lack of regulation in the banking sector. We do not want that happening to the credit union sector.
No one is advocating that.
In 2010, various expert opinion in, or close to, the Central Bank was forecasting the demise of the Irish credit union movement. This expert opinion proved to be well wide of the mark. Only four credit unions out of well over 400 at the time, less than 1%, have been resolved since then. The credit union sector has worked hard at building up reserves which are the envy of every banking institution in Europe. The Irish credit union sector is the most heavily reserved financial sector.
Much mention is made of the Commission on Credit Unions. To be fair to the Government, its establishment was one of the first promises on which it delivered. The commission’s report, delivered in March 2012, was a comprehensive and balanced way forward. It sought a balance of measures to secure the future of credit unions. It pains me, however, to say the commission’s report is being implemented in a selective and unbalanced manner, causing distress to the sector and undoing many of the positives of the report.
The one size fits all regulatory regime being proposed by the Central Bank in Consultation Paper 88, otherwise known as CP88, is an exercise in suppressive regulation and micro-management, in which it proposes to effectively manage the very same credit unions it is supposed to be regulating on a dispassionate basis. Sure, the Central Bank consulted, and when it met with unanimous rejection from every organisation, body and credit union in the sector it decided to go ahead regardless. This is consistent with a pattern that is now well established. Our Central Bank has the most extensive powers of any regulatory body in Europe when it comes to regulating credit unions and yet it wants more. I urge review and caution here.
I am aware of credit unions that have not been allowed to hold AGMs for two, four or more years but the Credit Union Act is very clear. Section 78(4) states the bank may direct the credit union to "postpone, for a period not exceeding nine months, the holding of the annual general meeting of the credit union in respect of the financial year specified in the direction." There are questions to be answered as to why existing powers are being applied in this way. Remember, credit unions are the members' unions, and members have the right to know what is going on.
Very legitimate concerns have been raised by credit unions in recent days. They say that under existing regulation their efforts to introduce debit cards are being frustrated at every turn by the regulatory regime. Even the most basic, risk free, prepaid debit cards are being turned down. Now, the regulator wants to limit inflow of savings and loan types. What hope have we of developing a viable third force capable of competing with the banking sector?
The lending restrictions placed on credit unions by these self-same regulators have done profound commercial damage. It is commercially naive of the Central Bank to think it can switch off lending for four years and not damage credit unions and their credibility in the local market. This was not a wise use of power, and is a further indicator that the regulator should not become involved in the day to day running of the bodies they regulate.
The Minister of State is over time.
Will the Ceann Comhairle allow me another ten seconds?
You are taking ten seconds from the next speaker.
I thank Deputy Mulherin and I appreciate it. It would be remiss of me not to comment on the Government's very welcome initiative on microlending. Let us be honest, this is the business of credit unions. They have been restricted from operating in this area by the Registrar of Credit Unions' prudential lending circular of February 2013. This circular and the way it is interpreted by regulatory inspectors will make it impossible for the new scheme to be a success.
I pay tribute to the numerous credit unions in my constituency in County Mayo. It is fair to say they have been of the utmost and greatest assistance to ordinary people who need small loans, an approachable financial institution and credit for the normal financial requirements of families and individuals. There are credit unions in Ballina, Swinford, Kiltimagh, Claremorris, Castlebar, Westport and Ballyhaunis, which has amalgamated with Castlebar which has an outreach office in Balla. Credit unions have 3 million members and 400 offices throughout the country so not too many people do not know the benefit of a credit union. Many people would have experienced the exploitation, or whatever one wants to call it, of a moneylender if they did not have a credit union accessible at a particular time or juncture in life when they needed to get a loan.
The credit unions' not-for-profit mandate, which has been mentioned, volunteer ethos and community focus mean they are very sensitive to the needs of their members and the reality of people's situations and their ability to repay. No more than our banking system, credit unions experienced the ravages of the collapse of our banking system at one point and the issues and problems people have run into in not being able to repay credit extended to them. Credit unions did not have secured loans. Secured loans owed to the banks got priority and where credit unions were not prudent in lending in certain cases a pecking order applied whereby credit unions were below secured bank loans on the repayment priority list.
The Government has had to intervene and many issues have been addressed and many steps been taken towards prudent regulation, improved governance and restructuring and amalgamation. ReBo, the Credit Union Restructuring Board, has operated in cases where credit unions wanted to amalgamate to improve their situation and create a stronger unit to deliver to the people. This is the case in my county, where the credit unions in Castlebar and Ballyhaunis merged. Financial stability has been created through the establishment of the stabilisation scheme and resolution fund.
We must look at new business opportunities. The emphasis is very much on electronic financial services and the creation of current accounts, small loans and business loans. There are great opportunities for expansion. Credit unions need the support. The key is the volunteers who carry a heavy burden in financial regulation which is quite complex. They need support through technology and the implementation of regulation in order that everybody can be on the right side and people do not have to carry this burden. There is also an issue with director fatigue with all of the pressure experienced by many of these volunteers. With conversation and communication with the Irish League of Credit Unions and the credit unions themselves there can be a bright future for the credit unions.
The next group of speakers comprises Deputies Michael Kitt, Brendan Smith, Barry Cowen, Sean Fleming, Robert Troy, Bobby Aylward and Charlie McConalogue.
I commend Deputy Michael McGrath on the comprehensive motion which he tabled and addressed yesterday. I agree with him on the need for a clear policy to support the strategic growth and development of credit unions in Ireland. It is certainly the case the main focus of the credit union movement is the community. I have always made the case that credit unions and the group water scheme movement are two organisations which have been a great addition to rural Ireland particularly. One only has to look at how credit unions have helped out, particularly in education because of the expense of third level education and back to school expenses, and other issues such as Christmas bills and loans for house improvements. These are very necessary expenses, particularly for people who are vulnerable. The credit union movement keeps vulnerable people away from loan sharks, which is something about which we should all be concerned.
Credit unions have kept credit flowing throughout the economy and have kept businesses going and people at work. It is interesting to note credit unions are available in more and more smaller towns. This is happening at a time when banks and post offices in rural areas are closing or moving out. It is very encouraging to see the credit union movement has grown. I saw figures which indicated that in the past two years membership has grown by 70,000 and the total membership is approximately 3 million members. The Irish League of Credit Unions as the representative body has approximately 455 credit unions on the island.
The sector can keep going only if it is able to issue more loans. We must address this. This issue has been raised by Members on this side of the House, particularly with regard to lending, new products and the cap on savings. I hope the Minister will review the legislation on restrictions of loans and term limits on lending. In particular, as has been pointed out in this debate, the Minister needs to bring forward a White Paper on the role of credit unions in the broader financial services sector in Ireland. There is certainly a need for a review of the process to approve additional services. I hope these will examine regulation, lending restrictions and electronic services, helping small businesses in particular and the role credit unions can play in the housing crisis.
They have a role and it is important to realise that the bank is not the only place to get a housing loan, even if it just relates to house improvements.
Many comparisons are being made between the credit union movement and post offices and both are based in the community. However, there have been suggestions of mergers between post offices and credit unions as an alternative to mainstream banking. I do not know where the proposal from An Post and the six Limerick credit unions on co-operation and a pilot project is but we have heard these suggestions before. Some post offices have been successful in getting new business but restrictions and obstacles have been put before credit unions. I hope the proposals for lifting lending restrictions that credit union personnel discussed at the Irish League of Credit Unions annual general meeting some months ago could feature in the Government's thinking.
Small business is often discussed by credit union personnel and when such small businesses need help or other assistance, the credit union movement is the one to provide it. I hope any changes will be embraced by the credit union movement if they can be done without changing the ethos and core values of the movement. It will always be about community, helping families and keeping many people in work. The credit union movement employs 4,000 people and has almost 10,000 volunteers, which means there is great community involvement. It is interesting to note that credit unions survived the crisis well, with just 1% of credit unions requiring State funding since the financial crisis began. The function and role are laid out by the credit union movement at a national policy level in other countries and that should be done here as well. It is interesting that the credit union movement has supported so many elements in communities and I mention, in particular, agricultural shows which have often found it hard to get funding.
I am glad of the opportunity to make a short contribution on this very important motion. There was an implication by some on the Government side that the contents of this motion could lead to inadequate governance and regulation but that is far from the truth. We want absolutely adequate, proportional and proper regulation. I have spoken to directors, members of credit unions and staff and they are of the same opinion that it is in everybody's interest to have proper governance. It is in our interest as public representatives and it is the interest of all members of credit unions, as proper governance and regulation protects members and staff. It is in the long-term interest of the credit union movement, and that is what the motion is about.
The motion was put forward by my party colleague, Deputy Michael McGrath, in a very comprehensive, well thought out and progressive speech last night. He indicated the motion was very comprehensive, balanced and realistic. The motion followed extensive consultation with the credit union movement, individual members and representative organisations. As Deputy Michael McGrath and others stated last night, the Fianna Fáil Party wants to outline its unequivocal support for the credit union movement, and we are determined to support its further development for the betterment of Irish society.
We all know the movement has a very proud tradition in communities throughout the country. Deputy Rabbitte put it very well when he spoke of the unique ethos of the credit union movement. We all know that many distinguished persons throughout the island have been involved with the credit union movement over the years. Some of the movement's strength derives from local knowledge and its good relationship with local communities. To its credit, the movement has considerably improved its regulatory framework over a number of years, which is a very welcome development. Excessive regulation will hamper the further development of the credit union movement and stymie its growth and potential. Proper governance is in everybody's interest.
The figures quoted last night by Deputy Michael McGrath indicated there are 4,000 employees, 10,000 volunteers and 3 million members of credit unions. These statistics alone are a powerful message on the importance of the movement throughout our country. There are credit unions based in many small local communities, meaning they draw from a small pool of people to appoint and elect directors. I know from speaking over the past number of years to some directors, who have served loyally and faithfully, that they believe that some demands made of them have been excessive recently. We know the powerful strength of good community involvement. If it emerged in years to come that many credit union branches had to merge, we would lose the unique community ethos. If a credit union in my constituency in Cavan or Monaghan was forced to merge with other credit unions 30 or 40 miles away - or even further away or in a different county - where would the local community involvement, knowledge and expertise come from? It would be lost, which would be a shame.
Deputy Kitt referred to the importance of the credit union movement to many families which have children going through school, right up to further education and third level education. As public representatives, we have all dealt with families over the years which may have a son or daughter going to further or third level education. This can put enormous financial pressure on households with limited incomes. In so many instances, I have helped people to fill out application forms for student grants, etc., and these people turned to local credit unions for assistance. That help was available over the years in the form of loans, which provided aid when it was most needed and there was an opportunity for a son or daughter to go to further or higher education. That opportunity may have been denied to their parents or older siblings. In many cases, if it were not for the availability of credit or a loan facility from the local credit union, a young person would have been denied the opportunity to go to further or third level education.
It is absolutely critical that this very comprehensive, progressive and positive motion be supported by this House. It outlines the opportunities to further develop the credit union sector.
Like others, I welcome the opportunity to speak to this issue. I commend my colleague, Deputy Michael McGrath, for his work in the area, in conjunction with the credit union movement, and for putting before the House the concerns and fears of that movement. He has offered suggestions and alternatives, and the Government might pay attention to them.
It is obvious in listening to much of the debate this evening that the credit union movement has played a fantastic role in this country's history to date. I have heard the Taoiseach speaking about pillar banks but the credit union movement is as much a pillar of the economic and social life of this country as any bank has been or ever will be.
We would like to see the Government respond this evening to our discussion of the role that credit unions can play into the future, meeting the needs of today's society and playing its part in supporting many of the new poor, the new marginalised, the hard-pressed middle and those who cannot be helped by State or bank but who could be helped by peers. These peers are the men and women in their own communities who form the volunteers of the credit union movement. We have heard some Government Members saying that they see nothing wrong with today's credit union movement, or that they see no difficulties in the restrictive manner of the regulator of the credit union movement.
That is unfair.
I wonder on what planet they are living. If everything was as fine and dandy as they believed, would credit union members and volunteers be here today? Would they be worried about their very existence and future? They would not. I wonder what this Government has against the credit union movement, as there are examples that would lead one to believe it has something against the credit union movement. Some years ago I heard the Minister for Finance, Deputy Noonan, say it would take up €1 billion to supplement the losses expected in the sector. The net loss was €11 million.
This Government spoke about how it would burn bondholders on entering office but the only bonds I am aware of that were burned by this Government were credit union bonds to the tune of €15 million.
It has instructed this regulator to be over-regulatory, to over-restrict and to place obstacles in the way of loans and investments and to impede the volunteering nature of many communities and the role they play by virtue of what they have been asked to do in fulfilling their roles as volunteers and as directors in the credit union movement. It is undermining credit unions. As the Minister of State's colleague, Deputy Rabbitte, said earlier, if the Government undermines the ethos of the credit unions, it undermines the credit union movement itself. I was delighted to hear him say that without the restrictions of Cabinet membership that he has had heretofore.
There is no doubt that many credit unions are facing closure. The Minister of State would say they face amalgamations, by virtue of what ReBo would recommend. The restrictions placed on them in recent years have been saved somewhat by virtue of the prudent investment that many of them have made throughout the country. They have achieved a return on investment of 4% or 5%, which supplements the halving of the number of loans they provide. We have arrived at the crossroads whereby that door of investment will no longer be open. The return on the investment they have will not be sufficient to meet the losses incurred by the halving of their loan book.
There is no doubt that if the credit union movement and the credit union suffers, society suffers. Communities suffer. The decimation of many towns will continue. We have seen the effect of post office closures and Garda station closures, and of the amalgamation and closure of rural schools. We have seen the effect of the loss of retail and pubs in many towns and villages. The Government's future and potential re-election prospects rest on many issues across society. It is not just a rural and urban divide in this instance, because credit unions are pivotal to the lifeblood of many cities and organisations throughout the country. I implore the Government to recognise that this movement is at a crossroads and to accept that there must be more meaningful negotiations to bring about a resolution whereby the restrictions placed on credit unions can be lifted to allow them to continue to play the great role that many of the Minister of State's colleagues have said they have played in the past in getting us to this juncture.
I welcome the opportunity to speak in this debate, which has an impact on the 3 million members of credit unions throughout the country and the various credit unions that exist, providing a long-established service. I thank my colleague, Deputy Michael McGrath, for his work with the credit unions in bringing about this fair, reasonable and balanced motion. It must be recognised that we have concerns regarding the overburdening of credit unions with limitations that are disproportionate to the nature and amount of lending, and the stifling of the growth potential of credit unions.
The debate has become a little simplistic. Some people are trying to say others want no regulation. This could not be further from the truth and it is unhelpful to credit unions for someone to make those statements in this House. Deputy Rabbitte was right when he referred to the unique ethos of credit unions. I would have thought most people in this House would share that view. However, there are people here tonight who may be misguided but who are operating in a divisive manner by trying to suggest some people here speaking on behalf of the credit unions are saying there should be no regulation at all. We are saying it should be proportionate, balanced and fair and that it is disproportionate at the moment.
There are a few points we want to highlight. Section 35 of the Credit Union Act restricts the percentage of the credit union loan book that can extend beyond a ten-year term. This has a serious impact on their ability to issue meaningful loans and it impacts on their ability to issue longer term loans. Another issue mentioned in our motion is the Personal Insolvency Act 2012, which has also had a disproportionate and negative impact on credit unions vis-à-vis other financial institutions. The credit unions highlighted this before this ever came into legislation and they have been proven right in some cases. We are calling for investment in infrastructure in the sector to facilitate the growth and development of products and services offered by credit unions and to review the process of approval of additional services, which are needed. We ask that the Central Bank engage in meaningful discussions with the credit union movement to facilitate this.
More than anything, I am impressed by the documents produced by the credit union movement itself. It succinctly outlines a clear business plan for the future. If we had all night to debate the issue, we could do so. Some of the key points from the submission it is making to the people and to the Government need to be reiterated here. The credit union movement is visionary and voluntary. That must be accepted. It vision is being restricted by overly burdensome regulation. It provides credit for the most vulnerable in society. Deputy Rabbitte has spoken about people who cannot get a credit rating and who have been helped by credit unions. They have asked to reduce or remove the red tape on the small loans they can offer. They have also asked for transparency and for greater regulation by the Oireachtas and more engagement with the Registry of Credit Unions. That is something that people should recognise and which we fully support.
I have already said that the issue of the lending restrictions is key. There should be a focus on a member's ability to repay a loan and essential criteria should be considered when making these loans. Deputy Rabbitte - I have now mentioned him three times - acknowledged that the people who cannot get the credit rating are the people we should be talking about. In addition, the limits on lending, in some cases €10,000 or up to €25,000 in exceptional cases, mean that credit unions cannot meet the requirements of their own members and their own customers. That is the essential problem.
There is funding available. Credit unions can be prudent and careful in what they are doing but they are not allowed, by regulation, to meet the requirements of their own members and customers. That cannot be a good thing because ultimately, the customers are being forced to go somewhere else and in some cases they are being forced to go to moneylenders, which is not a good position to be in. One of the most important things for a credit union is to be allowed to develop funding to support small and medium-sized industries. They have funding available of up to €6 billion or €8 billion - a national treasure - which is not being utilised. It should be allowed. In particular, they want to develop their own products to meet these areas.
The credit unions want to help us all with the housing crisis. They have the funding available. They want to help with an urgent social housing programme, to invest in the funds and to have them available. People talk about availability of funds. They are there. Please let the credit unions help and do not put any further restrictions in their way.
I welcome the opportunity to contribute to this important debate. The importance of the debate is signified by the large number of contributions from Members across the political divide. Our credit unions have a proud tradition and are deeply rooted in the communities they serve. They are a brand that has the confidence and loyalty of people in their areas. They are the financial institution that has kept many families and many small businesses going in the turbulent economic times of the last few years. Our credit unions are the one financial institution that did not play a part in crippling our country and bringing it to its knees. That is because the people who work in our credit unions were prudent. They lent based on local knowledge and sound personal relationships.
Our credit unions are stagnant and they need support. This motion is positive and the Government should have accepted it because it is a basis for reinvigorating the credit union sector.
When I speak to the various managers in the credit unions in my constituency, whether it be Mullingar, Kinnegad, Athlone, Longford, Ballymahon, Granard or Castlepollard, they all make the same point about the amount of current legislation and that the disproportionate amount of regulation is cumbersome. They want to see a relaxation of the lending restrictions so that they would have the ability to lend more. If they can lend more, they can generate more money for the credit union.
This introduction of a cap on savings sends out a terribly negative message that we do not support the credit unions or we do not think they are viable with deposits above €100,000 but nothing could be further from the truth. If this is to come about, some of the credit unions in my constituency will have to reimburse savings.
Then there are instances of fees being charged of them. The credit unions, unlike other financial institutions, do not pass on the fees.
Credit unions are the pillars of the community. They are tried, trusted and tested. The Government should be supporting them to become stronger as opposed to inhibiting their development.
I commend my colleague, Deputy Michael McGrath, on tabling this Private Members' motion.
I cannot understand why a sector which has close to 3 million members, employs 4,000 and has almost 10,000 volunteers is not being given an appropriate level of support from this Government. The manner in which credit unions are being stifled by lending restrictions and unfair competition from banks must be addressed as a matter of urgency. The sector is effectively stagnant due to current Government policy and the imposition of unnecessary constraints.
Credit unions have revolutionised their regulatory framework in recent years with professionally qualified persons among their employed and voluntary staff. They have greatly improved their overall reserve ratio without resorting to tactics employed by commercial banks, which sent interest rates and charges to the roof at the expense of their existing customers.
Credit unions have a proven track record on the ground, knowledge which results in sound judgments and expertise on lending to customers, SMEs, the self-employed and farmers. I have yet to meet a person involved in any of these sectors who looks forward to a meeting with his or her bank manager, which may be a daunting experience and which is not relished by most and yet people are put at ease by the credit unions' proud tradition in communities throughout the country of establishing strong personal relationships with their customers.
Credit unions are different in nature and they must be recognised and regulated in a different way to commercial banks. I am concerned that current regulatory and legislative restrictions threaten the viability of credit unions as they very much allude to maintaining an "as is" format which undermines the ability of the sector to innovate and expand. This sector can only make money if it is able to issue new loans. The infrastructure is there, the sector is ready to thrive and it only requires a shot in the arm from the Government.
I join my colleagues in supporting this motion put forward by Deputy Michael McGrath. The number of speakers on both sides of the House having to share time and having such a short period of time in which to make their contributions shows the value of credit unions to communities throughout the country. The large turnout in the Visitors Gallery, both last night and tonight, shows the esteem in which the credit unions are held and also is a reflection of the number of people involved in those credit unions and in running them on a day-to-day basis, ensuring that they make a real impact on the local economy. I had the privilege tonight of welcoming a representative from probably the most northern credit unions in the country, Mr. Brian Barr from Foyle Credit Union in Moville. The credit union movement is the same throughout the country.
The motion that has been put forward by Deputy Michael McGrath suggests coherent and sensible approaches that the Government could take to bolster the credit union movement and ensure that it can develop and be strengthened. For example, and just to be clear on what the motion is calling for, it seeks a review of section 35 of the Credit Union Act 1997 relating to restrictions on rescheduled loans and term limits on lending and a streamlining of the process for the approval of additional services. In the past six years, there has not been an additional service approved for even one of the credit unions across the country. It seeks a financial impact analysis to be conducted on the extent of losses incurred by credit unions arising from the Personal Insolvency Act 2012 and that the Central Bank, in its consumer protection role, engage directly with credit unions to establish the impact of the current legislation and regulatory restrictions on communities. It asks the Minister for Finance to bring forward a White Paper on the role of the credit union sector within the broader financial services sector in Ireland. In many other countries, credit unions are clear on the policy field within which they operate and how they can develop but that is not the case here and that must happen. It seeks the establishment of an industry-led forum with representation from all stakeholders in order to examine how credit unions can ensure their future growth across the country. All of these are sensible suggested measures which are very much needed by the credit unions.
At a time when we see bank branches closing throughout the country and, indeed, some banks withdrawing from the country altogether, the credit unions continue to provide 400 branches throughout the country and continue to be rooted in their communities. The credit unions local knowledge and expertise, and those involved in each of them, has ensured that they provided an essential service to their community over the years and that such collective wisdom brought the movement through what was one of the worst banking collapses internationally.
In 2011, the Minister for Finance, Deputy Noonan, stated, "If the movement was one large bank with individual branches, it would have no problems because the good ones would balance the bad ones". If the movement had been a bank, it would not have emerged overall from the financial crisis of the past few years in such a healthy state. The Minister went on to state that his advice at that stage was that it would cost between €500 million and €1 billion to deal with problems in certain credit unions.
It has been established in parliamentary questions put forward by Deputy Michael McGrath that €35 million has been drawn down from the resolution fund by way of expenditure relating to incentives for credit union resolution, Central Bank resolution related expenses and interest expenses. However, alongside that €35 million that has been drawn down from the resolution fund, there has been income from the resolution fund of €29 million, meaning that the net cost of the sector to the Exchequer over the past number of years is €6.5 million. If we could only say the same about other parts of the financial system, we would be in a very healthy position. That is why the measures put forward tonight need to be taken seriously and supported by the Government. The issues, such as caps on savings, restrictions on the type of lending and new business and products that credit unions can develop, need to be addressed and I urge the Government to adopt this motion tonight.
I am grateful to have an opportunity to respond to this debate and to contribute some of my own thoughts on the issue. I have no intention of engaging in any sort of partisan comments. That is unnecessary and is not what those in the Visitors Gallery came to hear last night or tonight. This is too important an issue. I accept the sincerity of Members on all sides of this House. There is not a Member who does not know of the benefit of the credit union movement because there is not a community in this country that does not benefit from that movement. We all have seen and heard it already. We have seen students who would have had an opportunity to go to college, perhaps even school, had we not had these supports. We have seen business owners who have benefitted. We have seen families who have been able to respond to emergencies due to the support of the credit union movement. I join with others in recognising the contribution made by the massive volunteer network and the staff and all those who have given a contribution in both time and expertise to that movement.
At a time when trust and confidence in so many financial institutions and, in fact, in so many parts of society has been shattered, the trust and confidence in which the credit union is still held is both incredible and justified.
Credit unions have a key role to play in providing access to credit and other important services in local communities throughout the country.
They provide a unique and trusted service to their members. As Deputy Michael McGrath noted yesterday, the credit union sector has a proud tradition in communities throughout the country, with expert local knowledge and strong personal relationships. I share that view.
The safety of members' savings and the security of the credit union sector as a whole are priorities for the Government. The Government recognises the important role of credit unions as a volunteer co-operative movement as well as the importance of getting lending going in the economy. We all want a strong, stable and progressive credit union movement. We are taking steps to ensure this and will work with the movement to that end.
As the Minister for Finance, Deputy Noonan, highlighted yesterday, the Government put in place a number of measures to ensure that credit unions could continue providing these vital services to their members and to ensure the stability of the sector into the future. These measures include the establishment of the Commission on Credit Unions, the publication of the Credit Union and Co-operation with Overseas Regulators Act 2012, the establishment of the Credit Union Restructuring Board, ReBo, the availability of €500 million to support the stability of the credit union movement should it be required, the introduction of stabilisation support schemes and the establishment of the credit union advisory committee.
The Government has worked closely with key stakeholders in the credit union movement to reach agreement on the Commission on Credit Unions' report and recommendations. The Government will continue its ongoing engagement with the movement so as to ensure the safety of members' savings, support credit unions in broadening the range of services to members and safeguard the credit union sector as a whole into the future.
The Government has a clear policy to support the strategic growth and development of credit unions as set out in the Commission on Credit Unions' report and recommendations. The Government established the commission in May 2011 within two months of being elected. The commission's report was agreed and co-authored by key stakeholders, including credit union representatives. The commission published its final report in March 2012. The Government has fully accepted all of its recommendations, with more than 60 having been implemented so far.
A number of Deputies raised the issue of lending restrictions. The imposition of lending restrictions is the responsibility of the Registrar of Credit Unions, who is the independent regulator for credit unions. The role of the Minister is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions, not the imposition of lending restrictions. Like other Deputies, though, I am aware that the Central Bank commenced a lending restriction review initiative last February. It is open to credit unions to make applications to it until 30 September. Like the Minister did yesterday, I encourage credit unions to partake in the review. Many have already done so. Separately, the Minister has introduced legislative changes whereby, as of 1 August 2013, regulatory directions are appealable to the Irish Financial Services Appeals Tribunal.
The Government wants to continue working with and growing the movement and to enhance its potential further. The commission's report was co-authored and agreed. The Government is always open to considering new proposals. Indeed, it is already doing so. This debate is not occurring in a vacuum. I recently held a meeting with the Irish League of Credit Unions, ILCU, and we are aware of its six-point plan. The Government's door remains open.
I welcome this debate. As we emerge from crisis on the road to recovery, it is timely that we examine the role of credit unions and work with that volunteer movement. This is exactly what the Government will do.
I welcome the opportunity to contribute on this debate. There are few movements in this country that can boast 3 million members, 400 offices, 4,000 employees and up to 10,000 volunteers. It is high time that we had a comprehensive debate on the current state and future of the credit union movement.
The problem is that, when people consider the movement and its national network, they are minded of the fact that there has been a withdrawal by the Government of services across the country. The Minister of State knows the list: Garda stations; libraries; public health centres; post offices, which face their own challenges; and small schools. These are being unravelled out of communities and warehoused in large towns and cities. The credit union movement sees this happening and is worried. What it is looking for, and what we are articulating on its behalf, is a coherent policy. It is only right that we ask the Minister of State, who is representing the senior Minister, to publish a White Paper on the future of the credit union movement. We will contribute to that process. In the absence of a White Paper, we will need a roadmap for the movement, which comprises many people.
Regarding section 35, like every Deputy, my clinics are attended week in, week out by people who are trying to access finance. They could get it from their local credit unions. It would be used for building small extensions to their homes, buying their council houses or other small and modest purposes. I am not referring to the high end of the mortgage sector. The restriction on this must be examined.
The credit union movement has been stung by the spin against it to the effect that it had to be bailed out. We know about Newbridge, Howth and Sutton and the Minister, Deputy Noonan, told the House that it would cost between €500 million and €1 billion to bail out the credit union movement, but we now know that the true net cost was only €6.4 million. The movement is working against this perception and there is an onus on the Government to address it.
The limitation placed on new products is not sustainable. Young people want to be able to access their credit unions in a dynamic fashion, be it through debit cards, online products or the modern conveniences that a proper financial services provider should be able to make available. That no new products have been permitted is unacceptable.
Like others, I wish to have the Personal Insolvency Act 2012 addressed. The elephant in the room was the bank veto, which the House has debated a number of times. That the law is weighted in favour of bank loans that transfer those losses onto the credit union movement is a matter that we must analyse so as to determine how it is affecting the movement.
Before entering the Chamber, I was listening to this debate. Much has been said about the movement's ethos and core values, and rightly so. However, we must have a frank discussion about the mindset of the Government. When preparing for this debate, I could not get my head around something that was troubling me, namely, the Government's real or perceived attitude towards the movement. It struck me that the only possible explanation was down to the people driving the agenda, be it the Minister of State, the Minister or the civil servants. Do they understand what the credit union movement is all about?
I am a member.
I am not trying to be divisive about it; I am asking the question. How could anyone who has had the experience of relying on a credit union in order to purchase school uniforms, bring children on their first holiday or buy a washing machine possibly stand over what has been happening to the movement? Be it by the Government, senior civil servants or the regulator, a mindset change is required.
In the short time available to me, I wish to refer to a number of credit unions in the Limerick area that have suffered large losses as a result of investments in IBRC.
The Deputy's time is up, I am afraid.
The House has seen much debate about IBRC, Siteserv and loan write-downs. The Government has discretion-----
I am sorry, but the Deputy is over time.
-----under the legislation that wound down IBRC. The credit unions in Limerick that are suffering write-downs on their investments - one is my local credit union, MPCC Credit Union of-----
The Deputy is taking time from Deputy Michael McGrath. Will he please resume his seat?
-----Mungret, Patrickswell, Crecora and Clarina - deserve fair play from the Government. There should be an intervention to ensure that their investments are repaid and honoured by the Government-----
There is a process with the liquidator.
-----as part of the IBRC liquidation process.
Deputy Michael McGrath only has nine minutes.
Come on, a Cheann Comhairle.
No. We should be ringing the bells now, as the Deputy knows.
I thank the Ceann Comhairle. I thank all of the Deputies from every side of the House who contributed on what was a good debate. There were some strong contributions from all sides, which is an acknowledgement of the vital role that credit unions are playing throughout Ireland. Clearly, there is a great deal of goodwill towards them, but that is no longer good enough. We need far more. We need practical and tangible action by the Government and the regulator to support the credit union movement.
Hear, hear.
I listened carefully to the Minister, Deputy Noonan, last night. I have to say I was deeply disappointed with his clear lack of understanding of the challenges facing the credit union movement at this time. He is either in complete denial about what is going on, or he is simply unaware of it. There was no acknowledgment of the serious issues that the credit union movement is facing at present. If the Minister and the Government honestly believe these serious challenges and problems do not exist, why do they think all the main leaders of the credit union movement in this country have given up their time over the past two evenings to come to the national Parliament and listen to this debate? They did not come for a night out.
I am aware of that.
They came because they are worried.
Hear, hear.
They came because they are concerned about what is happening to the credit union movement. They came because they care. They came as a cry for help to save a great movement. It is one of Ireland's greatest national movements. The starting point is to accept that there is a problem. If the Government does not accept this, we are going nowhere.
The Minister spoke at length last night about the Commission on Credit Unions, which focused largely on the regulatory structure. We all support its call for a strengthened regulatory structure. There is no issue with that. The commission's central recommendation with regard to the regulatory structure was that "credit unions should not be regulated on a one-size-fits-all basis; rather a tiered regulatory approach should be adopted". This has not happened, even though it was the commission's central recommendation in respect of the regulatory structure. The registrar proposed a tiered system in consultation paper 76. That was not consistent with the view or the spirit of the Commission on Credit Unions, which strongly recommended a system that would be reflective of the "nature, scale and complexity" of credit unions. Such a system would enable small credit unions to successfully continue to offer basic services with a lower regulatory demand on them, while enabling other credit unions that wish to expand the range of services they offer their members to put the necessary framework in place to get on with it. That is very explicit in the commission's report, but it simply has not happened.
The key issue in terms of regulation is the approach that is being taken. The spin from some Government Deputies is that we are trying to advocate lax regulation of credit unions, but that is simply not the case. The regulation of credit unions must be proportionate. Instead, we currently have regulation that is stifling, over-bureaucratic and heavy-handed. Under this form of regulation, which is not based on the basic principle of fairness, communication is very poor indeed. The entire regulatory structure that was put in place a number of years ago was based on the assumption that there were massive problems in credit unions throughout the country. Figures between €500 million and €1 billion have been cited on a number of occasions during this debate. Those massive problems have not transpired. I appreciate that there have been individual problems in credit unions, but they have been resolved at a minimal cost in the overall context. It has to be acknowledged that the structure which was put in place was based on the fundamentally false assumption that credit unions were in deep trouble in terms of their underlying financial health. That assumption has not proven to be the case.
Hear, hear.
Credit unions have invested in compliance and in improving their governance arrangements and internal controls. Those structures must now be funded because they come with additional costs. The reality is that credit unions need to be given the tools to allow them to compete in the Ireland of 2015 and to justify the costs involved in complying with that regulatory structure. New business opportunities, products and services are not being sanctioned. Not a single new credit union product or service has been sanctioned by the registrar in recent years.
Credit unions must be allowed to lend sensibly. Of course their lending has to be prudent. The restrictions that are currently in place are simply ridiculous. Last night, the Minister, Deputy Noonan, made great play of the fact that credit unions can now apply for a review of their lending restrictions. I assure the House that the review process is extremely onerous and expensive and involves a huge amount of work by the internal auditors of the credit unions. I will ask a fundamental question in this context. Why do they have to apply? The Registrar of Credit Unions has been crawling all over Irish credit unions in recent years. There have been on-site inspections. They have been through the books upside down and inside out. Credit unions are being put to the trouble, hassle and expense of making formal applications to have their lending restrictions reviewed. That should be done as part of the normal regulation of credit unions. The Minister should take that point up with them.
When the Minister spoke about the Credit Union Advisory Committee last night, he did not mention that it is a statutory committee that has to be established in law. Equally, he did not mention that there is no representative of the credit union movement on the advisory committee. That is a joke and should be amended immediately. The advisory committee's terms of reference are very narrow. It is not looking at fundamental issues like the overall business model, the need to modernise the structure and the appropriateness of the regulation that credit unions are facing. Why have some credit unions not been allowed to hold annual general meetings for four years? If the issues in the credit unions are so serious, the Registrar of Credit Unions should come out and say so, based on the level of work it has done to date. Why are credit unions being left in the dark? As I said last night, the healthy credit unions are not being told that they are healthy and that they should continue to do what they are doing. Equally, credit unions with problems are not being told what those problems are and how they can be fixed. This is not acceptable.
While the situation is quite bad, it will get much worse if the measures proposed in consultation paper 88 are implemented. Neither the Minister, Deputy Noonan, nor the Minister of State, Deputy Harris, referred to the consultation paper. I understand that the registrar and the Minister are about to sign off on the proposed measures. I will give an example of the profound implications that such a move would have. The proposal in consultation paper 88 to cap at €100,000 the amount of savings that a credit union member can hold would affect 55% of credit unions. I accept that it would affect a small number of members, but it would affect over half of credit unions. If this proposal is adopted, and credit unions are confined to holding a level of savings underpinned by the deposit guarantee scheme, it will send a negative and toxic signal that the registrar and the Government have no confidence in credit unions and will thereby do enormous damage to the credit union movement.
If the Minister and the Government want to help credit unions, they should press the pause button right now. Consultation paper 88 should not be signed off. A working group involving representatives of the industry should be initiated immediately to examine the appropriateness of the regulatory structure at this time. I am in favour of bringing it to the Joint Committee on Finance, Public Expenditure and Reform, but this should not be done after the horse has bolted. If these measures are signed into law by the Minister for Finance, we are heading for deep trouble. I would like to conclude by asking a fundamental question. Does this Government want to be the Government that presided over the gradual demise of the credit union movement? I am sure it does not. For that reason, this should be a watershed moment and a turning point. If this motion has achieved anything, it has put the future of the credit union movement firmly on the political agenda. I ask the Government to have a fresh look at the whole thing because the current approach is not working. Changes need to be made quickly. I commend the motion to the House.
Amendment put:
The Dáil divided: Tá, 66; Níl, 42.
Tá
- Bannon, James.
- Barry, Tom.
- Breen, Pat.
- Bruton, Richard.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Catherine.
- Byrne, Eric.
- Cannon, Ciarán.
- Carey, Joe.
- Coffey, Paudie.
- Connaughton, Paul J.
- Conway, Ciara.
- Coonan, Noel.
- Daly, Jim.
- Deering, Pat.
- Doherty, Regina.
- Dowds, Robert.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frank.
- Fitzpatrick, Peter.
- Gilmore, Eamon.
- Hannigan, Dominic.
- Harrington, Noel.
- Harris, Simon.
- Heydon, Martin.
- Howlin, Brendan.
- Keating, Derek.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Ciarán.
- Lyons, John.
- McCarthy, Michael.
- McEntee, Helen.
- McFadden, Gabrielle.
- McGinley, Dinny.
- McLoughlin, Tony.
- Maloney, Eamonn.
- Mulherin, Michelle.
- Murphy, Dara.
- Murphy, Eoghan.
- Neville, Dan.
- Nolan, Derek.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Mahony, John.
- O'Sullivan, Jan.
- Perry, John.
- Phelan, Ann.
- Phelan, John Paul.
- Rabbitte, Pat.
- Reilly, James.
- Ring, Michael.
- Ryan, Brendan.
- Spring, Arthur.
- Stagg, Emmet.
- Stanton, David.
- Tuffy, Joanna.
- Wall, Jack.
- Walsh, Brian.
- White, Alex.
Níl
- Adams, Gerry.
- Aylward, Bobby.
- Boyd Barrett, Richard.
- Broughan, Thomas P.
- Calleary, Dara.
- Collins, Niall.
- Colreavy, Michael.
- Coppinger, Ruth.
- Cowen, Barry.
- Daly, Clare.
- Doherty, Pearse.
- Dooley, Timmy.
- Ellis, Dessie.
- Ferris, Martin.
- Fitzmaurice, Michael.
- Fleming, Sean.
- Fleming, Tom.
- Halligan, John.
- Healy-Rae, Michael.
- Keaveney, Colm.
- Kelleher, Billy.
- Kirk, Seamus.
- Kitt, Michael P.
- Mac Lochlainn, Pádraig.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McGrath, Michael.
- McLellan, Sandra.
- Murphy, Catherine.
- Ó Caoláin, Caoimhghín.
- Ó Fearghaíl, Seán.
- Ó Snodaigh, Aengus.
- O'Brien, Jonathan.
- O'Sullivan, Maureen.
- Pringle, Thomas.
- Ross, Shane.
- Smith, Brendan.
- Stanley, Brian.
- Troy, Robert.
- Wallace, Mick.
Tellers: Tá, Deputies Joe Carey and Emmet Stagg; Níl, Deputies Sean Fleming and Michael McGrath.
Amendment declared carried.
Question put: "That the motion, as amended, be agreed to."
The Dáil divided: Tá, 66; Níl, 41.
Tá
- Bannon, James.
- Barry, Tom.
- Breen, Pat.
- Bruton, Richard.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Catherine.
- Byrne, Eric.
- Cannon, Ciarán.
- Carey, Joe.
- Coffey, Paudie.
- Conaghan, Michael.
- Connaughton, Paul J.
- Conway, Ciara.
- Coonan, Noel.
- Daly, Jim.
- Deering, Pat.
- Doherty, Regina.
- Dowds, Robert.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Farrell, Alan.
- Feighan, Frank.
- Fitzpatrick, Peter.
- Gilmore, Eamon.
- Hannigan, Dominic.
- Harrington, Noel.
- Harris, Simon.
- Heydon, Martin.
- Howlin, Brendan.
- Keating, Derek.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Ciarán.
- Lyons, John.
- McCarthy, Michael.
- McEntee, Helen.
- McFadden, Gabrielle.
- McGinley, Dinny.
- McLoughlin, Tony.
- Mulherin, Michelle.
- Murphy, Dara.
- Murphy, Eoghan.
- Neville, Dan.
- Nolan, Derek.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Mahony, John.
- O'Sullivan, Jan.
- Perry, John.
- Phelan, Ann.
- Phelan, John Paul.
- Rabbitte, Pat.
- Reilly, James.
- Ring, Michael.
- Ryan, Brendan.
- Spring, Arthur.
- Stagg, Emmet.
- Stanton, David.
- Tuffy, Joanna.
- Wall, Jack.
- Walsh, Brian.
- White, Alex.
Níl
- Adams, Gerry.
- Aylward, Bobby.
- Boyd Barrett, Richard.
- Broughan, Thomas P.
- Calleary, Dara.
- Collins, Niall.
- Colreavy, Michael.
- Coppinger, Ruth.
- Cowen, Barry.
- Daly, Clare.
- Doherty, Pearse.
- Dooley, Timmy.
- Ellis, Dessie.
- Ferris, Martin.
- Fitzmaurice, Michael.
- Fleming, Sean.
- Fleming, Tom.
- Halligan, John.
- Healy-Rae, Michael.
- Kelleher, Billy.
- Kirk, Seamus.
- Kitt, Michael P.
- Mac Lochlainn, Pádraig.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McGrath, Michael.
- McLellan, Sandra.
- Murphy, Catherine.
- Ó Caoláin, Caoimhghín.
- Ó Fearghaíl, Seán.
- Ó Snodaigh, Aengus.
- O'Brien, Jonathan.
- O'Sullivan, Maureen.
- Pringle, Thomas.
- Ross, Shane.
- Smith, Brendan.
- Stanley, Brian.
- Troy, Robert.
- Wallace, Mick.
Tellers: Tá, Deputies Joe Carey and Emmet Stagg; Níl, Deputies Sean Fleming and Michael McGrath.
Question declared carried.
The Dáil adjourned at 9.30 p.m until 9.30 a.m. on Thursday, 25 June 2015.