The first item on the agenda is a discussion with CUNA Mutual Europe on how the new financial regulatory system might impact on credit unions. CUNA Mutual is the largest global protection partner for credit unions. It is owned and operated by the global credit union movement and has operated in Ireland since 1963. It has formally reviewed the impact of regulation on Irish credit unions and presented its findings to the Department of Finance, the credit union advisory committee and the credit union regulator. As advised at our previous meeting, the mis-selling of investments to credit unions is a matter related to specific credit unions and is being pursued legally by them. As it is before the courts, members should be mindful of the possibility that comment might prejudice the outcome of judicial proceedings.
Financial Regulation: Discussion with CUNA Mutual Europe.
Mr. Paul Walsh
I thank the Chairman and members of the joint committee for the invitation to share with them our experience of the global credit union sector and observations after almost 50 years of working with credit unions in Ireland and the United Kingdom. I am the chief executive of CUNA Mutual Europe and joined by my colleague Karen Furlong, director of strategy and change. Our objective in this briefing is to inform and update the committee on discussions on regulatory affairs with credit unions.
CUNA Mutual is owned by and operated for the credit union and mutual sector worldwide. We have operated for more than 75 years exclusively to protect credit unions. We operate in 38 countries and have more than 10,000 trading partners. We have been instrumental in pioneering the credit union movement throughout the world. We deliver affordable and needs-driven insurance for credit union members. We also protect credit union boards and the assets of credit unions.
We have operated in Ireland since 1963 and, with the exception of a very short period, we have partnered the Irish credit union sector throughout that time. We have supported the Irish movement through the sector's establishment, development, growth and maturity. We support more than €3 billion in assets in Irish credit unions. We provide life cover for more than 1.5 million people from our Dublin base and are the largest specialist protection team for credit unions in Europe.
We appreciate that the committee is fully aware of the role of credit unions in our communities. To understand where credit unions stand today we must understand from where they have come. I will provide the committee with a quick potted history. From the 1960s to the 1990s the credit union sector was credit-led. During that time access to finance was limited to the privileged. In the 1960s there were two sources of credit — the bank for well-off individuals and the money lender for the less privileged. Credit unions were created to democratise this access to finance and have excelled in this. In 1963 the credit unions had a transformational leader in John Hume who introduced the principle of debt dying with the debtor which was novel for its time and a progressive idea. In 1963 CUNA Mutual came to Ireland at John Hume's request and we provide the protection programme for the principle of debt dying with the debtor. Subsequently we introduced a savings protection programme. Both programmes continue to differentiate credit unions and are still in place today.
The establishment of the Credit Union Act 1966 gave credit unions a legitimate platform for 40 years of uninterrupted growth. Committee members will be well aware that from the 1990s onwards traditional members matured and became net savers, leading to a decline in lending ratios. A new generation has been lured away from credit unions to banks by immediate, cheap and accessible credit. Lifestyles have changed, with more dual income households and a large increase in the level of household indebtedness. The basic credit union model is now under pressure. The mix of savers and borrowers has weakened, primarily owing to the lack of relevant borrowers. Credit unions are not simply a great community service; they are a solid financial system. They operate from a behavioural based credit model and by knowing their members more intimately than banks they can make better decisions. To date, credit unions throughout the world have fared better than traditional lenders by having lower impairment levels. This is particularly evident in industrial credit unions.
By 2009 the credit union had become one of the most important sources of household credit in Ireland based on volume of loans, not value. In most developed economies credit unions and their sister organisations provide a solid viable alternative to traditional banking and a useful counterbalance.
Sector maturity does not equate with regulatory maturity. To put Ireland's position on credit union regulation in context, I refer members to a study conducted in 2007 of the regulatory structures for markets in which CUNA Mutual operated. This lifecycle analysis compares the level of maturity of credit union sectors and their respective regulatory structure. Chart 1 outlines the positioning of several credit union systems. To review the chart, we should commence by examining the extremes of the Australian credit union sector on the most developed side of the axis and the Chinese sector at the introductory stage of development. We refer to the Australian sector as a sector undergoing transformation. Following the establishment of a new regulatory framework in 1998, the sector sought to reposition itself and work more closely with other mutuals, including building societies and trade unions, while retaining its independence and unique identity. In Australia the sector operates under the auspices of the financial regulator which also regulates all other financial organisations. Australian credit unions are taxed. The Chinese credit union sector is relatively recent, at a very early stage of development and a recipient of support from the international movement.
It may surprise members to find that Ireland is placed on the crossing-point of the growth stage and maturity stage. Although there is substantial evidence to indicate that the Irish sector and its membership base have moved into the mature life stage of credit unions, its regulatory and legislative framework has a retrospective focus and the sector's structure has not developed in line with the changing requirements of its base. This gap between the regulatory and legislative framework governing the sector and the needs of the sector's stakeholders is a source of frustration for all those involved.
Members will be aware of concerns the sector's representatives have expressed with regard to existing legislation. In effect, the Credit Union Act 1997 is a blunt instrument for both the regulator and the sector. It does not give stakeholders opportunities to avail of flexibility in the application of regulatory instruction or a measurement of appropriateness in its interpretation. This has become an issue, given that many credit unions have developed during the years into sophisticated community financial organisations. There are differences across the country in the size, scale and professionalism of credit unions. However, all credit unions, regardless of standing, are joined and aligned with a common brand. As a sector, they are unified by an ethos, a set of values and beliefs, not necessarily by structures, operations or financial co-operation.
The immediate discussion about existing regulation and legislation distracts stakeholders from addressing strategic issues which are vital to the future of the sector. The strategic review of the sector commissioned by the Minister for Finance affords stakeholders a unique opportunity to step back from the immediate detail. Stakeholders can create a vision for a future that affords credit unions a central role in the Irish financial services landscape and allows contributors a significant say in future policy for the sector. Substantial international evidence of similar mature credit union sectors concludes that credit unions can act and, in many cases, are acting as a viable alternative and counterbalance to traditional retail banks. We recommend that policymakers and the sector address the key enablers for such a strategic discussion. We recognise that such strategic discussions do not eliminate the need to address immediate matters but these can be addressed in parallel.
Our conclusions recommend that Irish credit unions can become a viable alternative to the banking sector if four conditions are met. First, a coherent, sector wide strategy is needed to address the role of credit unions. Second, appropriate prudential regulation should be introduced to cover solvency; reserves and capital adequacy rules; credit policy and guidelines; and a national liquidity programme which should be independently verified and self-financing. Third, non-prudential regulation should address governance frameworks; roles and responsibilities; staff training and competence, in which regard I commend the sector for making great inroads; operational processes, procedures and systems; risk management; and asset and liability management which is necessary to understand investment decisions. Fourth, legislative support will come into play after the preceding issues have been addressed appropriately. We believe in the tripartite method of regulation which provides consumers and members with the guarantee of credibility they need, sets out board governance procedures, roles and responsibilities and creates a regulator which can offer support, oversight and guidance.
Irish credit unions have a unique opportunity to address a social and financial need of national importance. A strong credit union sector provides for greater availability of credit for the economy. At a time of credit contraction in the banking sector, this availability has a significant positive impact. An empowered and enabled credit union sector that is permitted to offer a broader range of core financial services can provide a competitive counterbalance for an increasingly dominant set of retail banks. Such a holistic credit union policy embraces the broader objectives of social partnership and can provide substantial economic benefits for the State. Unlike banks, credit unions do not operate to maximise profit but to maximise social impact and inclusion.
Although we believe that, based on extensive experience, the strategic debate on the future of the sector should occur prior to considering the impact of regulatory change on credit unions, we can provide details of potential impact assessment. Research from 2009 on regulatory impact concluded that there were three key learning areas for credit unions in addressing trends in regulatory reforms. Credit unions must be cognisant of the tide of political and public opinion. If change is inevitable, they should be proactive in supporting the change programme and obtaining a favourable outcome for their sector. Credit unions globally have a unique opportunity to influence public policy structures to the benefit of uncomplicated banking operations such as theirs. By being helpful in the regulatory discussions, they can continue to influence public policy for the good of all concerned.
The role of regulation is critical to the public's trust in the credit union sector. The empirical evidence concludes that the worldwide trend in financial services is towards a consolidated regulatory structure. Academic literature does not prove a link between a financial regulatory structure and the performance or soundness of the sector. Although external regulation contributes to improved safety and soundness, the internal structure and capability of a credit union determine profitability and financial stability.
Irish credit unions have in the past 50 years been an essential source of community and household credit in Ireland. Their role in the past decade has been diluted with a younger audience owing to intensive competition from banks. Now more than at any time in the last decade the central role of the credit union as a trusted source of financial service and advice is re-emerging in communities. The key frustration shared by stakeholders in the sector with both regulation and legislation relates to the Credit Union Act 1997 which is a blunt instrument for governing modern credit unions. The sector and its members have matured and outgrown this legislation. Extensive empirical evidence concludes that regulatory structures have no performance impact on the sector. The current debate in the sector is focused on addressing the shortcomings of existing legislation and distracting the stakeholders from the core issue, namely, the strategic direction of the sector. This is the ideal time to craft the future of this vital sector by embracing and supporting the proposed strategic review of credit unions.
Is CUNA Mutual Europe a commercial company?
Mr. Paul Walsh
Yes, CUNA Mutual Europe is a series of limited companies regulated by the Financial Regulator in Ireland and its counterpart in the United Kingdom. It is a wholly-owned subsidiary of CUNA Mutual Group which is based in Madison, Wisconsin.
What does CUNA stand for?
Ms Karen Furlong
CUNA stands for Credit Union National Association. CUNA Mutual was set up by the credit unions of North America to provide insurance for credit unions there. We are the insurer of the credit unions.
I will be blunt. When I read sentences such as, "It does not permit stakeholders an opportunity to show flexibility in the application of regulatory instruction or a measurement of appropriateness in its interpretation", I can understand it but will the delegates give a layman's view? We have had representatives of the Irish League of Credit Unions before us and will receive representations from managers shortly. We are trying to listen to as many stakeholders as possible. We are trying to get a view on section 35, for example, and the current regulatory regime. The delegates have spoken about opportunities to show flexibility. In the context of Irish legislation, does this mean amending section 35 of the Credit Union Act? When speaking about the appropriateness of interpretation, does this refer to section 35 or something completely different? The two issues in which I have a particular interest concern section 35 of the Act and the current regulatory regime. There is one school of thought which suggests it must be under the auspices of the regulator's office under the umbrella of the Central Bank. However, there is another school of thought which suggests it should be a function of the Department of Enterprise, Trade and Employment or other such Department. I am trying to get the delegates' view and ascertain whether we should be moving towards the Australian model. Are we okay where we are?
If CUNA is the body for credit unions in North America, I presume the model in place there is not dissimilar to the one in place here. Will the delegates explain the differences from the punter's perspective? In the Irish context the guy on the street will use a credit union to take out a car loan. Does the credit union in North America serve a similar function, or is it a more extensive function more like a banking facility? If that is the case, is CUNA Mutual Europe's aim for us to move in that direction? Where does it see itself relative to the ILCU and other representative credit union organisations?
Mr. Paul Walsh
These are excellent questions and observations. I appreciate the Deputy has asked for responses in the way the man on the street — as he termed it — would want to hear them.
I will deal with the crux of the core question which was related to the view of the existing regulations. For today's submission we reviewed the position in 84 countries and the empirical evidence is that where matters are regulated, what is of importance is what the regulations contain. Moving on from this, there are interpretations and opinions as to where the regulatory role should be performed. There is a consolidated model and, on the other extreme, a fragmented model. CUNA Mutual does not have a hard and fast opinion on which is more appropriate; the issue is: what is appropriate for the regulator here? With all due respect, this is a relatively small economy in comparison to the United States or Canada. What we have seen in jurisdictions such as Ireland is a move towards consolidation. We have pointed to some facts in this regard. Over 33% of regulatory systems around the world have migrated to a single model, which makes sense for core reasons, including economies of scale and scope, flexibility, experience and expertise. That becomes a matter for the committee to consider as regards where regulation should take place.
CUNA Mutual's aims in Ireland have been consistent since 1963. We support the growth of the movement and deal with all credit unions. In Ireland there are three groupings: those represented by the Irish League of Credit Unions, with many of which we deal; those represented by the Credit Union Development Association; and a third group aligned to neither of the previous groups. Our view tends towards the success of this sector, which is why we came here and will continue to stay.
On section 35, our view as expressed in the paper is that there is a risk involved in us getting caught up in the wood and not taking a step back to consider the core debate. I will answer the Deputy's question in a straight fashion. The core debate in which credit unions are involved concerns the management of a regulation which is an add-on to the 1966 Act. The needs of consumers — members of credit unions — and credit unions have changed substantially in five decades. Before we get into the nitty-gritty, we should understand where we are going. If we know the destination before we leave the station, we will have a better chance of reaching more appropriate legislation. Sections 35, 32 and 46 are all symptoms of the problem. As soon as we fix one problem, there will be another to fix. The Deputy has heard many opinions and I hope I have answered his question. We have no hard and fast opinion on the exact wording of section 35 but I have a strong opinion that credit unions need more enabling legislation.
Our definition of the regulation as almost being restrictive can be considered from the layman's perspective. Credit union members come from a number of walks of life. They have a need for credit that is slightly more sophisticated than the standard loan for less than five years. Loans differ in size, term, rate and usage. In many ways, the Credit Union Act defines in a very rigid way what a credit union can do. It does not differentiate between a very small credit union which must engage in very simple lending and a sophisticated credit union which may have multiples of thousands of members and a sophisticated financial organisation. It does not sufficiently permit credit unions to adopt a broader range of products that may be more relevant to their members. That is what we mean by being more restrictive.
I welcome the delegation of persons connected with the credit union movement. As I said previously, I am a member of Longford Credit Union which involves a great group of people who provide a good service. I am delighted to give credit where it is due. I will not repeat all of what I said the last day.
Why not? We could have a reprise.
What can the committee do to help credit unions?
Each member's questions could be addressed individually.
Mr. Paul Walsh
It is not my prerogative to ask the committee to do anything but the Deputy has asked the question. I ask the members of this committee, as influencers of policy, when they have finished their review, to inform and inspire those responsible for producing legislation in establishing appropriate regulation to carry the credit union forward for the next 40 years. I must point out to Deputy Kelly that in 50 years of credit unions we have only twice had the need for Credit Union Acts. The predominant piece of work, led by the committee's predecessors in 1966, actually helped the credit union for 40 years. If this committee could influence the Government in producing another such Bill, it would be a major achievement for decades to come.
We have heard the opinions of the representatives and after a few more meetings we will produce our own research on the issue. Mr. Walsh says we should step back and do the review. That is fine, but these reviews sometimes go on for a long time with no definite end. It seems there are some changes that are needed now because, as I said last week, this will be a tough year. What are the views of the representatives on this? Do they think we should make those decisions? It seems the problem at the moment with the register is an issue of interpretation. Perhaps we should seek clarity on that and then do the review. Will CUNA Mutual be making a submission to the review? Does it act and speak for itself or in conjunction with the various credit union bodies?
Mr. Walsh said that CUNA Mutual delivers affordably priced and needs-driven insurance for credit union members. In what way does it insure people? I understand the end result, but how is the price calculated? Do large credit unions get a better deal than smaller ones? Mr. Walsh said CUNA Mutual deals with all the credit unions, but is it the only organisation providing such insurance in Ireland? Does it bid for this service or is it just assumed it will provide it?
Mr. Walsh said that credit unions have become one of the most important sources of household credit based on volume. By volume does he mean the number of loans? Does he have the figures? If so, we would be interested to see them.
Mr. Walsh stated in his presentation:
To date, credit unions throughout the world have fared better than traditional lenders by having lower impairment levels. This is particularly evident in industrial credit unions.
Could he expand on what this means? Is there any country in which credit unions have had major problems? We have been lucky here for many reasons. Is there any country where things have not gone so well in order that we can ensure the same thing does not happen in this country?
Mr. Paul Walsh
That is an extensive range of questions. I will speak first about the role of the review. There is no need for reviews to go on ad infinitum.
I agree with Mr. Walsh, but that does not mean they do not.
Mr. Paul Walsh
There is a need to commission this review and have it done expeditiously, taking into account the views of all stakeholders. I do not believe this should be an elongated process. We already have a well-informed group of stakeholders which can expedite the appropriate research. I agree with the Deputy that there are problems that need to be fixed. We support the sector in requesting that these issues, some of which have come to this committee, including the interpretation of the Act with regard to the duration of loans, capital adequacy requirements, minimum reserves and so on, would be resolved quickly. They are important matters and need to be addressed. I agree they cannot wait until the end of the review. Rather than dealing with these exclusively, however, we should also understand the need for a strategic outlook on the sector. It is important to bear this in mind for the strategic review as it has a bearing on objectives, input, timing and outcomes.
As for the role of CUNA Mutual in the review, if we are invited to participate, we will certainly do so. Our engagement is exclusively with credit unions and we support both the trade bodies and the credit unions themselves. Our bank of knowledge is built up with a depth of experience we are happy to share with anybody who is interested. As a mutual, we consider ourselves here for the sector.
The Deputy mentioned the volume of lending in Ireland. There is empirical evidence behind that, although I do not have it with me today. It is quite difficult to obtain these numbers but we do have some and I am more than happy to forward them on.
What has gone wrong with credit unions around the world? Ireland is unique in that it has not so far had an insolvent credit union. In practically every other jurisdiction, credit unions have had to close as a consequence of losses. In the United States, for example, those states that were more dramatically hit by the credit crunch have seen credit unions close and regulators take over control of credit unions. In credit union jurisdictions such as Australia, up to 20% of credit unions consolidated in the years after regulation. Around the world, many credit unions have improved their operation to the extent that they were able to withstand the credit crisis. Unfortunately, in many countries, including the US, the UK, some parts of Canada and some parts of Australia, credit unions have had to close, either voluntarily or by the instruction of the regulator.
The Deputy asked about CUNA Mutual affordable insurance, which is a good question. What is the difference between CUNA Mutual and traditional insurers? Credit unions are mandated to insure loans to protect families from being chased for repayment in the event of a member passing away. To do this, credit unions procure insurance from insurers such as CUNA Mutual, although we are not the only provider in the market, and provide free protection to credit union members. The effective rate at which credit unions buy is close to one eighth of the market rate for the same type of insurance. Many people who take out loans from or have savings with credit unions would find it difficult, theoretically, to obtain similar insurance in an open market environment and, if they did, would pay on average between six and eight times the rate we obtain.
I like the scheme and although I have never availed of it, I know many people who do. Why can the banks not do something similar? Could they? Perhaps Mr. Walsh cannot answer that. Why has no credit union become insolvent in Ireland? Is regulation the reason for this or do credit unions have a different philosophy? As Mr. Walsh said, we have a unique record in this regard.
Mr. Paul Walsh
We are factually based and I do not have any empirical data. The Deputy would have to direct that question to the regulator's office. It is a good sign that no credit unions have gone out of business. They have stuck to the knitting over recent years in terms of knowing their own business. It is a unique situation and is a compliment to the regulator and the directors of the credit unions. Credit unions in Ireland are made up of good people doing good things and we should not underestimate the hard work they have put into the sector. Why can banks not do the same? With respect, I will let the Deputy direct that to the banks.
Would it be possible for banks to do the same if they wanted to?
Mr. Paul Walsh
Of course. The model is replicable.
I know banks would be more sensitive.
Mr. Paul Walsh
The credit unions have used this to differentiate themselves over the years and it has stood them well.
It is ideal. I thank Mr. Walsh.
I thank Mr. Walsh for his presentation. I am interested in the capacity of the credit unions to be a viable alternative to banks. Last week when the representatives of the Credit Union Development Association were before the committee, they said their liquidity was of the order of 50%. There are some credit unions with liquid reserves of €70 million or €80 million. How soon will credit unions be able to act as lenders to small businesses and people who currently are starved of credit by the banks? Is there potential for an amalgamation of credit unions to make them more efficient? In the longer term, is there potential for credit union members to sell the credit union or demutualise it, thereby gaining a return, as happened with the Irish Permanent Building Society some years ago?
Mr. Paul Walsh
I thank the Deputy for his questions. I shall take the issue from a very broad angle and reduce it to points. Regarding the potential for amalgamation or consolidation within the credit union sector, we appended in our presentation our view as to what happens when regulatory change occurs. One tends to find that consolidation within that sector occurs for a range of reasons. It becomes a consequence rather than being a key driver. It occurs usually because there is a growing cost in maintaining credit union governance and, therefore, these increased costs and the governance costs of approved or enhanced regulation cause a number of smaller credit unions which cannot afford such costs to join up with others on a local basis.
Increased oversight usually places a greater set of requirements on the board of directors, either through the introduction of fitness and probity measures, through increased oversight or, in some markets, through semi-professionalism of the board whereby a credit union allocates a certain number of seats on its board to professionals. In some markets that has caused pressure on credit unions to find new board members and is the reason many credit unions in other jurisdictions have been forced to merge.
A third cause is the increased levels of transparency many members seek from their credit unions. We have seen a growth of consumerism in Ireland in recent years along with consumer protection measures. Consumers have a right and expectation to see more from their credit union. That increased level of oversight usually brings with it increased or enhanced risk management costs. Again, from a cost and operational perspective, credit unions tend to want to merge their resources to make that happen. A greater level of co-operation usually occurs because of cost efficiencies to pay dividends. These are all growth costs. The corollary concerns how we can become more efficient and merge our assets. That is another reason mergers occur. There are two final reasons: change of management and operational consolidation.
The United Kingdom has already commissioned a project to consolidate not the credit union movement but the back-end operations of credit unions. In the Republic of Ireland there are just under 500 credit unions and we have very little by way of shared services. One tends to find that before there is a full consolidation of the credit union entity, credit unions will start sharing resources. That is normally a first step — operational efficiency and sharing joint operations. These lead to greater working relationships. In effect, that is how consolidation occurs.
The Deputy asked whether there was opportunity for this in Ireland. Generally speaking, considering the size of the population and the size of the credit union sector, theoretically there would be. However, it normally comes as a consequence of another driver rather than being a driver itself.
The Deputy asked when credit unions will be ready to introduce lending for small and medium-sized enterprises and people who need the money. It is fair to say that during 2009 credit unions were lending to people in need. As credit unions, they operate in a sector where they have excess liquidity or excess deposits. They have loaned 50% of what they have and have €14 billion in deposits and shares. Approximately €7 billion is loaned. There is more capacity for lending. Credit unions need to be careful that the type of lending is appropriate and that they do not lend to people who cannot repay.
Mr. Walsh reckons there is 50% lending across the sector.
Mr. Paul Walsh
It is across the sector. Credit unions need to be careful they lend to the appropriate people. Some credit unions loan to sole traders and across a spectrum of household credit. They are in a position to do that through unsecured personal loans and within a very narrow band and time limit. That explains part of the frustration brought to this committee by a number of stakeholders. These are in the position, both from a capital perspective and, in some of the larger concerns, a risk perspective, to extend that lending net. However the support framework for them to do so does not appear to be present under the guise of the existing Credit Union Act. That is part of the process which is working its way through.
The Deputy mentioned potential for demutualisation. It is a great question but I do not have a short answer for him. It is not a matter we have reviewed in any great detail.
Ms Karen Furlong
I might try a long answer. Regarding demutualisation and what tends to drive it, I have experience from the building society sector. It tends to come about for two reasons. In the first place, members will drive it because they do not feel they are getting value out of being a mutual society. They compare their situation with that of banks, may see cheaper rates, ask what is the value of being mutual and elect to demutualise. The second reason is when members see value in a surplus, which in the banking sector means profit that can be taken out. However, in the credit union sector that vast surplus or profit does not exist. There is not really much in it for members to push for demutualisation.
Mr. Walsh stated the role of regulation is critical to public trust in the credit union sector, and that goes without saying. He advocated a tripartite view regarding regulation, namely, that it is intended to save the interests of the actual consumers and the credit union. He spoke of the need for the regulator to be independent and objective in his assessments.
In recent weeks, as Mr. Walsh will know, the Irish League of Credit Unions, ILCU, and the Credit Union Development Association, CUDA, sent delegates to the committee. Both organisations advocated an independent regulator and the need for greater entrepreneurial ventures by credit unions. Both argued for a greater degree of innovation and a more progressive approach in a more modern environment. Where they differed significantly was in their underlying philosophy as to how this might be driven in terms of regulation. For its part, the ILCU was adamant that the regulator should be taken away from the Department of Finance and moved to the Department of Enterprise, Trade and Employment to underpin the philosophy it expounded. On the other hand, CUDA, having advocated the same point, held the view that the Department of Finance was the proper place for the regulator. Do the delegates have a view on that?
Mr. Paul Walsh
I thank the Deputy. I shall take that question in three basic parts. Yes, we have a view on it. Statistically, we brought a review of 84 jurisdictions that demonstrates there is no empirical evidence that directly links the performance of the sector with the location of the regulator or whether it is an aggregated or fully integrated regulatory system. Second, it is clear there will be different opinions on that point. That is what they are — opinions. The performance of the sector is driven more by the quality of the regulation and the quality of the operation of credit unions. We take a pragmatic view that I shall share with the Deputy. In a jurisdiction the size of Ireland it may make more sense to consider it from a holistic, single regulatory perspective. However, I accept there are different opinions on the matter. We have stated and shared with the committee six compelling reasons one should consider or examine it. They include economies of scale and scope and the experience effect in the regulator looking at the range of regulatory functions. It is has been demonstrated that, even with a single regulatory system such as, for example, the one in place in Australia, there is flexibility within it for the regulator to recognise the independence of credit unions. If we take a step back, the simple point is that there is no empirical evidence to demonstrate either model is best. It is purely a matter of opinion and what best suits the State and the regulator from an economic and regulatory perspective.
Ms Karen Furlong
In Australia and the United Kingdom, where there is one prudential regulator, the credit unions have used this as a marketing tool to a large degree. They maintain or suggest they are regulated by the same regulator which regulates all financial services and institutions. It is a matter of trust. They use this as a marketing tool and it has benefited them.
On behalf of the joint committee, I thank Mr. Walsh and Ms Furlong for attending. I also thank members for their contributions.