The effect of Deputy Quill's amendment is to remove limits on a member's share holding and deposit holding in a credit union. As I have already indicated in the House, I do not want credit unions to diverge from their mission of catering for the personal financial needs of members in the local community. In particular, I do not want them chasing corporate business which has little commitment to the credit union other than for the rate of return on deposits.
This amendment would pave the way for overturning the ethos of the credit union movement and I am not prepared to accept it. My own amendments provide the necessary room for growth which credit unions are seeking while restricting their sphere of operations to the genuine credit union member who wishes to continue to invest.
The separate limits for an individual member of £20,000 on shares and deposits have been the focus of much discussion. Amendments Nos. 29 and 32 are aimed at meeting the needs as represented to me. I wish to reiterate the considerations which led me to select the figure of £20,000 for inclusion in the Bill. It compares with the current shares limit of £6,000 established by the industrial and provident societies financial limits regulations of 1985 which were brought into effect on 5 December of that year. When account is taken of inflation in intervening years this is worth approximately £9,000 today. Subsequently, the shares limit of £20,000 represents a doubling of the previous limit in real terms.
Unlike shares there is no set deposit limit for a credit union member other than the general deposit limits for credit unions under section 9 (2) of the 1966 legislation. This provides that the total amount on deposit in a credit union may not exceed the paid up share capital. Given that credit unions encourage members to invest in shares, it was anomalous that the more stringent limit under existing legislation applied to shares. Accordingly, in publishing the Bill I decided to correct this anomaly by providing that the limit on deposits should be the same as that for shares.
Since publication of the Bill I have received numerous representations relating to share and deposit limits. Some, such as that from the Irish League of Credit Unions, have sought higher figures for both shares and deposits while the Credit Union Advisory Committee, the statutory committee which advises the Government on credit union issues, suggested an amendment to include a combined figure of £40,000 for shares and deposits. The registrar's 1995 figures of credit union shares and deposits show that the average credit union member holds about £1,000 in shares and £100 in deposits. This is broadly consistent with the recent submission made by the Irish League of Credit Unions to my Department at our request, the purpose of which was to enable us assess the extent to which the limits in the Bill were inadequate. According to the league's submission, current average savings, which include shares and deposits, amount to £1,220 per member. Only 222 of the 1.85 million members, equivalent to 0.01 per cent, have savings in excess of £40,000. A further 1,938 members, equivalent to 0.1 per cent, have savings between £20,000 and £40,000. A further 23,244 members, or 1.25 per cent, have savings between £10,000 and £20,000. Therefore, almost 99 per cent of members have savings of £10,000 or less.
Putting to one side the small number of credit union members with savings at or near the combined limit of £40,000 proposed in the Bill, it is clear that the limits in the Bill provide substantial scope for credit unions to increase the amount of shares and deposits of the vast majority of members. However, in order to provide further flexibility for growth I have decided that subsection (4) should be changed in two ways. First, I propose to adopt the combined formulae recommended by the Credit Union Advisory Committee. Second, I have decided to increase the effective limit from £40,000 to £50,000 and I have included an aggregate shares and deposits figure of £50,000 in the amendment. This will allow members hold shares up to £30,000 and if they decide to invest all their funds in shares, the effective limit is £50,000. Having regard for the emphasis credit unions place on shares over deposits, I have decided to make no change in the deposit limit of £20,000.
I am aware that some credit union interests are unhappy with the concept of fixed sum ceilings despite these changes. Accordingly, a new subsection (5) provides flexibility enabling credit union members to go beyond the £50,000 limit in special cases. In addition, subsection (6) clearly states that anybody exceeding these limits at the commencement of the section will not be affected. Based on the figures provided by the Irish League of Credit Unions, I estimate there will be fewer than 100 members with credit union savings in excess of £50,000.
By reference to current credit union activities the original limits in the Bill would have been satisfactory. However, I decided to increase and revise the limit formulation in response to representations I received from many colleagues on both sides of the House and from the Irish League of Credit Unions and individual credit unions. This affords credit unions even greater scope for growth.
Amendment No. 32 provides for a new subsection (5) which defines the circumstances in which credit union members may exceed the aggregate savings limit of £50,000 outlined in subsection (4). There are two conditions: the number of members permitted to exceed the limit of £50,000 may not exceed 1 per cent of the total number of members in the credit union and any such members shall not hold more than £30,000 on deposit. This new subsection is a response to the special cases of credit union members which may arise from time to time. This will allow, for example, a long standing credit union member who may come into a substantial inheritance to invest that sum with their credit union. Similarly, a long standing member may hold significant savings in a credit union and then retire with a significant lump sum which he would wish to invest in the credit union. Such exceptional circumstances are now catered for.
We know from figures supplied by my Department and the League of Credit Unions that only about 222 members have savings over £40,000; I estimate that fewer than 100 members have savings above £50,000. This equates to 0.005 per cent of members, or one in 20,000. In providing for 1 per cent I am allowing credit unions substantial scope to cater for special cases for which the previous fixed limits did not cater. The remaining 99 per cent of members hold savings at or below £10,000. The new limit of £50,000 allows substantial scope for the growth of the movement in the years ahead.
The new subsection (5) also includes provision for the registrar to change the 1 per cent provision in the case of an individual credit union which may have a higher incidence of prosperous members. I was thinking, Deputy O'Keeffe, of Mitchelstown, for example. This provides further flexibility for credit unions whose profile of members might differ from the norm. Similarly, the Minister is given power in subsection (6) to increase by order the financial and percentage limits applying in subsections (4) and (5).
This generous and flexible package of measures amounts to an appropriate response to the future growth of the credit union movement and of individual credit unions.
