Joan submitted at the committee stage of the Central Bank Reform Bill 2010 an amendment which would have seen the proposed Section 35 A & B deleted and replaced with an amendment which would have provided specifically that the Central Bank would be in a position to facilitate the voluntary merger of credit unions in the State in the interests of improving financial stability and management of the credit union sector.
This approach was not accepted by the Minister, although he committed to bringing forward amendments at Report stage to address these issues. In the event, he introduced a report stage amendment, 2C, which was not substantively different from Sections 35 A & B.
Joan submitted two key Report Stage amendments to this Bill in respect of Credit Unions, numbers 10 and 55.
Amendment 55, like Joan’s committee stage amendment, would have facilitated the voluntary merger of credit unions.
Amendment 10 would have established on a statutory basis a Credit Union Consultative Panel. This would have created a forum where individual credit unions, their members and their representative bodies could interact on an ongoing basis with the Registrar and representatives of the Central Bank’s Head of Financial Regulation. It would also have gone some way towards facilitating and improving the consultation process between the Regulator and the credit union sector’s representative bodies.
The Report stage debate was guillotined, with all of the Ministers’s amendments, including 2C, being accepted and all opposition amendments rejected.
The Labour Party remains committed to the continued development of the credit union sector.
Deputy Joan Burton:
I move amendment No. 10:
In page 13, after line 43, to insert the following:
14.—(1) The Bank shall establish and maintain a consultative panel to be called the Credit Unions Consultative Panel (in this section referred to as “the Panel”).
(2) As soon as practicable after establishing the Panel, the Bank shall publish in Iris Oifigiúil a notice to the effect that the Panel has been established and the date on which the establishment took effect.
(3) The Panel is to consist of not fewer than 5, and not more than 20, members.
(4) The members of the Panel are to be appointed by the Minister for Finance after consulting those organisations that, in the opinion of the Minister for Finance,represent the interests of—
(a) credit unions, and
(b) credit union members.
(5) In appointing persons as members to the Panel, the Minister shall ensure as far as possible that those persons have knowledge or experience of or as consumers of services provided by credit unions.
(6) A person is not eligible to be appointed as a member of the Panel if the person—
(a) is a member of either House of the Oireachtas or is, with the person’s consent, nominated as a candidate for election as such a member, or
(b) is a member of the European Parliament or is, with the person’s consent, nominated as a candidate for election as such a member or to fill a vacancy in the membership of that Parliament, or
(c) is a member of a local authority or is, with the person’s consent, nominated as a candidate for election as such a member.
(7) A member of the Panel holds office for such period, not exceeding 5 years, as is specified in the member’s document of appointment, unless the member ceases to hold office.
(8) A member is eligible for reappointment at the end of a period of office.
(9) The Minister shall appoint one of the members of the Panel to be chairperson of the Panel.
(10) The functions of the Panel are as follows:
(a) to monitor the performance by the Bank of its functions and responsibilities in relation to credit unions;
(b) to provide the Bank with comments with respect to the performance of its functions and responsibilities in relation to credit unions;
(c) to provide the Bank with comments and suggestions with respect to the performance of credit unions;
(d) to provide the Bank with suggestions for initiatives that, in the Panel’s opinion, the Bank should take with respect to the performance of its functions and responsibilities in relation to credit unions;
(e) to provide the Bank with comments on the impact that the conditions and restrictions imposed by the Bank on credit unions have on the competitiveness of credit unions;
(f) to provide the Bank with comments with respect to changing trends within credit unions that have implications for the functions and responsibilities of the Bank;
(g) when the Bank so requests, to comment on a policy document or regulatory document, or a proposed policy document or proposed regulatory document, prepared by the Bank in relation to credit unions.
(11) The Bank shall provide the Panel with such administrative services (including technical and legal advice), and such funds, as the Bank believes are necessary to enable the Panel to perform its functions.
(12) The Bank shall arrange for an officer or employee of the Bank nominated by it to attend a meeting of the Panel whenever the chairperson of the Panel asks the Bank to do so.
(13) Within 3 months after the end of each financial year, or within such extended period as the Bank allows, the Panel shall prepare an annual report that provides details of its activities during that year.
(14) The Bank shall arrange for publication of the annual report of the Panel.
(15) The Bank shall also arrange for publication of—
(a) comments made by the Panel to the Bank in accordance this section, and
(b) any statement of reasons given by the Bank in response to any such comments, and
(c) reports of meetings of the Panel, and
(d) any other report produced or commissioned by the Panel, and
(e) the rules of procedure of the Panel.
(16) Before making or issuing a policy document or a regulatory document in relation to or affecting credit unions, the Bank shall consult the Panel, unless the Bank believes that the document must be made or issued without delay. In that case, the Bank shall consult the Panel as soon as possible after the document is made or issued.
(17) In making or issuing a policy document or regulatory document in relation to or affecting credit unions, the Bank shall take into account the advice (if any) provided by the Panel on any aspect of the document. If the Bank declines to give effect to any particular advice provided by the Panel, it shall provide the Panel with a written statement setting out its reasons for declining to give effect to the advice and shall, if the Panel so requires, publish the statement.
(18) If the Bank makes or issues a policy document or regulatory document, a failure to comply with subsection (15) or (16) in relation to the document does not of itself invalidate the document.
(19) The chairperson of the Panel shall attend a meeting of the relevant Joint Committee of the Oireachtas whenever that Committee requires the chairperson to do so.
(20) When attending a meeting of the relevant Joint Committee of the Oireachtas, the chairperson of the Panel shall provide that Committee with such information as it reasonably requires about matters with which the Panel is or has been concerned.
(21) In this section, “relevant Joint Committee of the Oireachtas” means a Joint Committee of the Oireachtas to which the Oireachtas has assigned the role of examining matters relating to the operation of the Bank.”.
These amendments deal directly with credit unions in Ireland and, in an important and significant way, with the future of the credit union movement in this country in terms of how it is to be regulated, assisted and enhanced in its important role in Irish society in respect of industrial credit unions for people at work in various occupations and, in particular, local credit unions which provide a service not alone to people who consciously choose to bank with credit unions but, more important, people and communities that no longer have access to banking services because they do not offer enough profit to the commercial banks.
The purpose of amendment No. 10, which I urge the Government to accept, is to put on a statutory footing in this important legislation, which seeks to regulate the financial services sector and to avoid the mistakes made in the past, the credit union movement, not as an add-on in the Schedules to the Bill to be regulated at the behest of the Central Bank, but by way of recognised position within the legal framework of the legislation. This would allow for the establishment of a credit union panel. Amendment No. 10 is detailed and sets out what the Labour Party has in mind.
The panel will have the power to consult organisations which in the view of the Minister for Finance represent credit unions and, more important, credit union members who at this time have between €11 billion and €13 billion in savings. People are currently saving more because they are terrified to spend. The credit union movement is strong in terms of savings. The Labour Party supports strong regulation of the credit union movement, as does the movement. It is important that people’s savings are fully protected. We want to see introduced a code of regulation which includes the credit union movement.
On the night of the guarantee scheme the bankers were called in.
Deputy Joan Burton: Mr. Seán FitzPatrick was called up to Farmleigh. It was not necessary to call in to Farmleigh or the Department of Finance the directors of credit unions because they were not indulging in massive speculation and the ruination of their financial institutions. Why will Fianna Fáil not in this legislation give due recognition in an orderly and structured way to the credit union movement? Other countries do this.
A consumer panel is a panel made up of people with an interest and expertise in finance, credit unions and credit union members. This will ensure continuous dialogue between the Central Bank, the Regulator, the credit unions and those who represent and are members of them in terms of obtaining the best possible outcome and regulation of the credit union movement in Ireland, thus allowing it to respond to the challenging conditions of the times and putting it in a position to upgrade, improve and change structures to respond to changing times. This is what we want. We also want consultation built in and for the people at the top of the Central Bank and Financial Regulatory Authority to give due recognition to issues other than profit in banking, which as I stated earlier is well considered in this Bill.
Part of the function of this Bill is to try to make the banks profitable. The function of the guarantee scheme was to plug the hole in the banks’ balance sheets. Anglo Irish Bank has so far cost us €22 billion. What is wrong with Fianna Fáil Members that they cannot get into their head that the interests of the credit union movement should be fully recognised in this legislation? Amendment No. 10 is a modest, careful and cautious proposal which would allow credit unions to have a statutory function in this Bill. During discussion on Committee Stage the Minister said that the proposal I put forward on behalf of the Labour Party was a good one. I note that he has responded by way of amendment No. 34 which seeks to give the bank the power to, if it so wishes, establish an advisory group in respect of credit unions. It is at the disposal of the Governor of the Central Bank to establish such an advisory group which will have no statutory function. We are proposing that we, once and for all, in reshaping financial review and regulation structures in Ireland, recognise the credit union movement.
We are all aware of the reports made to committees in regard to the bad debts or bad debt potential of approximately five credit unions, which we understand to be for the most part small local area credit unions. Amendment No. 55, a Labour Party amendment, provides specifically that the Central Bank will be in a position to facilitate the voluntary merger of credit unions in the State in the interests of improve financial stability and management of the credit union sector. The amendment provides for a resolution mechanism which would assist the Financial Regulator in dealing with, as stated by him in committee, the one or two credit unions about which he is concerned. Our amendment is a sensible response to the concerns that were expressed. The State should facilitate small area credit unions that may wish to merge. This legislation should allow that to happen. If the Central Bank and the Financial Regulator deem it appropriate, it should be facilitated in a positive way. Deputies from all parties, including Fianna Fáil, are familiar with the problems encountered by people in many communities, including my constituency, in the run up to Christmas. They have to go to credit unions, to registered money lenders, who charge huge rates of interest, or to informal money lenders, who charge mega interest rates. The Central Bank is not above considering the need for social banking. As this form of business is worth between €11 billion and €13 billion, it should not be dismissed out of hand. I hope the Minister of State, Deputy Killeen, can respond positively on behalf of Fianna Fáil to the Labour Party’s moderate and modest amendments, which would uphold and strengthen this country’s credit union movement and enable it to grow. We should not allow the credit union sector to be wiped out, which is the aspiration of certain commercial banks. They would like an additional €11 billion or €13 billion to be lodged into their accounts, and let the credit unions go on the hunt.
Deputy Kieran O’Donnell: I support amendment No. 10, which has been proposed by Deputy Burton on behalf of the Labour Party. It is very worthwhile. In the short time available to me, I would like to refer specifically to amendment No. 53. I thank the Minister of State, Deputy Killeen, for allowing some additional amendments to be discussed as part of this group. The amendments before the House go to the heart of the issue with the credit union movement. The Joint Committee on Economic Regulatory Affairs and the Joint Committee on Finance and the Public Service have had lengthy debates with the various bodies in the credit union sector. I understand the credit union movement, having met the Minister on a number of occasions, has reached a general consensus on the amendment to be made to section 35 of the Credit Union Act 1997. However, we are going into the unknown with the introduction of the new section 35A, which will give the regulator wide-ranging powers with regard to credit unions, in effect.
A number of factors need to be emphasised in this regard. We all want sound and strong regulation of the credit union movement. That is also the aim of the movement itself. We want to protect the interests of deposit holders. We need to ensure we do not throw out the baby with the bath water, however. The taxpayer has bailed out the large banks. The €22 billion that has been put into Anglo Irish Bank has gone down the toilet. Money has been also put into the other banks. I do not know of a red cent that has been put into the credit union movement. There is a concern that the credit unions’ deposit base will be ravaged by the banks. The credit union movement is based on lending the money the credit unions have on deposit. They do not go to the wholesale markets to borrow the money they lend. The banks that have taken such risks have wasted the hard-earned money of taxpayers.
The community-based credit union movement works by taking deposits as part of a saving culture, lending that money back into the community and making interest from the money it lends in order to pay a dividend. If credit unions cannot pay a dividend, they will not attract deposits. In such circumstances, the deposits will go instead to the banks, which are keen to raid the credit unions in any event, and the credit union movement will not be able to provide vital services to small people throughout this country. As a chartered accountant who worked as a sole practitioner for many years, I assure the House that many of my clients would have gone out of business in the 1990s if it had not been for the credit union movement. They could not get overdraft facilities from the banks. On Monday mornings, they used to go to their local credit union to get a bank draft before continuing to their local bank to lodge the draft and thereby stay in business. We owe the credit union movement something, but we owe the banks nothing.
Last night, I asked the Minister of State, Deputy Killeen, whether the Minister for Finance met the credit union movement before amendment No. 53 was tabled on Report Stage. I have not yet received an answer. I want to hear an answer. The credit union movement has worked with the Minister. We have had various meetings with the Minister. I have drawn up an amendment on behalf of the Fine Gael Party, but it does not appear to be on the list of Report Stage amendments. I will ensure it is tabled in the Seanad. The amendment will provide that the new section proposed in amendment No. 53, which combines sections 35 and 35A, “shall not come into effect” until an order for its commencement is laid before both Houses of the Oireachtas and an assessment of its impact on the credit union movement is undertaken and published.