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 Header Item Children (Amendment) Bill 2015 [Seanad]: Second Stage (Resumed) (Continued)
 Header Item Children (Amendment) Bill 2015 [Seanad]: Referral to Select Committee
 Header Item Credit Unions: Motion (Resumed) [Private Members]

Wednesday, 24 June 2015

Dáil Éireann Debate
Vol. 884 No. 1

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(Speaker Continuing)

[Deputy James Reilly: Information on James Reilly Zoom on James Reilly] I will respond briefly to a number of points. The external recruitment process for new staff in Oberstown commenced in 2014 and is ongoing. A total of 40 care staff have been recruited and posts filled to date, with one more appointment to be made shortly. Revised offers of employment are in the process of being issued to a number of candidates at present, with a view to ensuring the maximum possible uptake and approving of staffing levels and to enable new facilities to be brought into full operation this year.

On the progress of the Children First legislation, Deputies will be aware that the Bill passed Committee Stage in May. It is my intention to bring the Bill to Report Stage in the future.

I commend the Bill to the House. On Committee Stage, I will deal with any issues which Deputies believe have not been fully addressed.

Question put and agreed to.

Children (Amendment) Bill 2015 [Seanad]: Referral to Select Committee

Minister for Children and Youth Affairs (Deputy James Reilly): Information on Dr. James Reilly Zoom on Dr. James Reilly I move:

That the Bill be referred to the Select Committee on Children and Youth Affairs pursuant to Standing Order 82A(3)(a) and 126(1).

Question put and agreed to.

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

Acting Chairman (Deputy Charlie McConalogue): Information on Charlie McConalogue Zoom on Charlie McConalogue Deputy Finian McGrath is sharing time with Deputies Mick Wallace, Michael Fitzmaurice, Richard Boyd Barrett and Maureen O'Sullivan.

Deputy Finian McGrath: Information on Finian McGrath Zoom on Finian McGrath 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.

Deputy Mick Wallace: Information on Mick Wallace Zoom on Mick Wallace 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.

Deputy Michael Fitzmaurice: Information on Michael Fitzmaurice Zoom on Michael Fitzmaurice 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.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett 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.


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