Credit Unions have served Ireland well
8 March 2018
Parliamentary Party Chair and Spokesperson on Social Protection, Community and Rural Development and the Islands; Agriculture and the Marine
Speech by Séan Sherlock TD in the Dail debate on the report on the 'Review of the Credit Union Sector with specific reference to the Credit Union Advisory Committee Review of Implementation of the Recommendations in the Commission on Credit Unions Report'
This is a timely and very important review of the credit union sector.
This is a sector that has served the people of Ireland well, and continues to deliver excellent services, ethically, into communities when the banking sector is exiting communities.
Despite the lurid and sensationalist headlines, from Mr. Noon and his so-called €1billion hole, from , regulators and journalists alike, credit unions have retained market share and are now growing again.
Credit Union directors, managements and staffs have willingly adopted seismic change in 4 short years since enactment of the latest credit union act. They have survived unrelenting regulation, and universal restrictions, at a time that the banks are still being left get away with murder by the self-same regulator, the Central Bank. It is clearly evident that the Central Bank are well advanced on their road to eliminating smaller credit unions,and handicapping the medium and larger credit unions.
This report calls for constructive engagement between the regulator and the regulated. It was evident during the hearings, and is evident since, that this is not happening, and will not happen. Shortly after the hearings wound up, the Central Bank issued a series of further restrictions on credit union deposit investments, this despite widespread opposition. Put simply, the Central Bank is actively limiting credit union investment options.
This is the most powerful central bank in Europe when it comes to Credit Unions. The Central bank does not manage that power well. The Joint Committee recommended that a new appeal mechanism should be introduced to allow appeals of regulatory decisions to an independent body. This is long overdue and should now be pursued with urgency.
The Credit Union directors and staff that I know are decent people. They have shown their great capacity for change. Yet, we now witness a breakdown in the relationship between the all powerful Central Bank and these decent people. I am very pleased, therefore, to see the report suggest an alternative dispute resolution method.
I am also pleased to see the recommendation in the Report that Regulatory Impact Analysis be a feature going forward. This is standard in developed regulatory jurisdictions, and was a very firm requirement of the Commission on Credit Unions. Unfortunately, it has again been ignored by the Central Bank.
It is disturbing to read, and I quote from the report “The representative bodies raised serious concerns about the existing regulatory environment. Their view is that the current framework is disproportionate, is too costly and burdensome, stymies innovation, restricts the opportunities for credit unions to lend and to support members and communities and prevents the sector from receiving a fair return on its investments.”
The Central Bank has stubbornly refused to introduce tiered regulation, so that regulation would be proportionate to scale and complexity. Their “one-size-fits-all” is an extremely blunt and ineffective instrument. Volunteer directors and paid staff live in terror of the heavy hand of a regulator who knows they can push these small organisations around, unlike our serial-mortgage offenders in the banks. The costs of regulation is crushing, and is eroding credit union surpluses. The only ones winning out of all of this are the so-called expert consultants who charge credit unions inflated fees. Recent Central Bank speeches have focused on diminishing returns on assets – small wonder this, with the range of penal regulatory charges, direct and indirect, that the very same bank imposes on credit unions.
Much emphasis is placed upon the relatively low loans-to-savings ratio in credit unions. The main problem here is the cost of regulatory reserves. For every €10 lodged in a credit union, it costs the credit union €1 in reserve costs. Here again the Central Bank has refused to move to a risk-based reserving model, and credit unions are saddled with a huge bill. It should be remembered that it is the members of the public who voluntarily decide to invest their money in the credit union, and in an increasing number of cases, the credit union is the only financial institution left in the community. I am aware of credit unions who are refusing savings from members because they cannot afford the regulatory reserve costs. It is not acceptable that the Central Bank would be so obdurate as to penalise members of the public in this manner. It is very poor regulation that forces money to be hid in mattresses and presses. Very poor indeed!
It was very disturbing to learn, in the course of the hearings, how many recommendations of the Commission on Credit Unions had been ignored by the Central Bank, seven in all. This is indicative of a culture of intolerance towards credit unions in the Central Bank.
I would also like to highlight the report’s support for the retention of the ‘Common Bond’ structure. It is essential in underpinning the community and democratic base of credit unions.
The most immediate action the government needs to take on foot of this report is the establishment of a financial vehicle so that credit unions can at last invest in tier 3 Approved Housing Bodies .
I would also like to take this opportunity to ask the Minister – what is the status of the Public Banking Investigation? We have been told since before Christmas the report is complete and we are awaiting its publication. This has will have an impact on the future of the Credit Unions’ business model.
This is an issue of National Security. Are we content for Ireland to go back to the duopoly of the AIB and BOI, are we prepared to risk our entire society again being held to ransom by these two institutions in a future global financial crisis? We need to defend and protect our society against such threats.
- We need a vision for sector from the government and a framework for Credit Unions to move forward
- The Government must establish of a financial vehicle so that credit unions can at last invest in social housing
- The requirement of the Commission on Credit Unions for Regulatory Impact Analysis must be implemented
A Ceann Comhairle I commend this report to the house.