Draft General Scheme of the Credit Union Bill, 2012

1. Joint Committee on Finance, Public Expenditure and Reform Correspondence Item No. 2012/290 Draft General Scheme of the Credit Union Bill, 2012 Joint Oireachtas Committee on Finance, Public Expenditure & Reform 19th September 2012

2. Democratic Control Issue: Credit union thinking, planning and operations worldwide are based on ten fundamental Credit Union Operating Principles which provide a common foundation between all credit unions. Operating Principle No. 2 Democratic Control provides that: Credit union members enjoy equal rights to vote (one member, one vote) and participate in decisions affecting the credit union, without regard to the amount of savings or deposits or the volume of business. The credit union is autonomous, within the framework of law and regulation, recognising the credit union as a co-operative enterprise serving and controlled by its members. Credit union elected officers are voluntary in nature and incumbents should not receive a salary for fulfilling the duties for which they were elected. However, credit unions may reimburse legitimate expenses incurred by elected officials. Ask: In revisiting the draft General Scheme, full consideration be given to the significant concern that provisions of the draft General Scheme unduly interfere with this Operating Principle.

3. Restricting Volunteerism Issue: It would be inequitable, unnecessary and potentially detrimental to some (particularly small) credit unions to impose a legal restriction on the number of years an individual can serve as director or member of the board oversight committee. Were this proposal to be implemented, the Republic of Ireland movement would be the only credit union movement worldwide where such limitation would exist. What is the justification for this unfavourable treatment of Irish credit unions as against all other credit unions worldwide? That no other financial institution in the Republic of Ireland is subject to this restriction was found to be highly objectionable particularly in light of recent events in the wider financial services industry in this country. What is the justification for this unfavourable treatment of credit unions as against all other financial service providers in the Republic of Ireland?

4. Restricting Volunteerism (cont.) Ask: That, preferable to providing hard restrictions in primary legislation, credit unions be invited to amend their registered rules to insert a provision around term limits for the board of directors, board oversight committee and principal officers, where such a proposal is considered to be: • workable in the circumstances of that particular credit union (and the pool of volunteers available to it); and • in the best interests of its members.

5. Prohibitions on Board/BOC Issue: Serious questions exist around the legality/constitutionality of these exclusions which the members of the League Board view as representing an undue interference both with democracy and the constitutional rights of individuals. While understanding the necessity to implement some such prohibitions, the League Board believes that these recommendations go so far as to almost ensure a negative impact on credit unions as a result. Ask: That further and full consideration be given to the matter. In the event that the issue proceeds, the attention of the AGO be drawn to these concerns at an early stage.

6. Tiering by Asset Size Alone Issue: The League Board does not support the creation of classes/types/tiers of credit unions on the basis of asset size alone and believes that a model based on risk and complexity of business model would be considerably more appropriate. Ask: That the model which is already operated successfully by the Financial Services Authority (in GB and, more recently, for credit unions in Northern Ireland including the League’s 104 member credit unions there) whereby credit unions are categorised into Versions on the basis of risk and complexity of business model, be adopted in the Republic of Ireland.

7. Removal of Treasurer Issue: While fully accepting that the definition in law of Treasurer as Managing Director is incorrect and that a number of the current statutory functions are purely operational issues which should properly be conducted by the executive; the League Board does not believe that the office, in its entirety, should be abolished. Ask: That the office of Treasurer be retained in law for the purpose ensuring the timely preparation of the accounts of the credit union and the onward presentation of same to general meetings of its members.

8. Memorandum of Understanding Issue: At a time when credit unions are moving to a new and markedly different regulatory environment, the League Board believes that it is now absolutely critical that a Memo of Understanding be agreed between credit unions and the Central Bank of Ireland as a matter of urgency. The document should cover areas such as how each party will interact with the other and how communications are properly conducted – specifically, when written instructions or confirmations are required of either party. Ask: Support in this initiative will be appreciated.

9. Matters not addressed 1. Enabling Provision at Part II (Governance) A specific power should exist at Part II which clearly enables CBOI to vary the application of the governance regime between various tiers of credit unions. 2. Alternative/Additional Means of Raising Capital No provision for alternative/additional means by which credit unions could raise capital. The issue is of particular importance where credit union incomes continue to fall. Successful methods in use in other movements include issuing deferred shares/member paid in capital, non member paid in capital. 3. Liquidity Fund This opportunity should not be lost to provide, in law, for a credit union liquidity mechanism which could be triggered at a future date in the event that such need arises.

10. Issues not addressed (cont.) 4. Electronically Enabled Payments Account Credit unions should be leaders in assisting Government to implement its financial inclusion agenda. The new Bill should encourage credit unions in this regard by permitting them to offer electronically enabled payment accounts. 5. Social Finance The Bill should amend the Credit Union Act, 1997 so that credit unions can lend to Government backed/guaranteed schemes/projects which have a social benefit.   6. Shared Services The Bill should support the establishment of CUSOs and other means of sharing services between credit unions. 7. Regulatory Impact Assessment A legislative provision around RIAs being conducted by CBOI as part of its system of regulation of credit unions is both desirable and necessary.

11. Closing Remarks