A STAND-OFF over plans to make the credit union watchdog answerable to the new financial services regulator has been resolved after the Minister for Finance pledged that special regard would be paid to the sector's voluntary and non-profit status.
The Irish League of Credit Unions (ILCU) dropped its opposition following assurances from Mr McCreevy that the financial services regulatory authority would be required to take into consideration the "unique role" of the organisation's members.
The Minister created a furore late last year when he announced that a new registrar for credit unions would be supervised by the regulator. He had previously indicated it would answer directly to Government.
A compromise was brokered in a series of meetings between senior Department of Finance officials and the credit unions over Christmas.
But the chief executive of ILCU Mr Liam O'Dwyer last night sounded a cautionary note, saying conflict might emerge should the regulator, which is to be controlled by the Central Bank, pay mere lip service to the caveat by demanding its members adhere to the same standards as commercial financial services players.
Opposition politicians expressed disquiet at the settlement as the Bill setting out the regulator's powers and functions came before the Oireachtas Select Committee on finance and the public service yesterday.
It was essential that the registrar be fully independent of the banking supervisor, said Mr Richard Bruton, Fine Gael finance spokesman.
Mr Bruton also asked if it was wise to give the Central Bank control over the new consumer protection agency for the financial services, accusing it of holding the public in low esteem in the past.
"The Central Bank does not have high regard for consumer protection. It is a serious mistake to transfer the statutory responsibility for consumer protection in relation to financial services entirely over to it. The Government should recognise what the Central Bank is good at and what it is not. It should not seek to give it a role in which it has little interest or experience," he said.
"There are genuine conflicts of interest between the role of prudential supervision and the role of consumer protection. The Bank has been quite content to tolerate low levels of competition and high margins by financial institutions."
Pointing out that credit unions presided over savings of more than €8 billion, the Minister said it was vital they adhered to the highest possible standards.
But Mr McCreevy acknowledged that credit unions occupied a niche distinct from that of banks and building societies and said the regulator would be obliged to give due consideration to this.
Mr Dan Boyle of the Green party wondered why the Government had not followed the US model where credit unions were regulated separately from banks and building societies.
Mr McCreevy said the distinction only applied to credit unions licensed by the federal government.
