Credit unions get ease

CREDIT UNIONS in Barbados are getting a regulatory ease from the Financial Services Commission (FSC).

The FSC has issued a circular announcing its establishment of an “exemption regime” where credit unions may carry out functions related to multiple membership, borrowing by staff and elected officers, and signatories to bank accounts “without specific approval from the Commission, subject to compliance with applicable conditions”.

However, it also warned that “where the established criteria are breached, the Commission will restrict credit unions’ participation under this regime”.

The new exemptions relate to Section 52 (1) of the Co-operatives Societies Act Cap. 378A, and Regulation 23 Section 1 and Regulation 33 Sections 2, 3, 4 and 5 of the Co-operatives Societies Regulations, 2008.

“The regime exempts the credit union sector from specified legislative requirements as follows. For all credit unions: section 52 (1) of the Co-operative Societies Act Cap. 378A relating to multiple memberships [and] Regulation 23 Section 1 of the Co-operative Societies Regulations, 2008 relating to borrowing by staff and elected officers,” said the FSC in the Exemption Regime – Multiple Membership; Borrowing By Staff and Elected Officers; and Signatories to Bank Account circular.

Agreed in writing

Section 52. (1) of the Co-operative Societies Act states that “no person shall be a member of more than one credit union unless the credit unions have agreed in writing thereto”.

Regulation 23. (1) states: “No officer, director, credit committee member, supervisory committee member, or employee of a society may borrow from the society an amount in excess of his holdings therein in shares, deposits and accumulated earnings unless approved by the vote of two-thirds of the other members of the board, credit committee and supervisory committee sitting together.”

The FSC explained that the exemption from Regulation 33 Sections 2, 3, 4 and 5 was only available to credit unions “with total assets of $35 million and above, and with a structure that includes a manager and at least one other senior officer who can co-sign cheques”.

This part of the Co-operative Societies Regulations, 2008 relates to the authorisation of signatories to bank accounts.

Regulation 33 Section 2 says that “cheques drawn on an account . . . shall be signed by any two of the following people: a director; the treasurer; the chief executive officer, by whatever name called; [or] chief finance officer, by whatever name called.”

Section 3 of this regulation states that “notwithstanding Paragraph 2, the board may authorise a senior employee to sign cheques”.

In addition, Regulation 33 Section 4 says that “where a senior employee is authorised to sign cheques under [Section] 3, the cheques must also be signed by one of the persons mentioned in [Section] 2”.

Also, Section 5 of this regulation requires that “where a senior employee is authorised by the board to sign cheques under [Section] 3, the board must notify the Registrar [of Cooperatives] within two weeks of the grant of the authorisation”.

While the FSC is giving credit unions exemptions from the legislative requirements detailed, it said these financial institutions will have reporting requirements.

“Credit unions will be required to provide specific reports and declarations signed by their board of directors and supervisory committee,” the regulator said in the circular.

Activity report

For exemptions related to approval of loans to staff and elected officers, credit unions must submit “a quarterly activity report confirming whether the loans granted were consistent with the credit union’s loan policy”.

The FSC must also receive from them the “submission of Board approved policies and internal control procedures relating to the authorisation of signatories no later than 30 days” after the circular’s issuance.

“Submission of names and positions of signatories and authorisation limits must be reported to the Commission within five days of granting authorisation to the signatory, consistent with the material change guideline,” the FSC informed credit unions.

“The Commission expects that credit unions proactively monitor their operations to ensure ongoing compliance with this exemption regime. Where the established criteria are breached, the Commission will restrict credit unions’ participation under this regime,” the regulator advised.

Expectations

The circular on the exemption regime follows one from the FSC titled Provision of Adjunct Services By Credit Unions – Legal Services

to “provide guidance to credit unions regarding the FSC’ expectations relating to the provision of adjunct or ‘value-added’ services to members”.

The FSC said that while it did not regulate legal services, it expected credit union providing such services to obtain written confirmation from the relevant authority that the proposed activities are compliant with all laws, regulations and other requirements; develop and maintain policies and procedures to govern the operation of those activities; ensure that strong business conduct practices and risk management are in place; ensure that appropriate disclosure of the scope of permitted activities and fees is provided to members.

“The Commission expects that in respect of any add-on services provided, credit unions will apply sound practices that protect the reputation and safety and soundness of the sector,” the FSC said. (SC)

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