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'Light Touch' Regulation For Just One Credit Union

By NATARIO McKENZIE

Tribune Business 
Reporter

nmckenzie@tribunemedia.net

The proposed ‘light touch’ regulatory regime for credit unions with assets under $1 million would only apply to one organisation at present, the National Workers Cooperative Credit Union (NWCCU) chairman said yesterday.

Sonia Hamilton said credit unions welcomed the transition to becoming regulated by the Central Bank of the Bahamas, noting that this trend was happening worldwide.

The ‘light touch’ regulatory proposal is contained in the Central Bank’s consultation paper on the draft Bahamas Co-Operative Credit Unions Bill, and accompanying regulations, which have been released for final consultations after spending two years in development.

The consultation paper noted that seven credit unions remained in existence at end-October 2013, and were being governed with other co-operatives under the Co-Operative Societies Act 2005, stating: “The credit union sector has registered significant growth over the past five years, with assets of $301.074 million at end-December 2012, representing an average growth of 39 per cent since 2007, and membership at some 39,238 persons.”

Ms Hamilton said none of the premier Bahamian credit unions would be affected by the ‘light touch’ regulatory regime being proposed, with the one credit union falling in that category being a 40-year-old church credit union that did not offer loans.

“The ‘lighter touch’ which refers to credit unions having less than $1 million in assets will only apply to one credit union at this time, and to any new credit unions being formed in the future,” said Ms Hamilton.

She added that credit unions in the Bahamas have enjoyed a growth of almost 40 per cent over the past five years despite a depressed economy.

While credit unions with assets in excess of $1 million will have to maintain a combination of statutory reserves, retained earnings, qualifying shares and equity shares that amounts to 10 per cent or more of their total assets, smaller operators will have a smaller regulatory burden.

Those credit unions with assets of less than $100,000 will have to keep a reserve ratio equivalent to 1 per cent of total assets; those with assets between $100,000 and $300,000 a 3 per cent ratio; operators with assets between $300,000 to $500,000 a 5 per cent ratio; those with between $500,000-$700,000 in assets, a 7 per cent ratio; and credit unions with assets between $750,000 to $1 million will have to keep a reserve ratio that is, at a minimum, 9 per cent of total assets.

Ms Hamilton said: “As a means of securing the funds of the members, each credit union has always been mandated to place 10 per cent of their assets monthly to three special fundsm namely: Statutory Reserves, Liquidity Reserves, and Stabilisation Fund. This trend will continue under the new regime.”

Other requirements under the Bill include the need for credit unions to appoint a compliance officer; competency requirements for supervisory and credit committee members; and prohibitions on employing former directors or committee members.

Credit unions will also have to maintain an internal audit function, while a Registered Co-operative Credit Unions Appeal Tribunal, comprised of three persons, will be formed to hear appeals arising from a decision of the Central Bank or an arbitrator.

And the Bahamas Co-Operative Credit Unions Bill also requires the “Apex Body (the National League) to establish an investment committee, comprising of three persons, including a member of the Apex Body’s Board, to determine the Apex Body’s investment policies and co-ordinate and oversee its investment portfolio.

“An Investment Committee was formed almost two years ago and remains in place. Some credit unions conduct training for all nominees prior to the Annual General Meeting, and are able to determine competency in that manner. Other credit unions are adopting this approach,” said Ms Hamilton.

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