BOJ regulatory plan for credit unions enter bill drafting phase
Published:Wednesday | August 25, 2010 | 12:00 AM
Registrar of Cooperative Societies Errol Gallimore said local credit unions are now largely compliant with international financial-reporting requirements for permanent shares, and that Bank of Jamaica (BOJ) oversight for the sector has entered the bill-drafting stage.
"Credit unions are now 99 per cent compliant with new capital- structure requirements," Gallimore said of the 45 lenders making up the movement.
These requirements authorise the establishment of permanent, voluntary and deferred shares.
The new structure, which conforms to the International Financial Reporting Standards, allows for a portion of members' shares to become fixed or permanent and, as such, treated as equity, as well as a voluntary pool of shares which would be treated as deposits.
Credit unions currently have a membership numbering over 900,000.
The sector, at December 2009, was valued at J$56.5 billion by assets, of which loans amounted to J$36.2 billion.
Jamaicans currently save about J$44 billion with the small, community-based institutions.
Gallimore said as well that sectoral discussions in relation to BOJ oversight of the credit unions was at an end and that the bill to bring regulatory framework into law was being drafted.
While the BOJ has not commented on this phase of the programme to bring the cooperative organisations under its ambit, it is likely that regulations will not be dissimilar to those affecting financial organisations which now operate with central bank oversight.
Capital base
Such organisations must improve their capital base in order to engage in greater levels investments and loans, as directed by the central bank.
BOJ rules to sectors currently regulated include credit-exposure limits covering the acquisition dealing in or granting of credit facilities; investments limits; limits on fixed assets; minimum cash reserves and liquid assets; loan classification and provisioning guidelines; prudential returns and publication of accounts with regular submission of financial information is required and examination of institutions.
The BOJ is required, at least once a year, to examine the affairs of the licensees to ensure the various statutory requirements are being complied with and to determine whether the institution is in a sound financial position.
The BOJ is entitled to require any auditor of a licensee to, among other things, perform such audit procedures as it may specify, its website states.
The central bank may order a special audit of a licensee using an auditor other than the licensee's auditor.
Where the Minister of Finance, after consultation with the supervisor of banks and financial institutions - the central bank governor - believes that a licensee is or appears unlikely to meet its obligations, action will be taken.
Such breaches include the value of the licensee's assets being substantially less than the amount of its liabilities, or where the licensee stops taking deposits.
In such cases, a receiver may be appointed to assume temporary management of the licensee.
Other options are the suspension or revocation of the licence and the presentation to the court of a petition for the winding up of the licensee, or initiate a reconstruction of the licensee.