Credit check

by Shawn Cumberbatch

The Financial Services Commission is planning to tighten its regulation of Barbadian credit unions.

But before it implements the 15 new guidelines, including capping the amount of remuneration directors and committee members can receive, restricting overseas real estate purchases, and tightening loan management, the state agency is giving members of the cooperative movement until the end of this month to say how they feel about the proposed changes.

Additionally, representatives from the FSC’s credit union division will also be “hosting a face-to-face breakfast meeting for the sector, such that there will be additional opportunities for comments to be made”. This is at least the second time the credit union movement is being presented with draft guidelines to govern its conduct.

News of these new measures “to enhance the prudential regulation of the credit union sector in Barbados” come on the heels of similar new provisions, accompanied by legislative changes, proposed for the life and general insurance industry.

These intended guidelines included three related to the safety and soundness of directors, small credit unions, and management, as well complaints procedures for supervisory committees.

Other guidelines were liquidity and credit risk management, operational risk, doubtful loans, market risk investments, capital management, deposits, fundamental changes, valuation of real property, qualifications, and directors remuneration.

“The commission has developed a series of guidelines to ensure that the tools necessary to effectively manage risks that are present in our Barbados’ regulatory framework. The guidelines are being issued under the authority of Section 53 of the Financial Services Commission Act 2010-21. It is the commission’s expectation that all credit unions adhere to these guidelines,” the FSC stated.

Among the guidelines was one which sought to protect the interests of credit unions with less than $10 million in assets.

It wants the board and management of these smaller cooperatives to establish “appropriate and prudent risk management policies that address the significant risks to which the credit union is exposed, including the following … credit risk, operational risk, market risk (investments), operational liquidity risk, (and) capital management”.

Similar measures were also proposed for credit unions with more than $10 million in assets. Also proposed was a guideline specifying how supervisory committees should deal with complaints, in an effort to have them resolved before they reached the FSC.

When the Department of Cooperatives was responsible for the regulation of credit unions one of the controversial provisions of planned regulatory changes related to the purchase of property.

The FSC is now suggesting a similar guideline, which specified that “without the prior approval in writing of the commission, a credit union may only acquire real property, whether in fee simple or as a leasehold interest, if the real property is located in Barbados”.

“The commission may cause an expert appraisal to be made of the market value of any real property held by the credit union if he is not satisfied with the market value of the real property as determined by the credit union and may require that the appraised value be substituted for the value of the real property as determined by the credit union,” the specific guideline said in part.

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