Home' Trinidad and Tobago Guardian : April 13th 2014 Contents SBG8 NEWS
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt APRIL 13 • 2014
The Credit Union Bill, which
is on course to be passed
into legislation within the
year, will limit the non-
financial activities of credit
Speaking at the Aero Services Credit
Union annual general meeting last month,
Central Bank Governor Jwala Rambarran
said: "These non-core activities represent
a potential drain on the limited managerial
capacity and expertise of many credit
The non-core activities of credit unions
include travel agency services, resorts, gym
facilities, day-care services, retail outlets
and real estate development.
Under the legislation, credit unions would
be allowed to provide these non-financial
services once they represent no more than
5.0 per cent of total assets or 10 per cent
Central Bank statistics put the collective
asset base of credit unions at more than
TT$9.5 billion, with a membership base of
about one-third of the country s popula-
The Governor said: "These limits seek
to ensure that financial intermediation
remains the core business of credit unions
and credit unions can minimise balance
sheet risks arising from non-financial activ-
These activities are a source of additional
income for credit unions and additional
services for their members.
According to Rambarran, at the request
of the credit union sector, the Central Bank
has made a provision in the bill to address
circumstances where non-financial services
grow beyond the proposed limits.
"The members of the credit union must
direct the board to establish a new coop-
erative, singly or in conjunction with other
credit unions, to continue provision of these
He added that there was no prohibition
in the proposed legislation against the credit
union and the new cooperative having the
same governance structure and composi-
He said: "The Credit Union Bill makes
most violations of the act or failure to com-
ply with a directive issued by the bank, a
criminal offence, for the credit union and
the officer or director."
He told the credit unions, "do not see
this as the Centra Bank clamping down on
you, but doing what has to be done to pro-
tect our citizens and our economy."
The Central Bank s objectives, he said,
are: "to determine the safety and soundness
of credit unions and protect members
deposits and shares from undue loss; to
supervise credit unions to determine
whether they are in sound financial con-
dition and in compliance with the act (credit
union); to maintain confidence in and pro-
mote the stability of credit unions and, by
extension, the financial system of T&T."
He expressed confidence that the Central
Bank is more appreciative and understanding
of the special nature of credit unions, espe-
cially the co-operative ethos which distin-
guishes them from any other type of finan-
cial institution where usually the most
important motive is profit.
He highlighted the argument that the
credit union industry has survived, grown
and done very well for itself with "a light
touch" regulatory approach.
He added, "given the events of the last
six years, operating under the outdated leg-
islation of the Co-operatives Society Act
of 1971 cannot continue, as we have seen
the enormous impact the failure of one
credit union can have on confidence in the
entire financial system of the country and
how the same people you serve suffer."
Governor Rambarran described the fund
as "a key institutional support to the new
regulatory framework" when he spoke of
the fund being a "mandatory deposit insur-
ance system to protect credit union mem-
The protection fund, he said, "would be
managed by the Deposit Insurance Corpo-
ration (DIC)" and "not only would the fund
cover deposits but it would include with-
drawable shares, that is, shares not held as
permanent shares which represent most of
the sector s savings, a situation that is
unique to T&T."
In January 2014, the CBTT issued its
consultation paper on the protection fund
to the credit union sector for comments.
Included in the paper were the conditions
for membership, the seed funding and
annual contribution of 0.4 per cent and
0.1 per cent respectively and the proposed
coverage limit for deposits and shares of
$125,000, where $75,000 will apply to
deposits and $50,000 to shares.
This decision has been met with oppo-
sition by members of the credit union move-
Credit union concerns
The decision by the CBTT to introduce
a protection fund to be managed by the DIC
has been received with discontent by mem-
bers of the credit union movement. These
concerns stemmed from the DIC being a
entity established for the banking sector,
which credit union movement members see
as contrary to the movement s philosophy.
Rambarran addressed these concerns by
stating that "membership in the fund will
be mandatory for all credit unions. Mem-
bership is voluntary in the Stabilisation
Fund, which is a co-operative. There are
economies of scale to using the DIC and
the DIC stands as an entity with its own
statute governing its administration."
In discussing the potential conflict of
interest between the Commissioner of Co-
orporatives, who supervises the operations
of credit unions, and the CBTT, Rambarran
said, "the commissioner and the CBTT
have worked very closely on the Draft Credit
Union Bill and on amendments to the Co-
operative Societies Act to make sure that
there is no overlap or duplication between
these two pieces of legislation."
He urged credit unions to "embrace the
proposed prudential legislation and work
towards realigning their thinking towards
prudential regulation, understanding how
the decisions they make affect their balance
sheets and ultimately the welfare of their
Eastern Credit Union's income in 2013 at
$151.3 million was the highest it has been in
the ten years, according to the credit union's
Between 2012-2013 there was a rise in the
loan interest income from $120.1 million to
$125.4 million. The credit union's income in-
creased by 6.7 per cent, or $9.6 million, moving
from $141.6 million in 2012 to $151.2 million in
Income earned in 2013 was distributed in the
• interest on loans $125.4 million
• investment income $9.3 million
• miscellaneous financial income $16.6 mil-
In 2013, a total of 27,998 loans to the value
of $452.1 million was granted by the union
compared with 2012 figures of 25,515 and
$373.0 million, respectively.
This figure represented the largest number
of loans disbursed to members for the period
2004 to 2013.
The credit union increased the value of its
loans to its members by $82.9 million for the
Of the various types of loans available to
members, those applying for credit to buy,
build or repair houses received $148.6 million.
This was followed by members requesting con-
sumer loans: $127.1 million. Those who bor-
rowed to purchase vehicle: $77.3 million.
The number of members borrowing to pur-
chase consumer items totaled 12,487, which
was the largest number of loans disbursed by
the credit union in 2013. The total number of
loans for housing was 5,717, while the number
of vehicle loans totalled 2,273.
Net surplus for 2013 was $45.5 million which
represented an increase from 2012 by $6.5 mil-
Total shares increased every year from 2004
to 2013 at ECU with an increase of $77.5 mil-
lion from 2012 to 2013.
Within the resolutions of the annual report
2013 for special shares, "a dividend of 4.0 per
cent be declared and credited to members de-
posit accounts." As well as a dividend of "3.0
per cent be approved for dividends be credited
to members' share accounts consistent with
Bye-Law 25 (c) (i)."
President of the credit union, Gloria Roling-
son, said Eastern has 160,000 members and
was established more than 40 years ago, in
With respect to the introduction of new
services, Gloria Rolingson told the Sunday BG
that Eastern was in the process of implement-
ing new systems that would allow members
online access to their accounts.
Some 6,321 new members at the credit
union's nine branches made share contribution
that amounted to $20.9 million in 2013. The
branches are located in Arima, Barataria, Ch-
aguanas, Port-of-Spain, San Fernando, Sangre
Grande, St Joseph and Tunapuna.
Deposits at the credit union also increased
every year between 2004 and 2013.
The reserve fund, according to the perform-
ance highlights in ECU annual report, was
$76.4 million in 2013 and $71.8 million in 2012,
a $4.6 million increase in the fund.
jump in loans
New rules will limit non-core
activities of T&T's credit unions
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