Sean Nero

Cen­tral Bank Gov­er­nor Jwala Ram­bar­ran says leg­is­la­tion now be­fore Par­lia­ment will make it com­pul­so­ry for the sav­ings of cred­it union de­pos­i­tors to be pro­tect­ed un­der the de­posit in­sur­ance mech­a­nism.

"A key in­sti­tu­tion­al sup­port to the new reg­u­la­to­ry frame­work will be the es­tab­lish­ment of a manda­to­ry de­posit in­sur­ance sys­tem for the cred­it union sec­tor. Not on­ly would the in­sur­ance sys­tem cov­er de­posits, but it must in­clude shares which rep­re­sent the vast ma­jor­i­ty of the sec­tor's sav­ings, a sit­u­a­tion that is unique to T&T. In most ju­ris­dic­tions the pro­tec­tion fund for the cred­it union sec­tor cov­ers de­posits on­ly," he said.

Ram­bar­ran said they ex­pect the cred­it union move­ment to con­tin­ue to play a crit­i­cal fi­nan­cial in­clu­sion role in the fi­nan­cial sec­tor. "We feel strong­ly, how­ev­er, that more ro­bust reg­u­la­tion and su­per­vi­sion are ur­gent­ly need­ed to sup­port fur­ther growth and de­vel­op­ment of cred­it unions."The Gov­er­nor was de­liv­er­ing the fea­ture ad­dress at the 63rd An­nu­al Gen­er­al Meet­ing of the Tele­phone Work­ers Cred­it Union Co-Op­er­a­tive So­ci­ety Ltd at the Hilton Trinidad and Con­fer­ence Cen­tre on La­dy Young Road, St Ann's, yes­ter­day.

He took the time to ad­dress the clear dif­fer­ences be­tween the Co-op­er­a­tive So­ci­eties Act and the Draft Cred­it Union Bill, which he said many de­ci­sion-mak­ers in the cred­it union sys­tem were still un­sure about.While the com­mis­sion­er of co-op­er­a­tives was in­volved in the op­er­a­tions of the cred­it unions–ap­prov­ing by-laws, in­di­vid­ual in­vest­ment trans­ac­tions, pro­vi­sion of non-fi­nan­cial ser­vices and the use of re­serve funds–the Cen­tral Bank has placed pro­hi­bi­tions and lim­its on cer­tain ac­tiv­i­ties in the Draft Cred­it Union Bill and reg­u­la­tions.

This, as a con­se­quence, re­moved the need for the In­spec­tor of Fi­nan­cial In­sti­tu­tions to en­gage in the time-con­sum­ing task of ap­prov­ing in­di­vid­ual trans­ac­tions and ac­tiv­i­ties for cred­it unions.The Co-op­er­a­tive So­ci­eties Act is de­fi­cient in pru­den­tial cri­te­ria gov­er­nance, en­force­ment and pro­tec­tion of mem­bers' funds, Ram­bar­ran said. "The pru­den­tial cri­te­ria cov­er cap­i­tal and bor­row­ing on­ly and re­quire that cred­it unions must es­tab­lish ten per cent of their sur­plus in a re­serve fund and that a bor­row­ing lim­it be set an­nu­al­ly at an AGM.

"By con­trast, at the heart of the Draft Cred­it Union Bill is a regime of pru­den­tial cri­te­ria cov­er­ing cap­i­tal, liq­uid­i­ty, as­set qual­i­ty and earn­ings, bor­row­ing, cred­it ex­po­sure and non-fi­nan­cial ac­tiv­i­ties. The pru­den­tial frame­work is aligned with the Pearls fi­nan­cial ra­tios which have been adopt­ed in the main by the lo­cal cred­it union sec­tor."The pro­posed cred­it union leg­is­la­tion, ac­cord­ing to the Gov­er­nor, is an im­por­tant step to­wards plac­ing the cred­it union move­ment in a po­si­tion of greater strength, safe­ty and sound­ness.