UPDATED: Cooperative overhaul underway
The migration of regulatory oversight of the credit union sector to the Bank of Jamaica (BOJ) will require amendments to the Cooperative Societies Act, says the Registrar of Cooperative and Friendly Societies, Errol Gallimore.
Gallimore's department is otherwise in the process of overhauling the law governing cooperatives to properly codify its powers as supervisors, and to strengthen the operations of the small groups.
The amendments under consideration will expand the groups that qualify for membership, allow for the creation of joint accounts, and give added protection to directors.
Gallimore said the amendments to the Cooperative Societies Act will also introduce the BOJ as new regulator for the credit unions, while at the same time add amendments for the better regulation of groups supervised by the Department of Cooperative and Friendly Societies as a whole.
The proposed amendments to the Cooperative Societies Act will be ready for submission to the Minister of Industry Investment & Commerce, Anthony Hylton by May, Gallimore said.
The DCFS, which is an agency of Hylton's ministry, is currently the supervisor of provident societies, friendly societies and other groups such as housing and agricultural cooperatives.
Gallimore said the areas requiring amendment include the tenure of directors as currently no term limits exist; indemnification of directors and officers to protect them from actions pursued on behalf of the cooperatives in good faith; the matter of general meetings - enabling the registrar to call for a meeting outside of a quorum of members; and insertion of the cooperative principles guiding the sector into the law.
These changes, Gallimore said, will bring local legislation in line with international best practices for cooperatives.
Credit unions provide financial services to members, which other cooperatives - often restricted to providing services such as marketing within a particular industry - do not, Gallimore said.
Other proposed changes to the Cooperative Societies Act include an outline of the registrar's regulatory powers and the power of the registrar to issue guidelines; the introduction of joint accounts for members of cooperative societies; legal immunity for registrar and staff; and allowance for registered companies to become members of cooperative societies, which Gallimore said, is meant to improve the solvency and resource base of cooperatives; and to name the BOJ as the regulator for credit unions.
"Most of the areas of disagreements have been resolved after discussions between the BOJ and Jamaica Cooperative Credit Union League Limited, said Gallimore.
"My office is now in the process of doing a complete review of the Cooperative Societies Act and Regulations, to have a more modern act and to address the inclusiveness of the BOJ regulations for submission to the Honourable Minister Anthony Hylton by the end of May 2015," he said.
Under the changes for credit unions, the community banks will be required to operate under licence, as is the case for other deposit taking institutions, such as commercial banks and building societies. Up to now, credit unions simply underwent a registration process, Gallimore told Sunday Business.
Such licensing will be accompanied by fit and proper requirements for the credit union staff and officials.
The addition of credit unions to BOJ's regulatory portfolio has been in the works for several years. The pace of the migration was first held up by differences between JCCUL and BOJ over capital requirements and other issues, which have since been resolved.
The process is expected to be finalised once the regulations have been passed by Parliament.
When the process first got underway, the credit union sector had about 44 operators, several of which have since combined to strengthen their capital base. The sector is now down to 36, following the most recent tie-up in February when St Thomas Cooperative Credit Union combined with First Heritage Cooperative Credit Union.
A senior official within the movement said more mergers are pending, including that of University Credit Union with AAMM Cooperative Credit Union.
CORRECTION: This story has been updated to retract incorrect information on legislation under which credit unions will be regulated.