Avia Collinder, Business Reporter
JCCUL and the central bank will meet within a week to iron out final elements of what will become new regulations governing the credit union sector.
The 'Bank of Jamaica (Credit Unions) Regulations' remains an independent legislative initiative that will be finalised separately from the omnibus banking bill relating to reform of deposit-taking institutions (DTIs) policed by the central bank.
The negotiations over regulation of the sector have been ongoing for 13 years. The movement is now largely self-policed under JCCUL.
"The Bank of Jamaica (BOJ) has scheduled a meeting with the Jamaica Cooperative Credit Union League (JCCUL), which represents the credit union movement, to discuss their remaining issues of concern so that the draft regulations and other related legislative amendments can be finalised," said the central bank's communication unit.
JCCUL General Manager Glen-worth Francis said the meeting with BOJ will take place at the end of October.
The unresolved issues include a requirement that aggregate unsecured loans be capped at 10 per cent of regulatory capital, and credit union entry into the foreign-exchange market.
JCCUL is resisting the 10 per cent limit, saying the community banks have successfully managed loan portfolios without such restrictions for seven decades.
"The issue of unsecured loans is the main matter. We are still in discussions and have sent them a proposal which they requested," said Francis.
"I hope all of this leads to the finalisation of the process," he said.
A year ago, there were five outstanding issues.
A meeting between JCCUL, the minister of finance and BOJ governor in September 2012 led to agreement on four, said communications and advocacy manager for JCCUL, Claudette Christie.
"But the vexed issue of unsecured loans remain," she Christie. "We are also discussing JCCUL and credit unions being able to hold foreign-exchange accounts, which they cannot now do," she adds, referencing a sixth issue.
The BOJ names three settled areas as: agreement on a two-year period within which start-up credit unions would be allowed to achieve the J$5m minimum capital requirement; the treatment of cash reserves; and the definition of unclaimed funds to align with the treatment of dormant accounts at other banking entities.
Christie reaffirmed that were four settled issues on Wednesday. The BOJ, she said, also agreed not to impose a cash reserve requirement on the sector right away.
The regulations for the sector will span licensing, capital, reserves, prohibited business, remedial and intervention processes and the role of specially authorised credit unions, according to the central bank's 2012 annual report.
DTIs is the broad term for classes of banking operations that fall under BOJ's prudential supervisory regime - commercial banks; merchant banks or FIA licensees; and building societies or mortgage banks - spanning 12 entities.
The credit unions will add another 38 entities to the DTI oversight list.
At yearend 2012, the sector comprised 10 parish-based credit unions, 29 employee-based; and four 'others', namely COK Sodality, C&WJCCU, Church of the First Born, and First Heritage. Together the 43 managed J$71 billion of assets.
The central bank noted in its annual report that given the relative small asset base of the remaining credit unions, further consolidation in the sector was anticipated.
Since then, there have been a series of merger deals in which the operations of at least five credit unions were absorbed by three players.
Based on financial data submitted to BOJ, the credit union sector's net profit contracted to J$960 million last year from J$1.2 billion in 2011, even as membership grew by two per cent to 983,501.
BOJ began data collection on the movement in 1999.