Central Bank Governor Jwala Rambarran has issued a call for credit unions to get their act together as they prepare to be supervised by the bank.
Rambarran was speaking at the 63rd Annual General Meeting of Telephone Workers' Credit Union Co-operative Society Limited on Saturday, at the Hilton Trinidad, St Ann's.
He outlined a series of new measures which are included in the Draft Credit Union Bill which the bank would take when the sector comes under its watch.
He said several credit unions will have to improve their operations to be in accordance with sound prudential principles espoused by the legislation. And while there is a compelling case for credit union regulation, the Bank has proposed some compromises.
One key proposal which the bank will initiate as part of 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 Trinidad and Tobago. In most jurisdictions, the protection fund for the credit union sector covers deposits only," he said.
Rambarran observed that the Minister of Finance has agreed to extend the transition period from eighteen months to three years of the Act coming into effect, "so as not to cause undue disruption in the governance structure for the credit union sector."
He said the Draft Credit Union Bill makes most violations of the Act or failure to comply with a direction issued by the Bank, a criminal offence, for the credit union and the officer or director.
"I wish to advise that, in practice, the Inspector of Financial Institutions will first call on the credit union and the officers to fix a problem, by letter of advice, recommendation or compliance direction. In giving a direction, the Inspector follows due process of the law by giving the credit union time to make representation of the cause of the violation and to submit a plan for correction. I also wish to advise that the Central Bank will not exercise the option to bring the matter before the Court where the credit union opts for the payment of an administrative fine. As such, even though the provision for criminal charges is in the law, it will be used only as a very last resort when all else has failed," he said.