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Credit unions to offer foreign currency, other banking products under BOJ as watchdog

Published:Sunday | December 26, 2021 | 12:09 AMKarena Bennett - Business Reporter
Robin Levy, CEO of Jamaica Co-operative Credit Union League.
Robin Levy, CEO of Jamaica Co-operative Credit Union League.

A timeline for passage of two companion pieces of legislation – the Credit Union (Special Provisions) Bill and an amended Co-operative Societies Act – that will allow the Bank of Jamaica, BOJ, to commence the licensing process for credit unions has...

A timeline for passage of two companion pieces of legislation – the Credit Union (Special Provisions) Bill and an amended Co-operative Societies Act – that will allow the Bank of Jamaica, BOJ, to commence the licensing process for credit unions has not yet been finalised, but there is optimism among credit union operators that they will become law by March 2022.

Once they are placed under the central bank’s oversight, credit unions will be able to offer the same services as other deposit-taking institutions that are all regulated by the BOJ, such as foreign currency products.

Other new product offerings may include chequeing accounts, but a bolder outcome for the community banks would be BOJ’s granting of permits to offer corporate banking services.

“Credit unions are not allowed to accept foreign currency deposits currently but more and more people want to save in US dollars and so this will be one of the first service offerings credit unions will go after,” said CEO of C&WJ Co-operative Credit Union Carlton Barclay.

The offering of foreign currency savings accounts could serve to potentially double the size of the credit union movements’ membership base, Barclay theorised, adding that revenues from the product’s introduction would be “massive”.

As at December 2020, there were 25 credit unions operating in Jamaica with assets of $137 billion. Their combined membership is in excess of one million Jamaicans.

The efforts to place credit unions under BOJ’s regulatory umbrella have been ongoing since 1999, with the first set of regulations drafted in November of that year. Monitoring of the movement is done by the Jamaica Co-operative Credit Union League, JCCUL, which also provides a number of services to credit unions. Its monitoring role ends with the transition to BOJ oversight, and the group is in the process of repositioning within the sector as a service provider and adviser.

The credit unions fall within the ambit of the Department of Co-operatives, but the amendment to the Co-operatives Act is expected to unwind that.

A draft of the special provisions legislation is currently being reviewed by stakeholders, but JCCUL CEO Robin Levy expects no further delay for its approval by Cabinet and the bill tabled in Parliament, given that stakeholders have little to no issue with the draft in its current form.

Once the bill is passed, regulations will be drafted and stakeholder feedback will be sought before the document is sent back to Parliament.

Within the past five years, in preparation for BOJ oversight, which has more rigorous requirements for capital and governance, among other conditions, the credit union movement has seen a number of mergers and acquisitions, which served to narrow the number of institutions from around 43 to 25 today.

According to Levy, 90 per cent of credit unions are now in good standing for formal supervision by the BOJ. He expects the others to meet fit and proper requirements during the transition period.

“We may have mergers – I can’t speak to that – but that will be voluntary. There are no credit unions that are in danger of being strong-armed,” he said.

Currently, credit unions are registered among co-operatives and friendly societies. The Registrar of Co-operatives also acts as the supervisor of credit unions under the Co-operative Societies Act, but the BOJ will take over that role once the law is amended.

Under central bank supervision, savings within the credit union sector would be insured under the deposit insurance scheme administered by the Jamaica Deposit Insurance Corporation, similar to other deposit-taking institutions.

Under the scheme, insured savings recently doubled to $1.2 million.

“When licensed by the BOJ, credit unions should be able to offer every service and products offered by the banks. There is no reason why any of our members should not be able to access his account online or get his money through a Mastercard or a Visa card,” Levy said.

karena.bennett@gleanerjm.com