Strategic & Risk Management
The board of directors must prepare a strategic plan setting out the strategy and objectives of the credit union. The board must ensure that the credit union has the resources, both financial and otherwise, to undertake the activities provided for in the plan.
A credit union must develop and maintain a risk management system to allow it to identify and manage risks to which it is or may be exposed. It is also required to develop and maintain systems of control to manage and mitigate risks identified by the risk management system. A credit union must also develop and maintain a compliance program to evaluate compliance with legal and regulatory requirements.
Compliance & Risk Manager Officers
A risk management officer must be appointed. Directors, members of the Board Oversight Committee, auditors, and certain other persons are disqualified from being the risk management officer. The risk management officer must have appropriate resources and experience to fulfil all responsibilities, including managing risks to the credit union, including risks to employees, members’ reputation, and assets.
The compliance officer must have the necessary authority, resources, and experience to fulfil their role. They must be independent and not influenced in the exercise of their functions. They are responsible for managing compliance at all levels in the credit union. They must ensure compliance with legal and regulatory obligations.
Risk Management & Systems
The credit union is obliged to identify operational risks to which it is exposed and provide for their management in the risk management system.
The credit union must maintain documents and records enabling the board of directors, committees, nomination committees, Board Oversight Committees, and auditors to undertake their functions. These must be prepared in a timely, accurate, and consistent manner and produced when called upon under the Act, exercise of statutory powers, or otherwise.
Credit unions must employ information systems to produce accurate and reliable management information and reports consistently and in a timely manner. This information may be used by directors and the management team to manage the credit union’s business, make decisions, and provide accurate information to the Central Bank.
A credit union must prepare a business continuity plan, providing contingency arrangements to ensure business continuity in the face of abnormal events.
It may, by written agreement, outsource parts of its business activities to a service provider. There must be a written agreement outlining the rights and obligations of the provider.
Certain conditions are required to be part of each agreement. The service provider must have the requisite ability and authorization to carry out activities. However, notwithstanding outsourcing, the credit union retains full responsibility for its compliance obligations.
The credit union must notify the Central Bank of any proposed outsourcing of a material business activity or any development reflecting its ability to fulfil obligations related to a material business activity. The Central Bank may make regulations regarding formalities in engaging a service provider and arrangements for notifying the bank.
The board of directors must appoint internal auditors, provide independent internal oversight, and evaluate and approve the effectiveness of the credit union’s risk management, internal control, and governance procedures. The internal audit function is required to prepare an internal audit plan and report results of evaluations and recommendations to the internal audit committee or such other board as may be nominated.
Every credit union must have a Board Oversight Committee of between three and five members. Its role is to assess the performance of the board of directors in relation to their obligations under the legislation and any rules and regulations made thereunder.
Members of the Board Oversight Committee are to be appointed at a General Meeting in a manner similar to directors’ appointments. Certain persons are prohibited from being members of the committee, including those who have served more than nine of the last 15 years in either the Board Oversight Committee or the board itself.
Persons with conflicts of interest must not be appointed. There are procedural provisions regarding the Board Oversight Committee, with a term of office lasting three years, eligible for reappointment by the Annual General Meeting. The committee must possess the necessary skills and knowledge to perform its functions.
Each member individually or collectively must also possess the financial services expertise, qualifications, and background required or may be required to undertake training to ensure understanding of the credit union’s business nature and related risks. This understanding extends to their individual and collective responsibilities as members of the committee and understanding credit union financial statements. There are provisions for the operation of the Board Oversight Committee exist.
Central Bank Regulations
The Central Bank may make regulations to protect the financial interests of credit union members and ensure compliance with financial services legislation. These regulations may prescribe oversight policies, procedures, practices, systems controls, expertise, and reporting arrangements, which credit unions must maintain.
Before making such regulations, the Minister is to consult with the Credit Union Advisory Committee and other persons as the Central Bank considers appropriate to ensure the regulations are effective and proportionate given the nature, scale, and complexity of the credit union they apply to.
The Central Bank may make regulations prescribing minimum liquidity requirements for credit unions to comply with, including conditions on the application of minimum liquidity requirements. These regulations may require a proportion of liquid holdings to be held and provide for holding of liquid assets based on loan duration, maturity mismatches, and holding liquid assets as a safeguard against stress conditions.
Central Bank Powers
The Central Bank also has the power to require a credit union to carry out stress tests related to liquidity and set out the frequency and reporting arrangements for such tests.
After an investigation or inspection, the Central Bank may require the appointment of an additional director. Persons nominated by the nominations committee must be approved by the bank and may be appointed by being co-opted or elected/ appointed.
The procedure for the removal of an auditor is provided.