Bank of Jamaica (BOJ) officials have confirmed that they are still awaiting the return of revised and new regulations which will provide the basis on which the central bank will initiate oversight of the 34-member credit union sector.

Unions do not currently fall under the BOJ, which supervises other deposit-taking institutions including commercial banks, merchant banks and building societies.

The community savings sector at year end 2015 accounted for 6.9 per cent (2014: 7.1 per cent) of the $1.28 trillion in assets held by the combined deposit-taking sector.

A BOJ source told the Jamaica Observer that instructions were delivered to drafters at year end 2015, but that the regulations were not yet finalised.

The BOJ’s assumption of supervisory oversight for credit unions will involve passage of two companion pieces of legislation through Parliament: the Bank of Jamaica (Credit Unions) Regulations to be issued under the Bank of Jamaica Act, and amendments to the Co-operative Societies Act.

During 2015, the BOJ, as noted in the annual report, had further consultations with the credit union sector, which resulted in the issue of drafting instructions for the proposed regulations by the Minister of Finance and Planning to the Office of the Chief Parliamentary Council in December 2015.

The BOJ source told the Business Observer that the process was now centred on receipt of the regulations. Until these are received and promulgated into law, oversight responsibility for the credit union sector remains vested in the Department of Co-operatives and Friendly Societies as the statutory oversight agency, while the Jamaica Co-operative Credit Union League continues to undertake an industry self-regulatory role.

The BOJ outlines that regulations for the sector will provide for a licensing regime as well as prescribe prudential criteria covering capital adequacy, liquid assets, credit limits, non-accrual and provisioning requirements, submission of financial statements and minimum solvency standards.

“The regulations will also detail remedial actions that can be taken by the Supervisory Authority (BOJ) with respect to unsafe and unsound practices and insolvency. Significantly, with the implementation of a prudential oversight regime, all volunteers, managers and key employees will be required to be assessed as fit and proper persons for the roles to be performed at credit unions,” it was stated in the central bank’s annual report.

The BOJ said it is also expected that credit unions will become policy holders under the Deposit Insurance Scheme administered by the Jamaica Deposit Insurance Corporation, which will see credit union members’ savings being insured up to the prescribed limit.

During 2015, mergers within the credit union sector led to a contraction to 34 unions at the end of 2015, down from 37 at the start of the year.

Despite the contraction, the BOJ noted, credit unions deployed their services to members through a combined network of 89 branches, sub-branches and agencies, up from 87 at the end of 2014.

The BOJ said financial system surveillance and policy indicators reflected softer outturns as evidenced by the net profit margin and return on average asset ratios of 9.0 per cent and 1.2 per cent respectively (12.7 per cent and 1.7 per cent for 2014).

An incremental increase in assets was seen in the growth of $3.8 billion or 6.7 per cent in the loan portfolio (primarily consumer lending), and increased placements of $1.3 billion or 13.9 per cent (primarily with the League).

The BOJ said asset expansion among credit unions was funded largely by a $5.4 billion or 8.7 per cent growth in the savings fund, which primarily represented members’ savings which increased by $4.4 billion (9.9 per cent) to total $49.1 billion.