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New rules to improve governance and management of credit co-operatives in the works

SINGAPORE — New rules to tighten the governance and management standards of credit co-operatives, so as to better protect members’ interests, are in the works.

Singapore banknotes. TODAY file photo

Singapore banknotes. TODAY file photo

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SINGAPORE — New rules to tighten the governance and management standards of credit co-operatives, so as to better protect members’ interests, are in the works.

The Government wants to make these entities, which collect deposits from and provide loan services at affordable interest rates to members, abide by higher prudential standards and improve their governance. It is also looking for greater regulatory powers to deal with distressed and errant credit co-ops.

For instance, it is proposing to make credit co-ops hold at least 15 per cent of the deposits they collect in liquid assets, up from the current 13 per cent, as well as upping the Capital Adequacy Ratio to 10 per cent, up from 8 per cent. Capital adequacy serves as a buffer against unforeseeable losses by providing credit co-ops with a basic level of institutional capital.

Launching a public consultation exercise on the recommended changes today (Dec 22), the Ministry of Culture, Community and Youth (MCCY) said: “Co-op members are generally average income earners who can ill afford to lose their hard-earned savings. Hence, safeguarding depositors’ interest is paramount for the sector, and capital preservation should take precedence over investments for high returns and capital growth.”

There are now 27 credit co-ops, with about 142,000 individual members. As of the end of last year, they collectively held S$756.5 million in members’ deposits and S$14.6 million in members’ share capital. Their net assets were S$153 million and total loans given out amounted to S$185.5 million.

The MCCY noted that while credit co-operatives performed a useful social function, they must be financially sound and professionally managed to carry out their role effectively.

“Given the deposit-taking function and growing membership, it is necessary to subject these co-operatives to appropriate regulatory oversight so as to protect members’ interests,” the ministry said.

The proposed changes, which are targeted for implementation by 2018, are part of the Government’s ongoing effort to bolster regulatory oversight of the credit co-operative sector, to better safeguard the interests of members and uphold public confidence in credit co-operatives, it added.

In June, it was reported that around S$5 million had gone missing from the coffers of the Singapore Statutory Boards Employees’ Co-operative Thrift and Loan Society.

Responding to TODAY’s queries, the Registry of Co-operative Societies said police investigations into the case are still continuing. The registry added that an inquiry it had established into the operations, financial condition and affairs of the co-operative is also ongoing.

The public consultation on the recommended changes will close on Feb 2 next year.

More information on the proposed policy changes is available at http://www.mccy.gov.sg/coopconsult and http://www.reach.gov.sg. Members of the public can email their feedback and suggestions to mccy_regcoop [at] mccy.gov.sg or send their views by post to the Registry of Co-operative Societies.

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