Credit Unions Act 2010

Summary

This Act establishes the modern regulatory framework for credit unions in Bermuda, transferring licensing and supervisory responsibility to the Bermuda Monetary Authority (BMA). It sets out licensing requirements, governance and by-law standards, financial reporting obligations, prudential (capital, liquidity and lending) requirements, and the Authority's enforcement, investigation and appeal powers.

• Licensing: No person may operate a credit union in or from Bermuda without a BMA licence; applications must include a Gazette notice, supporting information and the prescribed fee.
• Governance: Every licensed credit union must have by-laws meeting Schedule 1 requirements and must include 'credit union' in its name; only licensed unions may use that name or hold themselves out as one.
• Fees: Licensed credit unions must pay an annual fee by 30 April each year (from the year after licensing) plus a pro-rated fee on grant of licence; late payment attracts a $500 per week civil penalty.
• Licence actions: The Authority may restrict, vary or revoke a licence on specified grounds, subject to notice and representation rights for the credit union and, in some cases, its officers.
• Reporting and audit: Credit unions must appoint auditors, prepare and audit annual financial statements, file annual returns, and notify the Authority of prescribed matters; the Authority may require information, reports and document production and has powers of entry and investigation.
• Prudential requirements (Schedule 3): Maintain institutional capital/reserves of at least 10% of total assets, allocate 25% of annual net surplus to the reserve fund, maintain a minimum liquidity ratio of 15% of withdrawable savings, cap member loans at 10 years and at the lesser of 10% of institutional capital or 2% of aggregate withdrawable shares, keep total loan portfolio at or under 80% of total assets, and limit external borrowing to the lesser of 10% of total assets or four times retained earnings and reserves.
• Arrears and provisioning (Schedule 2): Maintain and regularly review an arrears management policy, including provisioning for delinquent loans, as part of the minimum criteria for prudent conduct of business.
• Offences: Operating unlicensed, misusing the 'credit union' name, or breaching licence conditions are criminal offences carrying fines and, in some cases, imprisonment.

The Act repealed the prior Credit Unions Act 1982 and made consequential amendments to related Bermuda financial legislation. It came into operation on 1 January 2011 and has since been amended by BR 5/2011 and the 2017:38 amendment.

Key obligations

• A person must not operate a credit union in or from Bermuda unless licensed by the BMA.
• A credit union applying for a licence must provide a Gazette notice of the application, supporting information/documents required by the Authority, and pay the prescribed application fee.
• Every licensed credit union must adopt and maintain by-laws complying with Schedule 1.
• A licensed credit union must include the words 'credit union' in its official name; only licensed credit unions may use that name or represent themselves as one.
• A licensed credit union must keep its licence on display at its principal place of business.
• A licensed credit union must pay the annual fee on or before 30 April each year (beginning the year after licence grant) and a pro-rated fee on grant of licence; late payment incurs a $500 per week civil penalty.
• A credit union must appoint auditors and prepare, and have audited, annual financial statements and accounts.
• A credit union must file annual returns and notify the Authority of prescribed matters.
• A credit union must maintain a reserve fund/institutional capital of not less than 10% of total assets, placing 25% of net surplus into the reserve fund each financial year until that threshold is met.
• A credit union must maintain a minimum liquidity ratio of 15% of withdrawable savings in cash or highly liquid assets.
• A credit union must not lend to any member for a period exceeding ten years, must cap individual member loans at the lesser of 10% of institutional capital or 2% of aggregate withdrawable shares, and must keep its total loan portfolio at or below 80% of total assets.
• A credit union must not borrow an amount exceeding the lesser of 10% of total assets or four times its retained earnings and reserves.
• A credit union must maintain and regularly review an arrears management and loan provisioning policy.
• A credit union or affected person given notice of a proposed restriction, variation or revocation of licence may make written representations to the Authority within 14 days (or a longer period the Authority allows).

Applies to

credit unions, licensed credit unions, members of credit unions, directors and officers of credit unions, auditors of credit unions

Deadlines

• on or before 30 April each calendar year, beginning the year after the licence was granted: Annual licence fee payment due to the Authority.
• $500 per week or part week outstanding: Civil penalty for late payment of a fee under section 13.
• 14 days from the day notice is given (or longer period the Authority allows): Period for a credit union or affected person to make written representations after notice of proposed restriction/variation/revocation of licence.
• 28 days from the day the initial notice was given: Period within which the Authority must give notice of its decision on a proposed restriction, variation or revocation.
• 7 days from the day the decision notice is given: Period for a credit union to make written representations if the Authority's decision on restriction/variation differs from the original notice.
• 1 January 2011: Operative date of the Credit Unions Act 2010.

Related documents

• This document amends Bermuda Monetary Authority Act 1969
• This document amends Banks and Deposit Companies Act 1999
• Credit Unions Act 2010 - Statement of Principles (January 2011) is made under this document
• Credit Union Statement of Principles (January 2011) is made under this document