Credit Union Act 2012

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Implementation of the Credit Union and Co-operation with Overseas Regulators Act 2012

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PowerPoint Presentation:

Implementation of the Credit Union and Co-operation with Overseas Regulators Act 2012 September 2013

Agenda:

2 Agenda Implementation Timeline What do we have to do? Pre 1 st October 2013 AGM 2013 Ongoing Policies League Assistance Questions & Answers

Implementation Timeline:

3 Implementation Timeline 1 st August 2013 – standalone sections such as appeals to IFSAT, administrative sanctions, etc. 1 st October 2013 – sections 15-27 (most of the new governance & prudential requirements, roles and responsibilities of Board, Chair, Manager, committees, BOC, risk management, internal audit & compliance functions) 3 rd March 2014 – remainder of sections 15, 24 & 27 (including reduction of Board to 7-11, annual compliance statement & Board Oversight Committee provisions) Q2 2014 – prudential measures relating to savings, borrowing, lending, investments, reserves & liquidity, to facilitate a tiered regulatory approach

Implementation Timeline:

4 Implementation Timeline Central Bank Draft Handbook issued July 2013 CB Information Seminars Approach seems to be that they will take a pragmatic view of implementation E.g. prohibitions Reasonable progress by 1 st October NB – the provisions of the Act apply to all credit unions, irrespective of asset size

Pre 1st October 2013:

5 Pre 1 st October 2013 Risk Management Process & Officer Compliance Process & Officer Internal Audit Nomination Committee Enhanced role Credit Union Manager Policies Risk Officer & Compliance Officer : Can be one person; Can be a volunteer; Can’t be a Director. Skills & experience!

Risk & Compliance:

6 Risk & Compliance Risk Risk Process Risk System Risk Officer Compliance Compliance Officer Compliance Plan Reasonable Progress Appoint, set up system / process Risk Management is more than an automated, system-driven process Identify, assess, measure, monitor and manage risks Automated system is a component of Risk Management

Internal Audit:

7 Internal Audit Internal Audit Function Internal Audit Charter (activities & scope) Internal Audit Plan Reports to Board or Audit Committee Options: Outsource and / or share Re-deploy, but must have the necessary skills Reasonable Progress Must be independent – no other roles Not a full-time role Can be a volunteer, but not a Director Can’t be your Auditor

Nomination Committee:

8 Nomination Committee Crucial Role Fitness & Probity & implementation of the Act Must be Directors Develop, resource, up-skill In good time before AGM Identify and propose candidates, accept nominations, explain time commitment, etc. Balance of skills on Board Ongoing requirements Succession plan, induction and ongoing training, F&P requirements, record keeping, etc.

Credit Union Manager:

9 Credit Union Manager Statutory role begins 1 st October 2013 From then, all credit unions must have a Manager Executive role Day to day management of operations, compliance and performance Respective roles of Manager (executive) and Board (governance) must be established and documented Manager’s responsibilities Prepare / propose / implement strategy, finances, appointments, internal controls, etc.

AGM 2013:

10 AGM 2013 Reduce Board size to between 7 and 11 Rule Amendment takes immediate effect Term Limits begin Legal role of Treasurer ceases Prohibitions New directors cannot fall into prohibited categories Existing directors can complete their term of office (unless their circumstances change and they become ineligible) Applies also Board Oversight Committee Supervisory Committee deemed to become the Board Oversight Committee

Prohibitions:

11 Prohibitions Currently in a prohibited category and currently serving on a board or Supervisory Committee: Can continue to serve for remainder of three year term But – consider potential conflict of interest Currently in a prohibited category and not currently serving on a board or Supervisory Committee: Cannot be elected after 1 st October 2013 Currently serving on a board or Supervisory Committee and falls into a prohibited category after 1 st October: Must step down immediately

Ongoing:

12 Ongoing Operation of the Board (little new in practice but more prescriptive) Functions of the Board Strategy; appointments; succession plan; policies; performance reviews; etc. Chair Meetings; Board performance evaluation Board Committees Optional committees (unless Central Bank specifies)

Ongoing:

13 Ongoing General Governance arrangements Roles & responsibilities, organisation structure Conflicts of Interest Strong controls / procedures, legislation very detailed Additional Requirements Strategic Plan Risk Management system, Officer, Compliance Officer Records management, Information systems, Management information Business Continuity Plan Outsourcing

Policies:

14 Policies Section 17 – required policies Sixteen specific policies Motion to AGM – ILCU to develop policies Must be adapted to suit individual circumstances Will change over time (experience, regulator) Version numbering, note on changes www.creditunion.ie Secure Area Policies & Procedures New Policies

Policies:

15 Policies Section 17 – required policies ( i ) Lending (ii) Savings (iii) Liquidity Management (iv) Reserve Management (v) Investments (vi) Designating of depositories for the funds of the credit union and signatories (vii) Standards of Conduct & Ethical Behaviour (viii) Remuneration policies and practices

Policies:

16 Policies Section 17 (continued) (ix) Compliance Policy (x) Records Management (xi) Information Systems and Management Information (xii) Business Continuity Plan (xiii) Asset and Liability Management (xiv) Outsourcing (xv) Risk Management (xvi) Conflicts of Interest Feedback welcome

Governance – ILCU Assistance:

17 Governance – ILCU Assistance New Governance training course for Directors New Board Oversight Committee training course Nomination Committee – major change to role Updated / revamped training course General assistance (Monitoring, L&D, Legal & HR, R&D) Note on Implementation / Summary of the Act Fitness & Probity webpage covers many of the governance requirements

Operational & ILCU Assistance:

18 Operational & ILCU Assistance Strategic Planning Have been assisting credit unions since late 2011 Assistance with analysis, plan preparation, etc. Presentations to Boards, Chapter, etc. Risk Management / Operational Risk Developed manual RM system / process Training, guidance, support Presentations to Boards, Chapter, etc. Organisation Chart

Organisational Chart:

19 Organisational Chart

ILCU Assistance:

20 ILCU Assistance Website Summary of Act & relevant legislation General Guidance Policies Fitness & Probity E-mail actquery@creditunion.ie Phone Relevant League Department

PowerPoint Presentation:

21 Frequently Asked Questions?

PowerPoint Presentation:

22 Question 1 What Committees must the credit union have under the new Act, and how should they be comprised?

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23 Answer to Question 1 Principal Committees Credit Committee Credit Control Committee Membership Committee Consisting of members Be mindful of new governance arrangements Board Committees Risk, Audit, Remuneration Committee Establishment at Board discretion unless directed by Central Bank

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24 Question 2 When does the role of Treasurer cease?

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25 Answer to Question 2 1 st October 2013

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26 Question 3 Can the Treasurer receive an honorarium at AGM 2013?

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27 Answer to Question 3 This is the final year the credit union may approve the payment of an honorarium

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28 Question 4 Who presents the accounts to AGM 2013?

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29 Answer to Question 4 The Board should nominate a person, maybe a director, or former Treasurer, to present the accounts

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30 Question 5 Are there any changes to approving loans to those outside the common bond?

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31 Answer to Question 5 Previously required Board approval This provision has been deleted Loans to persons outside the common bond (non-qualifying members) may be approved under the normal approval procedures

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32 Question 6 Does the new Act only apply to credit unions whose asset size is more than 10m?

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33 Answer to Question 6 Applicable to all credit unions regardless of asset size Most changes come into effect for all credit unions from 1 st October 2013

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34 Question 7 How do we advise all members of the new nomination procedures?

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35 Answer to Question 7 Proactive Nomination Committee Different mediums of communication, e.g. Website/notice in banking hall No nominations from the floor

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36 Question 8 Can the Manager carry out the Risk Management and Compliance Officer Roles?

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37 Answer to Question 8 No prohibition Independence is key If taken on by Manager, increased monitoring by Internal Audit Function may be required

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38 Question 9 Can a director who is 90 days in arrears, remain on the Board?

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39 Answer to Question 9 The Standard Rules can provide for removal or suspension of such director First Schedule of 2012 Act

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40 Question 10 If there is a difference between the Act and the Standard Rules, which takes precedence?

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41 Answer to Question 10 The Standard Rules have yet to be updated to reflect changes introduced by 2012 Act If a discrepancy arises between these documents, deference will be given to the Credit Union Act 1997 (as amended)

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42 Question 11 When should the updated Standard Rules be available?

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43 Answer to Question 11 The amendments to the Standard Rules arising from 2012 Act will be brought to League AGM 2014 New version of the Standard Rules issued subsequent to this

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44 Question 12 Does every credit union now have to have a manager?

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45 Answer to Question 12 As of 1 st October 2013 every credit union must have a manager appointed, or be in the process of appointing someone into the role

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46 Question 13 Does the Manager now become the CEO?

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47 Answer to Question 13 Board of directors shall appoint a manager Manager shall have responsibility for the day-to-day management of the credit union’s operations, compliance and performance Compare the current job description with the updated version, which is compliant with the new legislation, and identify any variations and training needs as a result  Manager’s salary: any change should occur as a result of a review of the role currently being carried out against the responsibilities identified in the Act

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48 Question 14 Under the new legislation appointment of staff is the responsibility of the Manager – this has always been the responsibility of the board of directors. Does this mean the manager can just recruit people when he/she feels like it?

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49 Answer to Question 14 Board of directors will be responsible for the overall staffing structure Identify the roles required to support the needs of the business Should a vacancy arise, the new role will still need to be signed off by the board; the manager will then be responsible for the recruitment and selection of the suitable candidate

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50 Question 15 Role of the Board now includes Performance Management - how do we approach this?

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51 Answer to Question 15 Manager to carry out annual performance reviews with credit union employees Board of directors to review the manager’s performance on an annual basis Chair of the Board responsible for conducting a performance review on each member of the board of directors on an annual basis

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52 Question 16 Can the Compliance Officer be an employee of the credit union?

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53 Answer to Question 16 The role of Compliance Officer can be taken on by a current employee of the credit union in addition to or as part of their current role

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