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The government is proposing - and seeking feedback on - new policies to enhance credit co-operatives' (credit co-ops) financial prudence, governance and management capabilities, with changes targeted for full implementation by 2018.
Credit co-ops are membership- based entities which provide thrift and loan services to people who share a common affiliation (for example, an employer or community). Currently, there are 27 registered credit co-ops in Singapore, with about 142,000 individual members. As at Dec 31, 2013, they cumulatively held S$756.5 million in members' deposits and S$14.6 million in members' share capital. Total loans given out by credit co-ops amounted to S$185.5 million, while their net assets stood at S$153 million.
Following a Ministry of Culture, Community and Youth (MCCY) review of the existing rules governing credit co-ops, the government is proposing changes in three broad areas: raising prudential standards and promoting compliance; improving governance standards; and enhancing regulatory powers to deal with distressed and errant credit co-ops.
The last major change in credit co-op regulation was six years ago. Some of the changes proposed this time around will require amendments to legislation.
Said MCCY in a statement on Monday: "Credit co-ops serve a useful social role in encouraging savings and providing loans at reasonable interest rates to their members. However, to be effective in serving this role, they must be financially sound and professionally run. Given the deposit-taking function and growing membership, it is necessary to subject these co-ops to appropriate regulatory oversight so as to protect members' interests."
Some recommendations include raising requirements for the minimum liquid assets ratio from 13 per cent to 15 per cent, and the capital adequacy ratio from 8 per cent to 10 per cent. The government is also proposing to empower the Registry of Co-operative Societies to take regulatory action against the non-compliance of prudential requirements. For example, a credit co-op may not be allowed to distribute dividends to members if it does not meet the required minimum capital adequacy ratio.
The government has launched a public consultation exercise to seek views from credit co-ops, co-op members and the public from Tuesday until Feb 2. The consultation paper is available at www.mccy.gov.sg/coop consult or www.reach.gov.sg. Interested parties can send their feedback and suggestions via hard copy or email to email@example.com.
Credit co-ops form just one of three co-op categories in Singapore. There are consumer and services co-ops, which meet daily needs and provide a wide spectrum of goods and services ranging from childcare to eldercare, groceries, security services, training, and more. There are also school co-ops, which operate in secondary schools and junior colleges. These provide services such as the sale of books and stationery, and expose students to co-operative principles and social entrepreneurship.