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Credit Unions Excluded From Caribbean Banking Bill

Amanda Banks, Lowtax.net, London
15 May, 2015

The Eastern Caribbean Central Bank (ECCB) has confirmed that credit unions that operate within the Eastern Caribbean Currency Union (ECCU) will not be affected by new banking legislation which is being introduced in ECCB member countries.

The ECCB Monetary Council agreed to the banking reforms in the eight ECCB member states (Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines) at its 81st meeting on February 24, 2015. The Banking Bill will overhaul the regulation of the region's banking industry, providing greater protection for depositors. According to the ECCB statement, the Bill is "an urgent requirement to address the issues affecting the ECCU banking sector and to maintain the integrity and stability of the system."

In a statement published on May 8, the ECCB clarified that while credit unions conduct business of a financial nature, they do not conduct banking business, and are therefore not regulated by the ECCB under the existing Banking Act and will not be regulated under the proposed Banking Bill.

The Banking Bill defines banking business as the business of receiving funds through: the acceptance of monetary deposits which are repayable on demand or after notice or any similar operation; and the frequent sale or placement of bonds, certificates, notes, or other securities, and the use of such funds either in whole or in part for extensions of credit or investment for the account and at the risk of the person doing such business.

Credit Unions are regulated by the single regulatory units in individual ECCU countries under the Cooperative Societies Act.

In a recent address on the new Banking Bill to ECCU member states, K. Dwight Venner, Governor of the ECCB, observed that deposit protection is essential because "deposits, particularly savings deposits are of critical importance in our financial system. They are the main financial instruments available to the public for saving and provide the major funding source used by banks for lending. As such, banks must approach lending in a very prudent way to ensure that loans are recoverable so that they can honor their commitments to depositors."

"It is for these reasons that the Council has agreed to the passage of a new Banking Act which provides for greater protection of depositors and increased regulations of banks in keeping with the new international requirements. The legislation and other steps being proposed by the Central Bank and agreed to by the Monetary Council will give the legal capacity to successfully address the issues affecting the banking system and place us in a position to prevent future crisis of this kind."

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