The current economic environment is taking a serious toll on credit unions as more members face lay-offs and find it difficult to pay their loans on time.
This was revealed by Central Bank Governor Ewart Williams, during yesterday’s launch of the Co-operative Credit Union League’s calender of events at Crowne Plaza, Wrightson Road, Port- of-Spain.
Williams said data suggests that delinquency ratios went up significantly in 2010.
“Many credit unions have not been vigorously addressing delinquency, through adequate provisions, and writing up bad debts,” he said.
He said some credit unions have not recognised the importance of provisions, or still may not know how to provision.
“In some cases it is not clear whether the Board is aware of the problem. Dividend payments are coming out of reserves. If all of this is correct, it is not good financial management,” Williams warned.
Williams in referring to the Clico situation said over 60 credit unions had investments close to $800 million in Clico.
“For some credit unions, the impairment of these investments could threaten their viability. That suggests the management of these unions may not have properly assessed the credit and investment risks, and through insufficient portfolio diversification almost compromised the viability of their organisations,” he said.
He advised that financial literacy should be at the top of the sector’s agenda.
“The Clico crisis underscores the rapid pace of financial innovation required that financial institutions contribute to providing more information, and more financial education to the consumer public,” he said.
Williams noted that the Bank had no intention of stymieing the growth of the sector, or closing down credit unions that do not meet its credential requirement.
Source:Newsday
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