Credit Union and Co-operation with Overseas Regulators Act 2012

PART 1 Preliminary and General

1. Short title, construction and collective citation.

1.— (1) This Act may be cited as the Credit Union and Co-operation with Overseas Regulators Act 2012.

(2) The Credit Union Acts 1997 and 2001 and this Act (other than sections 36, 37, 48(2) and 56(3), Part 5 and Schedules 2 to 5) may be cited together as the Credit Union Acts 1997 to 2012 and shall be construed together.

(3) The Central Bank Acts 1942 to 2011, sections 36, 37, 48(2) and 56(3), Part 5 (in so far as it amends any of those Acts), and Schedules 2 and 3 (in so far as they amend any of those Acts) may be cited together as the Central Bank Acts 1942 to 2012.

2. Commencement.

2.— (1) This Act comes into operation on such day or days as the Minister may appoint by order or orders either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or provisions.

(2) Notwithstanding the commencement of the Principal Act, the provisions of section 3(2) of the Principal Act relating to an order under section 1(2) of that Act apply to an order made under this section.

3. Definition.

3.— In this Act “Principal Act” means the Credit Union Act 1997.

4. Savers for regulatory actions of Bank.

4.— (1) A regulatory action taken by the Bank under a provision being amended, repealed or revoked by this Act on or before the commencement of such amendment, repeal or revocation, continues to have effect according to its terms. The Bank may enforce such a regulatory action.

(2) Notwithstanding anything in the rules of a credit union, the board of directors may, by resolution passed during the transitional period, make such amendments of the rules of the credit union as may be consequential on the provisions of this Act.

(3) For the purposes of subsection (2), the transitional period is the period of one year from the commencement of this section.

(4) Notwithstanding anything in section 14(4) of the Principal Act, after the expiry of one year from the commencement of this section, the Bank shall not be required to register any amendment of a credit union’s rules unless such consequential amendments of the registered rules as are mentioned in subsection (2) either—

(a) have been made before the Bank receives the amendment; or

(b) are to be effected by the amendment.

(5) In subsection (1) “regulatory action” includes any direction, order, requirement, sanction, condition, appointment or request (however described) of a regulatory nature made, given or imposed by the Bank.

5. Expenses.

5.— The expenses incurred by the Minister in the administration of this Act shall, to such extent as may be sanctioned by the Minister for Public Expenditure and Reform, be paid out of moneys provided by the Oireachtas.

PART 2 Amendments to Credit Union Act 1997 and Consequential Amendments, etc.

6. Amendment of section 2 (Interpretation) of Principal Act.

6.— The Principal Act is amended by substituting the following for subsection (1) of section 2:

“(1) In the Credit Union Acts 1997 to 2012—

‘Act of 1966’ means the Credit Union Act 1966;

‘Advisory Committee’ means the committee established under section 180;

‘amendment’, in relation to the rules of a credit union, includes a new rule, and a resolution rescinding a rule, of the credit union;

‘annual accounts’ has the meaning given by section 111(6);

‘annual general meeting’ has the meaning given by section 78(1);

‘annual return’ means the annual return which a credit union is required by section 124 to send to the Bank;

‘Bank’ means the Central Bank of Ireland;

‘board of directors’ means the body which has general control, direction and management of a credit union and to which section 53 relates;

‘board oversight committee’ has the meaning given by section 76L;

‘books and documents’ includes accounts and records made in any manner, and ‘books or documents’ shall be construed accordingly;

‘business continuity’ and ‘business continuity plan’ have the meanings given to them, respectively, by section 76I;

‘chair’ has the meaning given by section 55A(2);

‘civil partner’ has the same meaning as it has in the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010;

‘cohabitant’ has the same meaning as it has in the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010;

‘common bond’ means a common bond falling within section 6(3);

‘compliance officer’ has the meaning given by section 76D;

‘contravention’ includes failure to comply;

‘Court’ means the High Court;

‘credit institution’ means—

(a) a recognised bank within the meaning of the Central Bank Acts 1942 to 2011,

(b) a trustee savings bank,

(c) the Post Office Savings Bank, or

(d) a building society within the meaning of the Building Societies Act 1989;

‘credit union’ means a society registered as such under this Act, including a society deemed to be so registered by virtue of section 5(3);

‘debentures’ means any debentures, debenture stock or bonds of a credit union, whether constituting a charge on the assets of the credit union or not;

‘financial services legislation’, where applicable to credit unions acting under any authorisation from the Bank provided for by law, means—

(a) the designated enactments within the meaning of section 2 of the Central Bank Act 1942,

(b) the designated statutory instruments within the meaning of section 2 of the Central Bank Act 1942, and

(c) the Central Bank Acts 1942 to 2011 together with the statutory instruments made under those Acts;

‘general meeting’ means an annual general meeting or a special general meeting;

‘internal audit charter’ has the meaning given by section 76K(2);

‘internal audit function’ has the meaning given by section 76K(1);

‘internal audit plan’ has the meaning given by section 76K(3);

‘manager’, in relation to a credit union, means the individual appointed to the role of manager of the credit union under section 63A;

‘management team’ has the meaning given by section 55(1)(i);

‘meeting’, includes, where the registered rules of a credit union so allow, a meeting of delegates appointed by members;

‘member of the family’, in relation to any person, means that person’s father, mother, grandfather, grandmother, father-in-law, mother-in-law, spouse or civil partner, cohabitant, son, daughter, grandson, granddaughter, brother, sister, half-brother, half-sister, uncle, aunt, nephew, niece, first cousin, step-son, step-daughter, step-brother, step-sister, son-in-law, daughter-in-law, brother-in-law or sister-in-law;

‘Minister’ means the Minister for Finance;

‘nomination committee’ has the meaning given by section 56B(1);

‘non-qualifying member’, in relation to a credit union, has the meaning given by section 17(4);

‘officer’, in relation to a credit union, includes—

(a) the chair, the secretary or any other member of the board of directors, a member of a principal Committee, a member of the board oversight committee, risk management officer, compliance officer, credit officer or credit control officer of the credit union,

(b) an employee of the credit union to whom paragraph (a) does not apply, and

(c) a voluntary assistant of the credit union,

but does not include an auditor appointed by the credit union in accordance with the requirements of this Act;

‘operational risk’ has the meaning given by section 76E(1);

‘organisation meeting’ has the meaning given by section 77(1);

‘pass book’ includes any type of written statement of account;

‘persons claiming through a member’ includes the executors or administrators and assignees of a member and, where nomination is allowed, the member’s nominee;

‘prescribe’ means—

(a) in relation to the Minister, prescribed by regulations made by the Minister under section 182, and

(b) in relation to the Bank, prescribed by regulations made by the Bank under section 182A;

‘principal Committee’, in relation to a credit union, means a credit committee, credit control committee or membership committee;

‘register’ means the register maintained under section 8(5);

‘registered’ means for the time being entered in the register and ‘registration’ shall be construed accordingly;

‘regulatory directions’ has the meaning given by section 87(3);

‘restructuring proposal’ has the meaning given by section 45 (1)of the Credit Union and Co-operation with Overseas Regulators Act 2012;

‘risk management officer’ has the meaning given by section 76C(1);

‘risk management system’ has the meaning given by section 76B(1);

‘savings’, in relation to a credit union, has the meaning given by section 27(1);

‘share’, in relation to a credit union, means each sum of one euro standing to the credit of a member of that credit union in respect of shares in the register of members required by this Act to be kept by that credit union;

‘special general meeting’ shall be construed in accordance with section 79;

‘special resolution’ means a resolution which is passed by a majority of not less than three quarters of such members of a credit union present and voting and who are for the time being entitled to vote in person at any general meeting of which notice, specifying the intention to propose the resolution, has been duly given according to the rules of the credit union;

‘strategic objectives’ has the meaning given by section 76A(1);

‘strategic plan’ has the meaning given by section 76A(1);

‘voluntary assistant’, in relation to a credit union, means a member of the credit union who, although not a remunerated employee of the credit union, is engaged in any way in the operation of the credit union.”.

7. Supplemental provisions relating to registration, etc., under section 6 of Principal Act.

7.— The Principal Act is amended by inserting the following section after section 6:

“6A.— (1) The Bank may impose such conditions, if any, as the Bank considers to be necessary to protect, with effect from registration under this Part, the interests of the members of the society seeking registration and any such conditions shall be a condition for registration as a credit union.

(2) The conditions imposed by the Bank under subsection (1) may include requiring a credit union—

(a) to notify the Bank of any events of such significance that could materially affect the credit union including any change to the strategic plan of the credit union;

(b) to operate a more limited business model agreed with the Bank;

(c) to cause to be undertaken an independent review of the credit union’s business within 12 months in order to ensure that the credit union is complying with all legal and regulatory requirements.

(3) Any of the conditions of registration may be amended or revoked by the Bank if, in the opinion of the Bank—

(a) the amendment or revocation is necessary to protect the interests of the credit union’s members, or

(b) the conditions concerned have become spent orobsolete and should be revoked.

(4) Whenever the Bank proposes to impose a condition in relation to a registration or to amend the conditions of a registration—

(a) it shall notify in writing the society seeking registration under this Part or the credit union concerned, as the case may be—

(i) that it intends to impose one or more than one condition in relation to the registration or to amend the existing conditions of the registration imposed under this section, as the case may be, and of its reasons for so doing, and

(ii) that the society or credit union concerned, as the case may be, may, within 15 working days after the date of the giving of the notification, make representations in writing to the Bank in relation to the imposition or amendment, as the case may be, and shall specify in the notification, the condition or the amendment, as the case may be,

and

(b) the society or credit union concerned, as the case may be, may make such representations to the Bank within the time referred to in paragraph (a)(ii).

(5) Before deciding to impose conditions of registration, or an amendment of conditions of the registration, under this section, as the case may be, the Bank shall consider any representations duly made to it under subsection (4)(b) and, after so considering, the Bank may—

(a) decide to impose the conditions of registration, or the amendment of the conditions of the registration, under this section, as the case may be,

(b) decide to impose the conditions or amend the conditions of the registration under this section, as the case may be, that differ from those specified in the notification concerned, but only if the difference results in the conditions concerned being no more onerous than would be the case had the Bank decided to impose the conditions or amend the conditions of the registration, as the case may be, in accordance with the notification concerned, or

(c) without prejudice to subsections (1) to (3), decide not to impose the conditions or not to amend the conditions of the registration.”.

8. Savings.

8.— The Principal Act is amended by substituting the following for section 27:

“27.— (1) A credit union may raise funds to be used for its objects—

(a) by the issue to its members of shares in the credit union (which may be withdrawable or non-withdrawable), and

(b) by the acceptance of money on deposit from a member,

and the cumulative amount of such shares in, and money on deposit (if any) with, the credit union is referred to in this Act as ‘savings’.

(2) For the adequate protection of the savings of members of credit unions the Bank may prescribe requirements and limits for savings, including—

(a) the maximum amount of savings (expressed as a monetary amount or as a percentage of some monetary amount or determinable monetary amount) or category of savings a credit union member may hold,

(b) the ratio of total deposits from members that may be held by a credit union to total shares issued to members, and

(c) any other requirement or limit which the Bank considers necessary to prescribe.

(3) In prescribing matters for the purposes of this section, the Bank shall have regard to the need to ensure that the requirements imposed by the regulations made by it are effective and proportionate having regard to the nature, scale and complexity of credit unions, or the category or categories of credit unions, to which the regulations will apply.”.

9. Protection of members’ savings.

9.— The Principal Act is amended by inserting the following after section 27 (inserted by section 8):

“27A.— (1) In addition to its reporting functions under the Credit Union Acts 1997 to 2012and complying with any matter prescribed under those Acts, a credit union shall maintain appropriate oversight, policies, procedures, processes, practices, systems, controls, skills, expertise and reporting arrangements to ensure the protection of members’ savings and that it complies with requirements imposed under the financial services legislation.

(2) Without prejudice to the generality of subsection (1), the Bank may make regulations prescribing—

(a) certain oversight, policies, procedures, processes, practices, systems, controls, skills, expertise and reporting arrangements which the credit union is required to maintain where the Bank considers this is appropriate in the interest of protecting members’ savings or otherwise appropriate to ensure compliance with the requirements imposed under financial services legislation;

(b) requirements in relation to the oversight, policies, procedures, processes, practices, systems, controls, skills, expertise and reporting arrangements required to be maintained under this section.”.

10. Borrowing.

10.— The Principal Act is amended by substituting the following for section 33:

“33.— (1) For the purpose of its objects as referred to in section 6 a credit union may borrow money, on security or otherwise, and may issue debentures accordingly.

(2) For the adequate protection of the savings of members of credit unions, the Bank may prescribe—

(a) the maximum amount of money a credit union may borrow at any one time which may be expressed as a percentage of the aggregate of shares balance and the deposits balance of the credit union, and

(b) the notice to be given to the Bank by a credit union in specified circumstances where the credit union proposes to borrow certain amounts of money (expressed as a monetary amount or as a percentage of some monetary amount or determinable monetary amount) in respect of those circumstances.

(3) Where the Bank considers it is necessary in the interests of the proper regulation of a credit union or credit unions generally, or the protection of members’ savings, it may do either or both of the following:

(a) permit a credit union to borrow moneys in excess of the amount prescribed in accordance with subsection (2);

(b) waive any notice requirement prescribed in accordance with subsection (2).

(4) A person dealing with a credit union shall not be obliged to be satisfied or to enquire into whether the limit imposed on the credit union by virtue of subsection (2) (or such limit as may be duly affected under subsection (3)) has been or is being observed; but if a person who lends money to a credit union or takes security in connection with such a loan has, at the time the loan is made or the security is taken, actual notice of the fact that that limit has been or is thereby exceeded, the credit union’s debt or, as the case may be, the security shall be unenforceable.

(5) Subject to subsection (4), a transaction with a credit union shall not be invalid or ineffectual by reason of the fact that the limit on borrowing prescribed by the Bank under subsection (2) (or such limit as may be duly affected under subsection (3)) has been or is by the transaction exceeded.

(6) In prescribing matters for the purposes of this section, the Bank shall have regard to the need to ensure that the requirements imposed by the regulations made by it are effective and proportionate having regard to the nature, scale and complexity of credit unions, or the category or categories of credit unions, to which the regulations will apply.”.

11. Lending.

11.— (1) The Principal Act is amended by substituting the following for section 35:

“35.— (1) (a) In this section ‘large exposure’, in relation to loans of a credit union to a borrower or a group of borrowers who are connected, means the total exposure (including contingent liabilities) of the credit union where the total exposure to such borrower or group of borrowers would be greater than an amount (whether expressed as a monetary amount or as a percentage of some monetary amount or determinable monetary amount) prescribed by the Bank.

(b) For the purposes of this subsection—

‘control’ has the meaning assigned to it by section 432 of the Taxes Consolidation Act 1997 and the other relevant provisions of Part 13 of that Act;

‘group of borrowers who are connected’ means 2 or more persons—

(i) who, unless it is shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other person or persons (not being individuals); or

(ii) between whom there is no relationship of control as set out in subparagraph (i), but who are to be regarded as constituting a single risk because they are so interconnected that, if one of them were to experience financial problems, the other person or some or all of the other persons would be likely to encounter repayment difficulties.

(2) A credit union may make a loan to a member for such purpose as the credit union considers appropriate, upon such security (or without security) and terms as the rules of the credit union may provide. The ability of the loan applicant to repay shall be the primary consideration in the underwriting process of the credit union.

(3) A credit union shall manage and control lending to ensure the making of loans does not involve undue risk to members’ savings taking into account the nature, scale, complexity and risk profile of the credit union.

(4) Every application to a credit union for a loan shall be in writing and shall state the purpose for which the loan is required and the security (if any) offered for it.

(5) A credit union shall not accept from an officer of the credit union a guarantee for a loan to another member unless that other member is the officer’s spouse or civil partner, child or parent.

(6) Where the rules of a credit union so provide, the credit union may determine in accordance with those rules the total, including percentage, amount of loans (if any) that it may grant to non-qualifying members.

(7) In relation to loans to which this section relates and for the adequate protection of the savings of members of credit unions, the Bank may prescribe one or more of the following:

(a) the classes of lending a credit union may engage in whether by reference to any common characteristic of the credit unions or loans concerned, or otherwise;

(b) the limits on the total, including percentage, amount of loans generally, or unsecured loans or class or classes of loans, that may be lent by credit unions, having regard to period or periods of time for which loans concerned are made;

(c) the matters relating to large exposures of credit unions and limits relating to such exposures;

(d) the limits on the concentration of lending, including concentration limits on loan classes, including concentration limits on loans to a member of a credit union;

(e) any other limit that the Bank considers appropriate.

(8) For the adequate protection of the savings of members of credit unions the Bank may prescribe such other requirements as it considers necessary in relation to any one or more of the following matters:

(a) the lending practices of credit unions, including—

(i) loan application assessments,

(ii) the making of provision for specified matters,

(iii) reviews to assess the adequacy of provisions,

(iv) maintaining policies for the holding of provisions, for credit and for credit control,

(v) the types of security that may be accepted;

(b) reporting loans to the Bank;

(c) the holding by credit unions of provisions, reserves or capital against loans or specified classes or types of loans.

(9) In prescribing matters for the purposes of this section, the Bank shall have regard to the need to ensure that the requirements imposed by the regulations made by it are effective and proportionate having regard to the nature, scale and complexity of credit unions, or the category or categories of credit unions, to which the regulations will apply.

(10) A credit union shall ensure that it has appropriate processes, procedures, systems, controls and reporting arrangements to monitor compliance with the requirements of this section and any requirement imposed under this section.

(11) Subject to its rules, in respect of a loan, a credit union may accept, in addition to other forms of security—

(a) a guarantee by a member, or

(b) a pledge by a member of shares in or deposits with the credit union,

and, where such a guarantee or pledge is accepted, it shall be deemed to be a security for the loan.”.

(2) Where immediately before the commencement of this section, either generally or in respect of a category or categories of credit unions—

(a) there is a subsisting approval given by the Bank under subsection (2) of section 35 of the Principal Act in respect of the limits set out in that subsection,

(b) there is a subsisting approval given by the Bank under subsection (4) of section 35 of the Principal Act in respect of a larger percentage than that to which the subsection relates,

(c) there is a subsisting order made by the Minister under subsection (6) of section 35 of the Principal Act in respect of financial (including percentage) limits, or

(d) there are requirements in place for the purposes of section 35 of the Principal Act in respect of credit unions,

then that approval or order or those requirements shall continue to have effect to the extent that the matters to which such approval, order or requirements relate have not been dealt with by being prescribed by the Bank under that section of the Principal Act as amended by subsection (1).

12. Investments.

12.— The Principal Act is amended by substituting the following for section 43:

“43.— (1) A credit union shall manage its investments to ensure that those investments do not (taking account of the nature, scale, complexity and risk profile of the credit union) involve undue risk to members’ savings and, for that purpose, before making an investment a credit union shall assess the potential impact on the credit union, including the impact on the liquidity and financial position of the credit union.

(2) A credit union may invest any of its funds, which are surplus to its operating requirements and are not immediately required for the purposes of the credit union, in any one or more of the following:

(a) the shares of, or deposits with (other than deposits to which subsection (6) relates) or loans to, another credit union as the Bank may prescribe;

(b) the shares of a society registered under the Industrial and Provident Societies Acts 1893 to 1978 as the Bank may prescribe;

(c) such other investments as may be prescribed for that purpose by the Bank under subsection (3).

(3) For the purposes of subsection (2)(c) the Bank may prescribe investments in which a credit union may invest its funds. In prescribing matters for the purposes of subsection (2) and having regard to the need to avoid undue risk to members’ savings, the Bank may also prescribe other matters in relation to prescribed investments, including any of the following:

(a) the classes of investments, including, where appropriate, any investment project of a public nature the credit union may invest in;

(b) the quality of investments and quality of counterparties that the credit union may invest in;

(c) the maximum, including percentage, amount (by reference to a credit union’s surplus funds to which subsection (2) relates or otherwise) of a class of investments that may be invested in;

(d) the term to maturity of a class of investments;

(e) the currency of a class of investments;

(f) limits for investment, whether by reference to maturity, currency, counterparty, sector, instrument or otherwise;

(g) any other matters that the Bank may consider necessary in the circumstances.

(4) The Bank may prescribe matters for the purposes of any distribution policy to be applied by a credit union in respect of investment income.

(5) In prescribing matters for the purposes of this section, the Bank shall have regard to the need to ensure that the requirements imposed by the regulations made by it are effective and proportionate having regard to the nature, scale and complexity of credit unions, or the category or categories of credit unions, to which the regulations will apply.

(6) In so far as any funds of a credit union that are surplus to its operating requirements—

(a) are not immediately required for the purposes of the credit union,

(b) are not invested in accordance with subsection (2), or

(c) are not kept in cash in the custody of officers of the credit union,

those funds shall be kept by the credit union on current account with a credit institution.

(7) Where any funds of a credit union are on current account with, or on loan to, an institution which ceases to be a credit institution, the credit union shall take all practicable steps to call in and realise the loan within the period of 3 months from the time when the institution so ceased or, if that is not possible, as soon after the end of that period as possible.”.

13. Reserves.

13.— The Principal Act is amended by substituting the following for section 45:

“45.— (1) In this section—

‘assets’ means such assets as the Bank may from time to time specify for the purposes of this section;

‘regulatory reserve’ means a reserve that is a realised financial reserve which is—

(a) unrestricted and non-distributable,

(b) identified separately in a credit union’s accounts, and

(c) to be maintained by a credit union pursuant to this section;

‘regulatory reserve requirement’ means the amount required to be held in the regulatory reserve of a credit union, expressed as a percentage of the assets of a credit union and prescribed by the Bank.

(2) A credit union shall maintain reserves that are adequate having regard to the nature, scale, complexity and risk profile of its business.

(3) The Bank may prescribe the regulatory reserve requirement that a credit union shall maintain at a minimum and, in so prescribing, may include conditions on the application of the regulatory reserve requirement. For that purpose the Bank may also prescribe in respect of other matters related to the regulatory reserve requirement, including any of the following:

(a) the application of risk weightings to assets for the purposes of calculating the regulatory reserve requirement;

(b) the types and attributes of the assets or liabilities included in the calculation of the regulatory reserve requirement;

(c) the requirement for initial reserves to be held by a newly-registered credit union under section 6.

(4) Where requirements to which subsection (3)(c) relate have been prescribed, they shall not apply to a credit union established as a result of amalgamations of 2 or more existing credit unions.

(5) A credit union shall maintain reserves, in addition to the regulatory reserve requirement prescribed under subsection (3) that—

(a) it has assessed are required in respect of operational risk having regard to the nature, scale, complexity and risk profile of its business, and

(b) which shall not be less than those required under any additional reserve requirement applicable to it in respect of operational risk by virtue of subsection (6).

(6) Either or both the level of additional reserves to be maintained by a credit union and the basis for calculating the additional reserves to be maintained by a credit union under this section in respect of operational risk may be prescribed by the Bank. For that purpose the Bank may also prescribe in respect of ancillary matters related to the additional reserves held in respect of operational risks.

(7) A credit union that fails to meet any reserve requirement under this section—

(a) may be required by the Bank to transfer all or part of its surplus to reserves, and

(b) shall secure the written approval of the Bank before paying a dividend or loan interest rebate.

(8) In prescribing matters for the purposes of this section, the Bank shall have regard to the need to ensure that the requirements imposed by the regulations made by it are effective and proportionate having regard to the nature, scale and complexity of credit unions, or of the category or categories of credit unions, to which the regulations will apply.

(9) (a) Pending the prescribing by the Bank of reserve requirements for the purposes of this section in respect of credit unions generally or a category of credit unions, the reserve requirements applicable to credit unions under section 85 shall continue to apply generally or to such category of credit unions, as the case may be.

(b) Where reserve requirements have been prescribed by the Bank for the purposes of this section in respect of credit unions generally or a category of credit unions, then section 85 shall cease to apply generally to that category of credit unions, as the case may be, in respect of the matters so prescribed.”.

14. Appeal against certain decisions of Bank.

14.— The Principal Act is amended by substituting the following for section 52:

“52.— The following decisions are appealable decisions for the purposes of Part VIIA of the Central Bank Act 1942:

(a) a decision by the Bank under section 6A for the purposes of subsection (1) or (2) of that section;

(b) a decision by the Bank under section 11(5) to direct a credit union to change its name to a name approved by the Bank;

(c) a decision by the Bank under section 41(5) to direct a credit union to dispose of the interest to which the direction relates;

(d) a decision by the Bank under section 49(3)(b) to refuse to grant approval;

(e) a decision by the Bank under section 50(3)(a) to withdraw an approval granted under section 49;

(f) a decision by the Bank under section 50(3)(b) to vary any condition imposed on such an approval;

(g) a decision by the Bank to impose any condition on such an approval (whether at the time the approval is granted or later by virtue of section 50(3)(c));

(h) a decision by the Bank to give a regulatory direction under subsection (1) or (2) of section 87.”.

15. Board of directors.

15.— (1) The Principal Act is amended by substituting the following for section 53:

“53.— (1) A credit union shall have a board of directors which shall have responsibility for the general control, direction and management of the credit union.

(2) The board of directors of a credit union shall be of sufficient number and expertise to adequately oversee the operations of the credit union.

(3) Except in the circumstances set out in subsection (4), the number of directors shall be specified in the registered rules as set out in section 13 and shall be—

(a) not less than 7,

(b) not more than 11, and

(c) an odd number.

(4) The number of directors of a credit union may be more than 11 or may be an even number if an additional director is appointed under section 95A.

(5) Each director of a credit union shall ensure that he or she has sufficient time to devote to the role of director and the responsibilities associated with that role as indicated by the nomination committee under section 56B(4)(g).

(6) The board of directors of a credit union shall be elected—

(a) where the organisation meeting occurs after the commencement of this provision (as amended by section 15 of the Credit Union and Co-operation with Overseas Regulators Act 2012), by secret ballot at the organisation meeting and, subject to subsection (15) and section 57, subsequent vacancies on the board of directors shall be filled by secret ballot at an annual general meeting, and

(b) in any other case, by secret ballot at the annual general meeting first occurring after the commencement of this provision (as amended by section 15 of the Credit Union and Co-operation with Overseas Regulators Act 2012) or, if earlier than that annual general meeting, at a special general meeting called for the purpose of such ballot and, subject to subsection (15) and section 57, subsequent vacancies on the board of directors shall be filled by secret ballot at an annual general meeting.

(7) The term of office of a director of a credit union—

(a) shall begin at the conclusion of the general meeting at which the director is elected,

(b) shall not extend beyond the third subsequent annual general meeting after his or her election, and

(c) subject to paragraph (b), subsections (8) and (12) and all other applicable requirements of financial services legislation, shall be determined in accordance with the registered rules,

but, except where this Act or any other applicable requirement of financial services legislation or the registered rules otherwise provides, a retiring director shall be eligible for re-election.

(8) At each annual general meeting of a credit union the number of directors whose term of office expires shall, as near as possible, be the same.

(9) Only a natural person of full age may be a director of a credit union.

(10) The following persons are not eligible to become a director of a credit union:

(a) an employee or voluntary assistant of the credit union or an employee of any other credit union;

(b) a member of the board oversight committee of the credit union;

(c) a director of any other credit union;

(d) an employee of a representative body of which the credit union is a member, where that employee’s role could expose them to a potential conflict of interest;

(e) a public servant (within the meaning of the Financial Emergency Measures in the Public Interest Act 2009) assigned to the Department of Finance and involved in advising the Minister on credit union issues or in the examination of credit union issues;

(f) a member of the Commission of the Bank;

(g) an officer (within the meaning of section 2 of the Central Bank Act 1942) or other employee of the Bank and who is involved in the regulation of credit unions;

(h) the Financial Services Ombudsman (within the meaning of section 2 of the Central Bank Act 1942) or a Bureau staff member (within the meaning of section 57BA of that Act);

(i) a member of the Irish Financial Services Appeals Tribunal or a member of its staff (including the Registrar of the Appeals Tribunal appointed under section 57J of the Central Bank Act 1942);

(j) the chief executive of the National Consumer Agency, an authorised officer of that Agency (within the meaning of section 2 of the Consumer Protection Act 2007) or any other member of its staff;

(k) the auditor of the credit union or a person employed or engaged by that auditor;

(l) a solicitor or other professional adviser who has been engaged by or on behalf of the credit union within the previous 3 years;

(m) a person who is a spouse or civil partner, parent, sibling or child of a director, board oversight committee member or employee of that credit union.

(11) A person shall resign from being a director of a credit union if and when he or she becomes a person to whom any provision of subsection (10) relates.

(12) A member of a credit union may not be appointed or elected to the board of directors if he or she has served for more than 12 years in aggregate in the previous 15 years on either the board of directors or the board oversight committee of thecredit union.

(13) For directors of a credit union or members of the board oversight committee who were already directors or members of the board oversight committee on the date of the commencement of this section in respect of such credit union, the 12 year period set out in subsection (12) commences on the date this subsection so commences.

(14) Directors of a credit union may not serve more than 3 consecutive years in any one principal post (as referred to in section 63) and a person who has been the holder of such a principal post shall not be eligible for re-election thereto until after the expiry of one year since he or she last held it.

(15) Subject to the requirements set out in this section and all other applicable requirements of financial services legislation, the board of directors may at any time and from time to time appoint a member of the credit union (including a former director) to be a director to fill a casual vacancy.

(16) A director appointed under subsection (15) shall hold office from the date of the appointment to the next following annual general meeting of the credit union or, if it is earlier, the next special general meeting at which an election is held for directors of the board of directors.

(17) Where all the directors of a credit union intend to resign on the same date, the secretary shall give written notice of the directors’ intention to the Bank and the board oversight committee.”.

(2) An amendment to the rules of a credit union passed in accordance with section 14(1) of the Principal Act to give effect to a reduction in the number of board of directors in compliance with that Act, shall have immediate effect notwithstanding section 14(2) of that Act.

16. Operation of board of directors.

16.— The Principal Act is amended by substituting the following for section 54:

“54.— (1) The board of directors of a credit union shall meet as often as may be appropriate to fulfil its responsibilities effectively and prudently and reflecting the nature, scale and complexity of the credit union, but in any event—

(a) the board of directors shall hold at least 10 meetings in any year, and

(b) the interval between any 2 meetings of the board of directors shall not be greater than 6 weeks.

(2) Meetings of the board of directors of a credit union shall be chaired by the chair or, in his or her absence, by the vice-chair or, in the absence of the chair and the vice-chair, in a manner prescribed by the Bank or, if no manner is so prescribed, in a manner provided for in the rules of the credit union.

(3) The secretary of a credit union shall keep minutes of all meetings of the board of directors.

(4) Subject to subsection (10), the chair shall cause a detailed agenda of items for consideration and discussion to be prepared by the secretary of the credit union for each meeting of the board of directors.

(5) The secretary of the credit union shall cause the detailed agenda and proposed minutes of the previous meeting of the board of directors to be circulated sufficiently in advance of each board of directors meeting to allow all directors adequate time to consider them. Where necessary, sufficient and clear supporting information and papers shall also be so circulated.

(6) Nothing in subsection (4) or (5) shall be read as preventing discussion or consideration of any matter urgently arising that is not included in the detailed agenda but any such matter shall, without prejudice to subsection (7), be recorded in the minutes of the meeting concerned and, where appropriate or the board of the credit union so directs, clear supporting information and papers relating to the matter so arising shall be circulated as soon as practicable in the circumstances.

(7) Minutes of all meetings of the board of directors shall—

(a) be prepared with all decisions, discussions and points for further action being documented,

(b) record all dissensions or minority votes in terms acceptable to the dissenting person or minority voter, and

(c) provide sufficient detail to identify the nature and extent of the discussion on any matter and the decision or other outcome.

(8) All discussions at board of directors meetings relating to conflicts of interest (whether of board members or otherwise) shall be recorded in sufficient detail in the minutes of the meeting concerned, together with a record of any action taken or proposed to be taken.

(9) The minutes of each meeting of the board of directors shall be motioned for agreement and approval at the next subsequent meeting of the board of directors. Those minutes shall be so approved or approved subject to such qualifications and modifications as may be made to them at that subsequent meeting. Any such modification or qualification shall also be minuted in the minutes of that subsequent meeting.

(10) In causing the agenda for a meeting of directors of a credit union to be prepared, the chair shall endeavour to ensure that adequate and sufficient time is provisionally allocated to all material relevant matters for discussion.

(11) Directors of the board of directors shall attend every meeting of the board of directors unless they are unable to attend due to circumstances beyond their control.

(12) The extent of the attendance of each board member at meetings of the board of directors shall be recorded in the minutes for the meeting concerned.”.

17. Functions of board of directors.

17.— The Principal Act is amended by substituting the following for section 55:

“55.— (1) Without prejudice to the generality of section 53(1), the functions of the board of directors of a credit union shall include the following:

(a) setting the strategy for the credit union by preparing, including active participation and examination of strategies being developed or proposed by the manager, management team or others and preparing and adopting a strategic plan;

(b) monitoring the implementation of the strategic plan by the credit union, reviewing the performance of the credit union against the measurements defined in the strategic plan and assessing, on a regular basis but at least annually, how the strategic objectives of the credit union are being achieved;

(c) reviewing the credit union’s strategic plan on a regular basis, but at least annually, to ensure that it remains relevant and up to date and modifying or revising the strategic plan to incorporate any changes required as a result of the review;

(d) operating a comprehensive decision-making process, considering all matters it considers to be of material relevance to the credit union and documenting the reasons for its decisions;

(e) the appointment of a manager, risk management officer and compliance officer and the approval of the appointment of any other member of the management team;

(f) ensuring that there is an effective management team in place;

(g) reviewing the performance of the manager on an annual basis and monitoring on an ongoing basis his or her continued appropriateness to be the manager;

(h) ensuring that the performance of every other employee and voluntary assistant, is reviewed and monitored on an ongoing basis to ensure his or her continued appropriateness for his or her role in the credit union;

(i) identifying, in consultation with the manager, other officer positions within the credit union that—

(i) are essential to the proper management of the credit union,

(ii) are likely to enable the person holding the position to exercise significant influence on the conduct of the affairs of the credit union,

and which, together with the manager and risk management officer of the credit union are referred to in this Act as the ‘management team’;

(j) ensuring there is an appropriate succession plan in place in respect of each of the positions that constitute the management team;

(k) exercising appropriate oversight over execution by the management team of the agreed strategies, goals and objectives;

(l) reviewing and approving all elements of the risk management system on a regular basis, but at least annually and, in particular—

(i) assessing the appropriateness of the risk management system,

(ii) taking account of any changes to the strategic plan including the credit union’s resources or the external environment, and

(iii) taking measures necessary to address any deficiencies identified in the risk management system;

(m) ensuring compliance with all requirements imposed on the credit union by or under the Credit Union Acts 1997 to 2012 or any other financial services legislation;

(n) the removal from office of an officer of the credit union, except directors or members of the board oversight committee, where the board of directors has duly determined that there has been a failure by the person concerned to perform duties or responsibilities;

(o) approving, reviewing, and updating, where necessary, but at least annually, all plans, policies and procedures of the credit union, including the following:

(i) lending policies including lending limits;

(ii) policies in relation to members’ shares and deposits including the setting of a maximum number of shares a member can hold and a maximum amount that a member may deposit;

(iii) liquidity management policies;

(iv) reserve management policies;

(v) investment policies;

(vi) the designating of depositories for the funds of the credit union and signatories to cheques, drafts or similar documents drawn on thecredit union;

(vii) standards of conduct and ethical behaviour for officers;

(viii) remuneration policies and practices;

(ix) compliance plan and policies;

(x) records management policies;

(xi) information systems and management information policies;

(xii) business continuity plan;

(xiii) asset and liability management policies;

(xiv) outsourcing policies;

(xv) risk management policy;

(xvi) conflicts of interest policy;

(xvii) such other matters as the Bank may prescribe;

(p) the recommendation to members, for approval, of dividends to members;

(q) ensuring the accounts of the credit union are submitted for audit;

(r) reporting to the members of the credit union at the annual general meeting, including nominating a member of the board to present the annual accounts at the annual general meeting;

(s) reviewing and considering any update of financial statements provided to the board by the manager under section 63A(4)(c).

(2) In deciding on the roles, responsibilities and administrative structures and reporting relationships of all officers, the board of directors of a credit union shall ensure that no single person is responsible for making all of the material decisions of the credit union or has effective control over the business of the credit union.

(3) The board of directors shall implement a risk management process that ensures that all significant risks are identified and mitigated to a level consistent with the risk tolerance of the credit union.

(4) The board of directors shall carry out at least annually a comprehensive review of its overall performance, relative to its objectives and implement any necessary changes or improvements.

(5) The review carried out by the board of directors under subsection (4) shall be documented in writing.

(6) In respect of the exercise of functions by the board of directors of a credit union, the board shall set out in writing a register of matters or categories of matters that require the board’s approval and which cannot be assigned by the board to other persons for performance on the board’s behalf. The register shall be used to record all such approvals by the board of directors.

(7) Where the board of directors causes any matter relating to its functions to be performed or carried out on its behalf, it shall continue to have responsibility for the matter.

(8) The board shall regularly review, but at least annually, the performance and effectiveness of the internal audit function, including reviewing and approving the internal audit charter and the internal audit plan and reviewing and approving any modifications to them, ensuring they are updated and that any issues identified in the review are managed and rectified in a timely manner.”.

18. Chair of board of directors, etc.

18.— The Principal Act is amended by inserting the following after section 55 (inserted by section 17):

“55A.— (1) The board of directors of a credit union shall elect one of its number to be the chair of the board, subject to that person being eligible to be chair of a board of directors.

(2) The chair of the board of directors of a credit union may be referred to by whatever title the rules of the credit union provide.

(3) The functions of the chair of a credit union include the following:

(a) ensuring that meetings of the board of directors operate in an efficient and effective manner;

(b) encouraging constructive discussions and debate at board of directors meetings;

(c) promoting effective communications between members of the board of directors and between the board of directors and the management team of the credit union;

(d) causing the agenda to be set by the secretary, attending and chairing board of directors meetings;

(e) ensuring that the responsibilities of the nomination committee, as set out in section 56B(4), are performed by that committee;

(f) conducting a performance evaluation of each member of the board of directors on an annual basis to ensure that each director is complying with the obligations under financial services legislation and the board of directors’ objectives as set out in the credit union’s strategic plan;

(g) facilitating the work of the board oversight committee through providing it with all reasonable assistance to enable that committee to carry out its functions;

(h) ensuring that conflicts of interest are appropriately managed by the board of directors, and by each of them, in accordance with section 69.

(4) A director of the credit union shall not be eligible to be elected as chair if the director had, at any time during the 5 years preceding the election, been—

(a) an employee of that credit union, or

(b) a person who acted in any management capacity (whether voluntary or paid) in that credit union,

and, for the purposes of this subsection, ‘acted in any management capacity’ includes performing a role where the person was in a position to exercise a significant influence on the conduct of the credit union’s affairs but does not include acting as a member of the board of directors or as a member of the board oversight committee.

(5) Subject to subsection (7)(a), the term of office of a chair of a board of directors shall be for the period of one year.

(6) A chair of a board of directors shall not serve more than 4 consecutive terms in that position and, having so served, shall not be eligible to be chair until—

(a) after another director has served at least one term as chair, or

(b) where such other director has served for less than one year, after 2 or more directors have served as chair for the equivalent of at least one complete term,

but nothing in this section shall prevent a former chair of the board of directors from being selected under section 54(2) from chairing a meeting of the board in the absence of the chair and, where relevant, the vice-chair.

(7) A person shall cease being chair of a board of directors if—

(a) the person ceases being a director for any reason, or

(b) the person resigns from being chair in accordance with subsection (8).

(8) A director may resign from being chair of the board of directors by sending his or her resignation in writing to the secretary of the credit union.”.

19. Board committees.

19.— The Principal Act is amended by inserting the following after section 56:

“56A.— (1) Subject to the other provisions of the Credit Union Acts 1997 to 2012 and any matter prescribed by the Bank, the board of directors of a credit union may cause any matter relating to its functions to be performed or carried out on its behalf by a committee, comprised entirely of directors or of a majority of directors, to act on behalf of the board of directors in respect of matters to be performed or carried out.

(2) A decision of the board of directors to cause any matter relating to its functions to be performed or carried out on its behalf under subsection (1) shall be taken at a meeting of the board.

(3) The Bank may prescribe that credit unions generally or any category or categories of credit union establish one or more of the following committees, all members of which shall be directors of the credit union:

(a) an audit committee;

(b) a risk committee;

(c) a remuneration committee.

(4) Where a credit union is not required to establish a committee to which subsection (3) relates, the credit union—

(a) if such a committee is already in place when this section is first commenced, shall as soon as practicable thereafter decide whether or not the committee shall continue, or

(b) at any time after such commencement, it may decide voluntarily to establish such a committee if it considers it appropriate and proportionate to do so,

and the provisions of this section shall apply to the credit union, in respect of the committee so continued or established as if that committee were required to be established under subsection (3).

(5) A decision by the board of directors under subsection (1) shall be documented in writing by the board, which documentation shall include—

(a) the terms of reference for the committee including—

(i) identifying the subject matter of the area concerned and respective responsibilities of both the board of directors and the committee,

(ii) indentifying the matters that may be decided by the committee and those that require the approval of the board,

(iii) a schedule of matters reserved for the board of directors that would otherwise be performed or carried out by the committee,

and

(b) the procedures for monitoring and documenting in writing the exercise of the matters to be carried out on behalf of the board.

(6) The board of directors shall appoint the members of each committee to which subsection (1) relates.

(7) A person appointed to a committee—

(a) shall hold office until the next general meeting at which an election is held for the board of directors, or such shorter period as may be specified at the time the person is appointed to the committee, and

(b) may be removed from the committee by a decision of the board of directors.

(8) When appointing members of a committee to which subsection (1) relates, the board of directors of a credit union shall ensure that—

(a) each committee has an appropriate balance and sufficiency of skills and expertise available to it to carry out the matters delegated to it, and

(b) where necessary, some or all of the members of the committee are prepared to undertake relevant training to enhance their skills and experience for the purpose of carrying out functions in the context of paragraph (a).

(9) For the purposes of a committee to which subsection (1) relates, the board of directors or, failing them, the committee concerned in consultation with the secretary of the credit union, shall appoint a secretary to the committee. The secretary to a committee shall perform the same functions to the committee as does the secretary to the credit union perform under subsections (3), (5), (7) and (8) of section 54.

(10) The members of a committee to which subsection (1) relates shall perform their functions as such members in a manner consistent with the exercise of functions by members of the board of the credit union, both collectively and individually, as if the committee were the board and accordingly, the provisions of section 54, other than subsection (1), that relate to the board shall, subject to any necessary modifications, apply to the committee.

(11) A committee to which subsection (1) relates shall be chaired in such manner as its terms of reference provide or, where not so provided, as the committee shall decide.

(12) The board of directors of a credit union—

(a) may establish such other committees as the directors consider appropriate, and

(b) shall have such other committees (if any) as may be prescribed by the Bank.

(13) In composing the membership of any committee under this section, the board of directors of a credit union shall endeavour to ensure that no one individual director is in a position to exercise excessive influence or control, in respect of the business affairs of the credit union, through membership of committees.

(14) Each committee shall, at least quarterly in every year, prepare and submit in writing to the board of directors a formal report on its activities and deliberations.”.

20. Nomination committee.

20.— The Principal Act is amended by inserting the following after section 56A (inserted by section 19):

“56B.— (1) The board of directors of a credit union shall establish a committee (in this Act referred to as the ‘nomination Committee’) whose members shall be elected in accordance with subsection (13).

(2) The nomination committee shall comprise not less than 3 members and not more than 5 members.

(3) Only members of the board of directors of a credit union are eligible to serve on a nomination committee of the credit union.

(4) The nomination committee shall be responsible for the following:

(a) identifying candidates to be nominated for appointment to the board of directors;

(b) accepting nominations of candidates proposed to be appointed to the board of directors;

(c) proposing—

(i) candidates, for election by a general meeting, to be members of the board, and

(ii) if prescribed by the Bank for the purposes of section 53(15), at least such and so many candidates as may be required for consideration for appointment to fill vacancies on the board of directors;

(d) proposing an additional person to be a director of the credit union pursuant to section 95A(1);

(e) assisting the credit union in performing anyobligations of the credit union under section 23 of the Central Bank Reform Act 2010 in relation to any candidates proposed to perform pre-approval controlled functions (as construed in accordance with section 22 of that Act);

(f) assisting the credit union in carrying out any checks which the credit union is undertaking to enable it to comply with its obligations under section 21 of the Central Bank Reform Act 2010;

(g) informing each prospective candidate by notice in writing, before he or she is proposed as a candidate in accordance with paragraph (c), of the time commitment expected from him or her in respect of his or her role as a director;

(h) ensuring that there is an appropriate succession plan in place for the board of directors;

(i) ensuring that each director is given adequate induction to his or her role on the board of directors so as to ensure he or she has sufficient appreciation of, and appropriate training about, the strategy, operations and performance of the credit union;

(j) ensuring that the induction process and training referred to in paragraph (i) occurs as soon as is practicable and in any event by no later than 6 months following a director’s appointment to the board of directors;

(k) arranging additional training, either individually or collectively, for the members of the board of directors during their respective terms of appointment to the extent that the nomination committee considers it necessary in order for the board of directors to make informed decisions;

(l) maintaining a record in writing of the periods of time during which a person has served as a member of the board of directors of the credit union.

(5) Every candidate to be nominated for appointment as a member of the board of directors of a credit union shall be proposed through the nomination committee of the credit union. No person shall otherwise be put forward for election or seek election at an annual general meeting or special general meeting of the credit union at which an election is held for members of the board of directors.

(6) The nomination committee shall ensure it receives nominations for appointment of persons as members of the board of directors of a credit union in time prior to any annual general meeting, or special general meeting at which an election is held for such members, so as to enable any requirements by or under Part 3 of the Central Bank Reform Act 2010 to be met in advance of those persons being nominated for appointment.

(7) In identifying prospective candidates under subsection (4)(a) and considering the proposing of candidates under subsection (4)(c), the nomination committee shall consider the balance of skills, experience and knowledge on the current board of directors and any review undertaken under subsection (11).

(8) In considering the proposing of candidates under paragraph (4)(c), the nomination committee shall have regard to—

(a) the number of directors on the board of directors and the number of vacancies to be filled,

(b) whether potential conflicts of interest could arise from the appointment to the board of directors of a person if such person were duly nominated and appointed to the board, and

(c) any other matter that the Bank may prescribe.

(9) Any potential conflict referred to in subsection (8) shall be brought to the attention of—

(a) where subsection (4)(c)(i) is relevant, the members of the credit union at the general meeting concerned, and

(b) where subsection (4)(c)(ii) is relevant, the directors of the board of directors of the credit union at the meeting of the board concerned.

(10) The nomination committee shall not propose appointments to the board of directors or allow appointments to proceed where conflicts of interest exist or could arise in a way which in its opinion could significantly affect the ability of the board of directors to operate in accordance with section 69(1).

(11) The nomination committee shall review the composition of the board of directors at least once a year for the purpose of identifying any deficiencies in the composition of the board. The review shall include determining whether or not there are any deficiencies in the balance of skills amongst the members of the board of directors and considering other matters relating to deficiencies that may be prescribed by the Bank.

(12) The nomination committee shall—

(a) formally review the membership of any person who is a member of the board of directors for more than the 12 years in aggregate permitted under this Part, and

(b) shall document the rationale for the continuance of such membership of that person.

(13) (a) At a meeting of the board of directors of a credit union—

(i) which is held immediately after the organisation meeting, an annual general meeting or special general meeting at which an election is held for members of the board of directors, and

(ii) which is chaired by a member of the board oversight committee,

the board shall elect by secret ballot directors to fill such positions as are then vacant on the nomination committee.

(b) In the event of a casual vacancy on the nomination committee, the board of directors may by secretballot elect a director to fill that vacancy until the next meeting at which, in accordance with paragraph (a), an election should be held to fill any vacancy in the nomination committee.”.

21. Manager of credit union.

21.— The Principal Act is amended by inserting the following after section 63:

“63A.— (1) The board of directors of a credit union shall appoint an individual to the role of manager of the credit union.

(2) The manager of a credit union shall be the chief executive officer of the credit union having responsibility for the day-to-day management of the credit union’s operations, compliance and performance and shall be responsible to the board of directors for the performance of his or her functions.

(3) Subject to the Credit Union Acts 1997 to 2012, any matters which the Bank may prescribe and other financial services legislation, the respective functions of, and the division of responsibilities between, the board of directors and the manager of a credit union shall be clearly established, formally documented in writing and approved by the board of directors.

(4) The functions of the manager of a credit union include the following:

(a) without prejudice to the exercise by the board of directors of its functions under subsection (1)(a) of section 55, preparing and proposing to the board of directors for debate, scrutiny and approval, strategies for the strategic plan that the board of directors are required to prepare and approve under that subsection;

(b) implementing the strategies agreed by the board of directors to the standards set out in the strategic plan or as otherwise required by the board of directors;

(c) updating the board of directors on the financial position of the credit union, including submitting to the board of directors on a monthly basis unaudited financial statements that set out the financial position of the credit union;

(d) appointing or causing to be appointed such and so many persons as employees or as voluntary assistants as the manager considers appropriate after consulting with the management team of the credit union;

(e) preparing or causing to be prepared such financial reports and returns as may be required by the auditor of the credit union;

(f) implementing the proper systems of internal control which the board of directors have approved;

(g) ensure that all cash is deposited in accordance with the instructions of the board of directors;

(h) such other matters as may be duly assigned to the manager by the board of directors.

(5) In appointing a person as manager of a credit union, its board of directors shall ensure that the person complies with all legal requirements (including requirements which the Bank may prescribe) to be appointed.”.

22. Credit officer and credit control officer.

22.— The Principal Act is amended by substituting the following for section 65:

“65.— (1) The board of directors may—

(a) approve the appointment of a person by the manager, other than a member of the board, a member of the credit control committee or a credit control officer, as a credit officer to work under the supervision of the credit committee, and

(b) assign to the credit officer the power to approve credit on its behalf—

(i) that is fully secured by the shareholding of the borrowing member or to an amount in excess of that shareholding, or

(ii) that qualifies as emergency credit within such definitions and limitations as to amount, the terms of repayment and security required for emergency credit as may be established in writing by the board of directors,

and the amount of the excess referred to in paragraph (b)(i), shall be determined from time to time by the board of directors.

(2) A record of each application for credit which has or has not been approved shall be furnished by the credit officer to the credit committee not later than 7 days of receipt of the application.

(3) Where the board of directors has assigned the power to approve credit under subsection (1)(b), a credit officer shall enquire into the character and financial circumstances of an applicant for credit and the security offered, if any, in order to—

(a) ascertain the applicant’s ability to repay a loan in accordance with its terms, and

(b) ensure that the provision of credit does not involve undue risk to members’ savings.

(4) The Board may approve the appointment of a person by the manager, other than a member of the board, a member of the credit committee or a credit officer, as a credit control officer to assist the credit control committee and work under its supervision and control.”.

23. Directors: suspension and removal by board oversight committee.

23.— The Principal Act is amended by substituting the following for section 66:

“66.— (1) If the board oversight committee of a credit union considers that a member of the board of directors has taken any action or decision which, in the opinion of the committee, given in writing to the director concerned, is not in accordance with the requirements of this Part, then, after consulting the Bank, the committee may either—

(a) suspend, with immediate effect, the director by a unanimous vote of all the members of the committee taken at a meeting of the committee called for the purpose of considering the director’s suspension, or

(b) convene a special general meeting of the credit union to consider whether to remove the director in light of the action or decision taken by that director,

but no steps shall be taken under this subsection without the director concerned being given an opportunity to be heard by the members of the board oversight committee.

(2) Where a director of a credit union has been suspended by the board oversight committee in accordance with subsection (1), the board oversight committee shall, within 7 days of that suspension, convene a special general meeting—

(a) for the purpose of reviewing the suspension, and

(b) to consider whether to remove the director having regard to the action or decision taken by that director.

(3) Where the board oversight committee convenes a special general meeting for the purposes of this section the credit union may, by resolution of a majority of the members present and voting at that special general meeting—

(a) ratify the suspension of the director concerned and remove that director from office,

(b) rescind the suspension of that director, or

(c) remove that director from office,

but no director shall be so removed from office without being given an opportunity to be heard by the members present at the meeting.

(4) The secretary of the credit union shall, not less than 21 days before the date of the special general meeting at which it is proposed to move a resolution referred to in subsection (3), give written notice of that meeting to the director concerned.

(5) Where notice is given of an intended resolution to remove a director under this section and the director concerned makes in relation to it representations (not exceeding a reasonable length) in writing to the credit union and requests their notification to the members of the credit union then, unless the representations are received by it too late for it to do so, the credit union shall, subject to subsection (7)—

(a) in any notice of the resolution given to members of the credit union, state the fact of the representations having been made, and

(b) send a copy of the representations to every member of the credit union to whom notice of the meeting is sent.

(6) Subject to subsection (7), and whether or not copies of any representations made by it have been sent as mentioned in subsection (5), the director concerned may require that, without prejudice to his or her right to be heard orally, the representations made by him or her shall be read out at the special general meeting.

(7) Subsections (5) and (6) shall not apply if, on the application either of the credit union or of any person who claims to be aggrieved, the Bank is satisfied that compliance with the subsections would diminish substantially public confidence in the credit union or that the rights conferred by those sections are being, or are likely to be, abused in order to secure needless publicity for defamatory matter.

(8) Where a director of a credit union is removed from office at a special general meeting pursuant to this section, the vacancy caused by the removal shall be filled in such manner as may be determined by the meeting.”.

24. General governance requirements.

24.— The Principal Act is amended in Part IV by inserting the following after section 66:

“General governance requirements

Governance arrangements in credit unions.

66A.— (1) A credit union shall have governance arrangements which shall—

(a) be such as to ensure that there is effective oversight of the activities of the credit union, taking into consideration the nature, scale and complexity of the business being conducted,

(b) include a clear organisational structure with well-defined, transparent and consistent reporting lines,

(c) be documented and set out the roles, responsibilities and accountabilities of the officers clearly in writing,

(d) be communicated in writing to all officers in the credit union, and

(e) be subject to regular internal review by the board of directors on, at a minimum, an annual basis.

(2) A credit union shall have in place the oversight, policies, procedures, practices, systems, controls, skills, expertise and reporting arrangements to ensure compliance with the requirements set out in this Part.

Remuneration policies and practices.

66B.— A credit union shall put in place remuneration policies and practices which shall be consistent with and promote sound and effective risk management.

Reporting to Bank.

66C.— (1) A credit union shall submit an annual compliance statement to the Bank certifying its compliance with the requirements of this Part and any other regulations prescribed under it by the Bank including regulations setting out the form and content of that statement.

(2) The annual compliance statement referred to in subsection (1) shall be submitted by a credit union to the Bank within 2 months of the end of each financial year of the credit union, or with such other frequency as the Bank may notify to the credit union from time to time.”.

25. Conflicts of interest.

25.— The Principal Act is amended by substituting the following for section 69:

“69.— (1) Officers of a credit union, including the members of its board of directors, shall at all times ensure that individually, and collectively when acting in that capacity, they act in a manner free from conflicts of interest.

(2) The board of directors of a credit union shall approve and document in writing a policy for identifying, managing and resolving conflicts of interest and which policy will apply to all officers of a credit union.

(3) Every officer of a credit union shall identify all potential conflicts between his or her own interests and the interests of the credit union and shall take all necessary steps to ensure his or her role in the credit union is not influenced by any other interest.

(4) An officer of a credit union shall not, in any manner, directly or indirectly, participate in the consideration or determination of any matter which he or she, or a body with which he or she is connected, has a pecuniary interest or other conflict of interest or where a reasonably perceived conflict of interest exists and, accordingly, an officer shall withdraw from any meeting or part of the meeting during which such a matter is to be considered or determined.

(5) If, apart from this section, the withdrawal of an officer from a meeting in pursuance of subsection (4) would cause the meeting to become inquorate, the remaining members shall be treated as constituting a quorum while the matter in question is being considered or determined.

(6) An officer of a credit union who is or becomes interested, directly or indirectly, in—

(a) a contract that is made or proposed to be made by the credit union or proposed to be amended by the credit union,

(b) any matter prescribed by the Bank for the purposes of this section, or

(c) any other matter identified by the board of directors for the purpose of this section,

then the officer shall declare the nature of his or her interest—

(i) where that officer is the chair of the board of directors, in writing to the board of directors and served on the secretary,

(ii) where that officer is the secretary, in writing to the board of directors and served on the chair,

(iii) where that officer is any other member of the board of directors, in writing to the board of directors and served on the secretary and the chair,

(iv) where that officer is the manager, in writing to the board of directors and served on the secretary, or

(v) in any other case, in writing to the board of directors and the manager and served on the secretary,

as soon as possible after the contract is so made or proposed to be made or so proposed to be amended or, as the case may be, after he or she becomes so interested.

(7) In the case of a declaration under subsection (6) by a member of the board of directors—

(a) where the contract or matter concerned comes before a meeting of the board, the declaration shall also be made in person by the member (if present) at the meeting at which the contract or matter is to be considered, and

(b) in every other case, the secretary shall read the declaration made in writing under paragraph (i) or (ii) (as the case may be) of subsection (6) at the next meeting of the board of directors held after service of that declaration.

(8) Subject to subsection (9), for the purposes of this section, a general notice in writing which is served by an officer of the credit union on the appropriate person to whom paragraph (i), (ii), (iii), (iv) or (v) of subsection (6) would relate if a declaration were served under that subsection and which is to the effect that—

(a) the officer is connected (whether as member, director, employee or otherwise) with a specified body and is regarded as interested in any contract, or other matter to which subsection (6) relates, which, after the date of the notice, may be made with or relate to that body; or

(b) the officer is to be regarded as interested in any contract, or other matter to which subsection (6) relates, which, after the date of the notice, may be made with or relate to a specified person who is connected with him or her,

shall be deemed to be a sufficient declaration of interest in relation to any such contract or other matter.

(9) In the case of a general notice under subsection (8) and to which paragraph (i), (ii) or (iii) of subsection (6) relates, notice under subsection (8) may be given—

(a) by the director concerned in person at a meeting of the board of directors, or

(b) where the director concerned is the chair, in accordance with paragraph (i) of subsection (6) or where the director concerned is the secretary, in accordance with paragraph (ii) of that subsection, or, where the director concerned is any other director, in accordance with paragraph (iii) of that subsection,

and where a notice is given as mentioned in paragraph (b), the secretary shall read the notice at the next meeting of the board of directors.

(10) For the purposes of this section—

(a) this section applies in relation to a transaction, arrangement or proposal in the same manner as it applies in relation to a contract, and

(b) an officer of a credit union shall be regarded as connected with a particular body if the officer has an interest in the body, whether directly or indirectly and whether as a member, director, employee, shareholder or otherwise.

(11) Within 3 working days after a declaration or notice under this section is made or given, the secretary or manager (as the case may be) of the credit union concerned shall cause a copy of the declaration or notice to be entered in a register kept for that purpose, and that register shall—

(a) be open for inspection without charge by any officer, auditor or member of the credit union or the internal audit function, and

(b) be available at every general meeting of the credit union and, if adequate notice in advance is given to the secretary by any director, at any meeting of the board of directors.

(12) In the case of a member of the board of directors of a credit union, where recurring or ongoing conflicts of interest arise for the member, then—

(a) where the member concerned is the chair, seek formal or informal guidance from some or all of the other directors, and

(b) where the member concerned is not the chair, seek formal or informal guidance from the chair,

as to whether it is appropriate to resign and, following the consideration of such guidance by the member concerned, he or she shall resign as a member of the board of the credit union if he or she considers it appropriate to do so in the circumstances.”.

26. Additional requirements for credit unions.

26.— Part IV of the Principal Act is amended by inserting the following after section 76:

“Additional requirements for credit unions

Strategic plan.

76A.— (1) The board of directors of a credit union shall cause to be prepared and shall adopt a plan (in this Act referred to as a ‘strategic plan’) which documents the strategy and objectives of the credit union (in this Act referred to as the ‘strategic objectives’) and indicates how those strategic objectives are to be achieved.

(2) A strategic plan shall include—

(a) the objectives of the credit union’s activities for a specified period of at least 3 years,

(b) the nature and scope of the activities to be undertaken,

(c) the strategies and policies for achieving those objectives,

(d) the targets and criteria for assessing the performance of the credit union,

(e) the financial projections for the credit union for a specified period of at least 3 financial years from, and including, the current financial year together with the supporting financial analysis and assumptions made,

(f) the funding strategy proposed to support the projected balance sheet structure, and

(g) such other matters as may be prescribed by the Bank.

(3) A credit union shall maintain adequate resources, both financial and non-financial, in relation to the nature, scale, complexity and risk profile of the activities being undertaken or to be undertaken in accordance with the strategic plan.

Risk management systems and systems and control.

76B.— (1) In this section—

‘compliance programme’, in relation to a credit union, means the policies, procedures, systems and plans the credit union puts in place to monitor compliance, on an ongoing basis, with its obligations including requirements under all legal and regulatory requirements;

‘risk management system’, in relation to a credit union, means the sum of those components that provide the basis (including organisational arrangements) for designing, implementing, monitoring, reviewing and continually improving risk management processes throughout the credit union;

‘systems and controls’, in relation to a credit union, means a set of arrangements designed to provide reasonable assurance regarding the achievement of objectives in relation to the effectiveness and efficiency of operations, reliability of financial reporting and compliance with all legal and regulatory requirements.

(2) A credit union shall develop, implement, document and maintain a risk management system with such governance arrangements and systems and controls to allow it to identify, assess, measure, monitor, report and manage the risks which it is, or might reasonably be, exposed to.

(3) The risk management system—

(a) shall be clearly set out and documented, and

(b) shall clearly set out the related tasks and responsibilities within the credit union.

(4) A credit union shall develop, adopt, implement, monitor, document and maintain systems and controls to manage and mitigate the risks identified by the risk management system.

(5) A credit union shall develop, implement, document and maintain a compliance programme that allows it to evaluate compliance with its obligations under this section including compliance with all legal and regulatory requirements.

Risk management officer.

76C.— (1) The board of directors of a credit union shall appoint a person (in this Act referred to as a ‘risk management officer’) with the necessary authority and resources to manage the risk management function within the credit union.

(2) Except where subsection (3)(a) applies or where otherwise prescribed by the Bank under subsection (3)(b), nothing in this section shall be read as preventing the appointment of a person as risk management officer of a credit union who—

(a) holds another position as an officer in the credit union, or

(b) is the risk management officer for one or more than one other credit union.

(3) The risk management officer of a credit union shall not—

(a) be a director, a member of the board oversight committee or the auditor of the credit union, or

(b) hold such other position (whether within the credit union or otherwise) that the Bank may prescribe as being inappropriate to hold while being a risk management officer.

(4) The risk management officer of a credit union shall be responsible for identifying, assessing, reporting and monitoring all internal and external risks that could affect the credit union to which the risk management system referred to in section 76B relates, including risks to its employees, members, reputation and assets, and assisting the manager with managing and mitigating those risks.

(5) The board of directors of a credit union shall ensure that the risk management officer—

(a) has clearly documented reporting lines to the board,

(b) has access to the board,

(c) is independent in the exercise of his or her functions and, subject to paragraph (d), shall be free from influence, and

(d) is subject to internal oversight by the internal audit function.

(6) The board of directors of a credit union shall ensure that the role and functions of the risk management officer are documented in writing and include any role or function that may be prescribed by the Bank or be otherwise duly provided for by the Bank under any other enactment.

Compliance officer.

76D.— (1) The board of directors of a credit union shall appoint a person (in this Act referred to as a ‘compliance officer’) with the necessary authority and resources to manage the compliance programme, as provided for by section 76B, within the credit union.

(2) Except where subsection (3)(a) applies or where otherwise prescribed by the Bank under subsection (3)(b), nothing in this section shall be read as preventing the appointment of a person as compliance officer of a credit union who—

(a) holds another position as an officer in the credit union, or

(b) is the compliance officer for one or more than one other credit union.

(3) The compliance officer of a credit union shall not—

(a) be a director, a member of the board oversight committee or the auditor of the credit union, or

(b) hold such other position (whether within the credit union or otherwise) that the Bank may prescribe as being inappropriate to hold while being a compliance officer.

(4) The compliance officer of a credit union shall be responsible for managing compliance at all levels in the credit union including—

(a) ensuring that the credit union complies with all statutory and regulatory requirements, and

(b) monitoring such compliance to ensure that no conflict of interest arises.

(5) A credit union shall ensure that the compliance officer—

(a) has clearly documented reporting lines to the board,

(b) has access to the board,

(c) is independent in the exercise of his or her functions and, subject to paragraph (d), shall be free from influence, and

(d) is subject to internal oversight by the internal audit function.

(6) The board of directors of a credit union shall ensure that the role and functions of the compliance officer are documented in writing and include any role or function that may be prescribed by the Bank or be otherwise duly provided for by the Bank under any other enactment.

Operational risk.

76E.— (1) In this Act ‘operational risk’, in relation to a credit union, means the risk of loss (financial or otherwise) resulting from—

(a) inadequate or failed internal processes or systems of the credit union,

(b) any failure by persons connected with the credit union,

(c) legal risk (including exposure to fines, penalties or damages as well as associated legal costs), or

(d) external events,

but does not include reputational risk.

(2) A credit union shall identify the operational risks it is exposed to, or is likely to be exposed to, and provide for the management and mitigation of those risks in the credit union’s risk management system as provided for by section 76B.

Records management.

76F.— (1) Without prejudice to sections 108 and 109, a credit union shall ensure—

(a) that it makes, maintains and retains in books and documents proper and secure records of all matters that are required to enable the credit union, including the board of directors, board committees, nomination committee and officers and its board oversight committee and auditor to discharge their respective functions and as required by law,

(b) that those records are made in a timely, accurate and consistent manner so that—

(i) they contain the information necessary to enable persons discharging functions to which paragraph (a) relates to discharge their respective functions and that those records are sufficiently accurate and available with sufficient regularity and sufficient promptness for the purpose of so discharging, and

(ii) any information furnished or caused to be furnished by or on behalf of the credit union to the Bank is sufficiently accurate for the purposes for which it was so furnished and is available as and when required by the Bank,

and

(c) that those records are produced when duly called upon—

(i) by or under this Act, or

(ii) for the purposes of any other statutory obligation to produce them.

Information systems.

76G.— (1) In this section ‘information systems’, in relation to the business of a credit union, means all the technical and non-technical methods of establishing, implementing, documenting and maintaining data and information within the credit union in a coherent and informative way which is in, or capable of being reproduced in, a legible form.