Credit Union and Co-operation with Overseas Regulators Act 2012

“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.

• (2) For the purpose of supporting the strategic plan and enabling the board of directors of a credit union and other persons involved in the management of the credit union to control, direct and manage its affairs, a credit union shall, taking account of the nature, scale and complexity and risk profile of its business but without prejudice to any other statutory obligation to the like effect as this section—

  • (a) develop, prepare, implement and maintain secure and reliable information systems, or

  • (b) where such systems already exist within the credit union, continue to implement and maintain such systems.

  Management information.

  76H.— Without prejudice to any other statutory obligation to the like effect as this section, a credit union shall ensure that its information systems (within the meaning of section 76G) produce management information and other reports that are accurate, reliable, consistent, and timely so as to enable the board of directors and management team to—

  • (a) direct, control and manage the credit union’s business efficiently and effectively,

  • (b) make informed strategic and operational decisions, and

  • (c) provide accurate information to the Bank on a timely basis, as and when required.

  Business continuity plan.

  76I.— (1) In this section—

  ‘business continuity’, in relation to the occurrence of one or more abnormal events which could cause a material interruption to the business of a credit union, means the continuation of its business during and after such an occurrence;

  ‘business continuity plan’, in relation to a credit union, means the contingency arrangements put in place to ensure that its essential functions can continue during and after the occurrence of one or more abnormal events which could cause a material interruption to the business of the credit union.

• (2) A credit union shall put in place a business continuity plan—

  • (a) to ensure its business continuity if there occurs one or more abnormal events which could cause a material interruption to its business, and

  • (b) to enable it to continue to meet all requirements imposed on it under the Credit Union Acts 1997 to 2012 and other financial services legislation if any such interruption occurs,

  and such plan shall include, where appropriate, comprehensive testing at regular intervals of recovery procedures by officers of the credit union and testing of backup facilities.

  Outsourcing.

  76J.— (1) Subject to the other provisions of this section, a credit union may by an agreement in writing entered into with any person (in this section referred to as a ‘service provider’) and upon such terms and conditions as may be specified in the agreement, provide for the performance by that person, subject to such terms and conditions (if any) as may be so specified, of such process, service or activity (in this section referred to as ‘outsourced activities’) of the credit union as may be so specified.

• (2) The respective rights and obligations of the credit union and of the service provider shall be clearly allocated and set out in a written agreement.

• (3) A credit union shall exercise due skill, care and diligence when entering into, managing or terminating any outsourced activities with a service provider.

• (4) A credit union shall not enter into an agreement with a service provider for the performance of any of the functions exercisable by the board of directors of the credit union under section 55(1) but, subject to any matter that may be prescribed by the Bank, this shall not prevent the credit union from entering into an agreement under subsection (1) with a service provider for the provision of services in respect of any business activity (other than any such function) that is preliminary to or consequential upon the exercise by that board of the function concerned.

• (5) The following conditions shall form part of every agreement to provide outsourced activities between a credit union and a service provider:

  • (a) the service provider has the ability, capacity and any authorisation required by law to perform those activities reliably and professionally;

  • (b) the service provider will carry out those activities effectively;

  • (c) the service provider shall properly supervise the carrying out of those activities, and adequately manage the risks associated with the outsourcing;

  • (d) appropriate action shall be taken by the credit union if it appears to it or to the Bank that the service provider may not be carrying out those activities effectively and in compliance with any applicable laws and regulatory requirements;

  • (e) the service provider shall disclose to the credit union any development that may have a material impact on its ability to carry out the outsourced activities effectively and in compliance with applicable laws and regulatory requirements;

  • (f) the credit union may terminate the arrangement for outsourcing, where necessary, without detriment to the continuity and quality of its provision of services to members;

  • (g) the service provider shall, when required, co-operate with the Bank in connection with the outsourced activities;

  • (h) the credit union, its auditors and the Bank shall have effective access to data related to the outsourced activities, as well as to the business premises of the service provider;

  • (i) the Bank shall have without notice the right of access to the business premises of the service provider for the purposes of paragraph (g);

  • (j) the service provider shall keep any confidential information relating to the credit union or its members in a safe and secure manner.

• (6) For the purposes of every agreement to provide outsourced activities between a credit union and a service provider, the credit union shall—

  • (a) ensure that the service provider has no conflicts of interest in relation to the outsourced activity,

  • (b) retain the necessary expertise to supervise the outsourced activities effectively, manage the risks associated with the outsourcing and supervise those activities and manage those risks,

  • (c) establish methods for assessing the standard of performance of the service provider, and

  • (d) be capable of resuming direct control over any outsourced activity or ensure that alternative arrangements are in place to provide the outsourced activities without detriment to the proper operation and functioning of the credit union or the continuity and quality of its provision of services to members.

• (7) Where—

  • (a) an agreement under this section has been entered into between a credit union and a service provider, and

  • (b) it is necessary having regard to the activities that have been outsourced,

  then the credit union and the service provider shall both establish, implement and maintain a business continuity plan and the credit union shall ensure that such plan is integrated, as necessary, within the business continuity plan referred to in section 76I.

• (8) An outsourced activity shall not impair—

  • (a) the orderliness of the conduct of the credit union’s business,

  • (b) the credit union’s ability to manage and monitor its business,

  • (c) the ability of the board of a credit union to undertake its functions,

  • (d) the ability of the credit union to comply with requirements imposed under financial services legislation,

  • (e) the supervision of the credit union by the Bank, and

  • (f) the quality of the credit union’s internal controls.

• (9) Where a credit union has outsourced activities, the credit union remains legally responsible for compliance with requirements imposed under financial services legislation in respect of those activities.

• (10) Nothing in this section shall be construed—

  • (a) as applying to any person in his or her capacity as an officer of the credit union, or

  • (b) as affecting any contract (whether oral or in writing) entered into between the credit union and any person for the performance by that person of any minor non-business activity where a defect or failure in its performance could not impair—

    • (i) the continuing compliance with the conditions and obligations of the credit union’s registration or its other obligations under the financial services legislation,

    • (ii) the credit union’s financial performance,

    • (iii) the soundness or continuity of the credit union’s financial performance, or

    • (iv) the soundness or continuity of the credit union’s business.

• (11)

  • (a) A credit union shall notify the Bank, in writing—

    • (i) when it is proposed to outsource to a service provider a material business activity, or

    • (ii) of any material development affecting the service provider and his or her ability to fulfil its obligations.

  • (b) In this subsection and subsection (12) ‘material business activity’ means an activity where a defect or failure inits performance would materially impair—

    • (i) the continuing compliance with the conditions and obligations of its registration or its other obligations under the financial services legislation,

    • (ii) its financial performance,

    • (iii) the soundness or continuity of its financial performance, or

    • (iv) the soundness or continuity of its business.

• (12)

  • (a) The Bank may prescribe the matters that a credit union shall have regard to when selecting a service provider.

  • (b) Without prejudice to the generality of paragraph (a), requirements for the purposes of that paragraph may include any of the following:

    • (i) the formalities to be involved in engaging a service provider for the purposes of a proposed outsourced activity including, for the purposes of subsections (1) and (2), the nature and content of written agreements to be entered into between the credit union and the service provider prior to commencement of the outsourcing activity;

    • (ii) the arrangements for notifying the Bank in writing when a material business activity is proposed to be outsourced;

    • (iii) the arrangements for notifying the Bank in writing of a material development affecting a service provider and what constitutes a material development.

• (13) 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.

Internal audit.

76K.— (1) The board of a credit union shall appoint a person (in this Act referred to as the ‘internal audit function’)—

- (*a*) to provide for independent internal oversight, and

- (*b*) to evaluate and improve the effectiveness,

  of the credit union’s risk management, internal controls and governance processes.

• (2) The internal audit function shall prepare, implement and maintain a document (in this Act referred to as the ‘internal audit charter’) which, subject to subsection (4), shall define—

  • (a) the activities of the internal audit function within the credit union, and

  • (b) the scope of those activities,

  and, relevant to the performance of its audits, shall authorise the access by the internal audit function to records, personnel and physical properties of the credit union. The internal audit charter shall be reviewed and modified in accordance with section 55(8).

• (3) There shall be prepared by the internal audit function and approved by the board of a credit union or, where an audit committee exists for the credit union, by the audit committee with the agreement of that board, a written plan (in this Act referred to as an ‘internal audit plan’) detailing the scope and objectives of audits, setting priorities as regards areas to be audited and determine the necessary resources required to implement the plan. The internal audit plan shall be reviewed and modified in accordance with section 55(8).

• (4) The internal audit function shall be separate from other functions and activities of the credit union, and be capable of operating independently of management and without undue influence over its activities.

• (5) The internal audit function shall report the results of its evaluations and recommendations to the audit committee, where one exists, or otherwise to the board of directors, on a regular basis, and at least quarterly.

• (6)

  • (a) The Bank may prescribe the form and content of the internal audit charter and internal audit plan, and related matters.

  • (b) Without prejudice to the generalityof paragraph (a), regulations may prescribe—

    • (i) the frequency and timing at which an examination of the records of the credit union is to be undertaken by the internal audit function, and

    • (ii) the nature of the records to be inspected for the purposes of subparagraph (i).

• (7) The internal audit function shall have access, at all times, to the books and documents (including draft documents) of the credit union to enable it to carry out its functions under the Act.”.

27. Board oversight committee.

27.— (1) The Principal Act is amended by inserting the following Part after Part IV:

“PART IVA

Board Oversight Committee

Board oversight committee.

76L.— Every credit union shall have a committee (in this Act referred to as a ‘board oversight committee’) which shall—

• (a) consist of 3 or 5 members elected in accordance with section 76N, and

• (b) exercise the functions assigned to it by this Part.

Functions of board oversight committee.

76M.— A board oversight committee of a credit union shall assess whether the board of directors has operated in accordance with—

• (a) Part IV, this Part and any regulations made for the purposes of Part IV or this Part, and

• (b) any other matter prescribed by the Bank in respect of which they are to have regard to in relation to the board of directors.

Election of board oversight committee, etc.

76N.— (1) The board oversight committee of a credit union shall be elected—

• (a) where the organisation meeting occurs after the commencement of this provision, by secret ballot at the organisation meeting and, subject to section 76R(4), subsequent vacancies on the board oversight committee shall be filled by secret ballot at an annual general meeting,

• (b) in any other case, by secret ballot at the annual general meeting first occurring after the commencement of this provision or, if earlier than that annual general meeting, at a special general meeting called for the purpose of such ballot and, subject to section 76R(4), subsequent vacancies on the board oversight committee shall be filled by secret ballot at an annual general meeting.

• (2) If a casual vacancy arises in the membership of a board oversight committee, then—

  • (a) within one month of the vacancy arising, the Committee shall appoint a person (who may, if the Committee thinks fit, be a former member of the Committee) other than a person to whom subsection (4), (5) or (6) relates to fill the vacancy, and

  • (b) the person so appointed shall hold office until the next general meeting at which an election is held for members of the board oversight committee.

• (3) Where the secretary of the board oversight committee becomes aware that all the members of the committee intend to resign on the same date, the secretary shall give written notice of their intention to the Bank and the board of directors of the credit union.

• (4) A credit union shall not elect under subsection (1) any of the following persons to be a member of its board oversight committee:

  • (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 any other credit union;

  • (c) 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;

  • (d) 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;

  • (e) a member of the Commission of the Bank;

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

  • (g) 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);

  • (h) a member of the Irish Financial Services Appeals Tribunal or a member of its staff (including the Registrar);

  • (i) 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;

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

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

  • (l) a person who is a spouse or civil partner, cohabitant, parent or child, of a director, board oversight committee member or employee of that credit union;

  • (m) a body corporate;

  • (n) a person who is not of full age;

  • (o) a director of the credit union.

• (5) A person shall resign from being a member of the board oversight committee of a credit union if and when he or she becomes a person to whom any of the provisions of subsection (4) relates.

• (6) A board oversight committee member may not be appointed or reappointed to the board oversight committee if he or she has served for more than 12 years in the previous 15 years whether on the board of directors or the board oversight committee.

• (7) The board oversight committee shall appoint one of their number as secretary of the committee.

Board oversight committee: procedural provisions.

76O.— (1) The board oversight committee of a credit union shall hold—

- (*a*) at least one meeting in every month, and

- (*b*) meetings with the board of directors at least 4 times in every year to facilitate it in carrying out the assessment under subsection (2),

  and the board oversight committee shall keep minutes of every meeting held by it under paragraphs (*a*) and (*b*).

• (2) The board oversight committee shall submit, within 2 weeks of any meeting referred to in subsection (1)(a), a written report to the board of directors on their assessment of whether the board of directors has operated in accordance with Part IV and this Part and any regulations relating to Part IV or this Part.

• (3) The board oversight committee shall have access, at all times, to the books and documents (including draft documents) of the credit union to enable it to carry out its functions under the Act.

• (4) Members of the board oversight committee shall have the right to attend all meetings of the board of directors and all meetings of committees of the credit union.

• (5) The board oversight committee shall ensure at least one of its members attends every meeting of the board of directors.

• (6) The board oversight committee may notify the Bank of any concern it has, that the board of directors has not complied with any of the requirements set out in this Part or Part IV, or regulations made thereunder, following a unanimous vote at a meeting of the committee called for the purpose of considering such a notification.

• (7) The board oversight committee shall report to the members at the annual general meeting and, if it thinks fit, at a special general meeting, on whether the board of directors has operated in accordance with Part IV and this Part.

Board oversight committee: term of office and retirement.

76P.— (1) The term of office of a member of the board oversight committee—

- (*a*) shall begin at the conclusion of the general meeting at which the member is elected,

- (*b*) shall not extend beyond the third subsequent annual general meeting after being so elected, and

- (*c*) subject to the provisions of this Act and all other applicable legal requirements, shall be determined in accordance with the registered rules,

  but, except where this Act or any other applicable legal requirement or the registered rules otherwise provides, a retiring member of the committee shall be eligible for re-election.

• (2) The rules for retirement from the board oversight committee shall be as follows:

  • (a) where the committee consists of 3 members, one shall retire at each annual general meeting;

  • (b) where the committee consists of 5 members, 2 shall retire at each annual general meeting;

  • (c) subject to paragraph (d), the members to retire at any time shall be those who have served longest since they were last elected;

  • (d) as between members who were last elected on the same day, the member (or members) to retire shall be determined by agreement or, in default of agreement, by the drawing of lots.

  Board oversight committee: removal from office.

  76Q.— (1) Subject to subsection (2), a credit union may, by resolution of a majority of the members present and voting at a special general meeting called for that purpose, remove a member of the board oversight committee from office.

• (2) 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 (1), give written notice of that meeting to the member concerned.

• (3) Where notice is given of a resolution mentioned in subsection (1) and the member of the board oversight committee concerned makes in relation to it representations in writing to the credit union (not exceeding a reasonable length) and requests their notification to the members of the credit union, the credit union shall, subject to subsection (5), (unless the representations are received by it too late to do so)—

  • (a) in any notice of the proposed 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.

• (4) Subject to subsection (5), and whether or not copies of any representations made under subsection (3) have been sent in accordance with that subsection, the member of the board oversight committee concerned may require that, without prejudice to that member’s right to be heard orally, the representations made by that member shall be read out at the special general meeting.

• (5) Subsections (3) and (4) 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 subsections are being, or are likely to be, abused in order to secure needless publicity for defamatory matter.

• (6) A vacancy arising from the removal of a member of a board oversight committee under this section shall be filled in accordance with section 76N(2).

Board oversight committee: supplementary provision.

76R.— (1) A register of the members of the board oversight committee shall be kept by the secretary of the credit union and shall be signed by each member of the board oversight committee after an annual general meeting or, in the case of a member appointed to fill a casual vacancy, after such member’s appointment.

• (2) In the event that the number of members of the board oversight committee falls to less than half the number specified in the registered rules, the secretary of the committee shall forthwith notify the Bank and the board of directors.

• (3) The acts of a member of the board oversight committee of a credit union shall be valid notwithstanding any defect in the election or appointment of the member which may subsequently be discovered.

• (4) Where any of the following events occur—

  • (a) the secretary of the board oversight committee has given notice under section 76N(3) that all the members of the committee intend to resign on the same date,

  • (b) all the members of the board oversight committee have been removed or suspended in accordance with section 96(1), or

  • (c) there are no members of the board oversight committee,

  then the board of directors shall convene a special general meeting of the credit union, within one month of the occurrence of the event in question, to elect a board oversight committee.

• (5) If the special general meeting referred to in subsection (4) is not convened in accordance with that subsection, the Bank may convene such a special general meeting under section 92(1)(b).

• (6) A credit union shall meet all such expenses as may be reasonably incurred by its board oversight committee in carrying out its function.”.

• (2) Notwithstanding the repeal by this Act of the provisions of the Principal Act relating to Supervisory Committees, each member of the Supervisory Committee of a credit union shall, unless he or she resigns or otherwise ceases to be a member of that committee, be deemed to have been duly elected a member of the board oversight committee of the credit union for the remainder of the term that he or she would have been a member of the Supervisory Committee had this section not been enacted.

28. Special resolutions.

28.— The Principal Act is amended by substituting the following for section 83:

“83.— (1) If, at any general meeting of which notice has been given specifying the intention to propose a special resolution, the chair declares that the resolution has been passed as required by the definition of ‘special resolution’ in section 2(1), that declaration shall, without more, be evidence of that fact until the contrary is proved.

• (2) A copy of every special resolution for any of the purposes mentioned in this Act—

  • (a) shall be signed by the chair of the meeting at which the resolution was passed,

  • (b) shall be countersigned by the secretary of the credit union, and

  • (c) within 21 days of the date of the meeting at which the resolution was passed, shall be sent to the Bank to be registered by it,

  and the special resolution shall not take effect until that copy is so registered.”.

29. Power of Bank to make regulations.

29.— The Principal Act is amended by inserting the following after section 84:

“84A.— (1) In making regulations under this Act the Bank shall have regard to the need to ensure that the requirements imposed by the regulations so made 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.

• (2) Before making regulations under this Act, the Bank shall consult with—

  • (a) the Minister and the Credit Union Advisory Committee,

  • (b) any other body that appears to the Bank to have expertise or knowledge of credit unions generally, and

  • (c) any other body that the Bank considers appropriate to consult in the circumstances.

• (3) Regulations made under this Act may—

  • (a) contain any incidental, supplementary and consequential provisions that appear to the Bank to be necessary or expedient for the purposes of the regulations,

  • (b) apply either generally to a specified category or categories of credit union, and

  • (c) include different provisions in relation to different categories of credit union.”.

30. Liquidity and stress testing, etc.

30.— The Principal Act is amended by inserting the following section after section 85:

“Liquidity.

85A.— (1) In this section—

‘liquid assets’ means the assets held by a credit union to enable it to meet its obligations as they arise;

‘maturity mismatch’ means the ongoing or possible future divergence between a credit union’s assets and liabilities because non liquid assets of the credit union have not or, at the appropriate time, will not have matured;

‘total assets’ means all the assets of a credit union having due regard to the accounting principles in section 110 after deducting provisions for bad and doubtful debts.

• (2) A credit union shall at all times keep a proportion of its total assets in liquid form (in this section referred to as ‘liquid assets’) so as to enable the credit union to meet its obligations as they arise. The proportion of assets kept in liquid form shall take into account the nature, scale and complexity of the credit union, and the composition and maturity of its assets and liabilities.

• (3) The Bank may prescribe the liquidity requirements that a credit union is required to maintain at a minimum as well as conditions on the application of the liquidity requirements. Regulations made by the Bank for the purpose of this section may deal with other matters related to minimum liquidity requirements, including—

  • (a) the proportion and nature of assets to be held in liquid form,

  • (b) the holding of liquid assets based on the duration of loans,

  • (c) in relation to maturity mismatches, and

  • (d) the liquid assets to be held as a safeguard on the basis of stressed conditions that may arise.

• (4) 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.

Supplemental provisions to sections 85 and 85A.

85B.— (1) In this section—

‘liquid assets’ has the meaning given by section 85 or 85A, as appropriate in the circumstances;

‘maturity mismatch’ has the meaning given by section 85A(1);

‘stress test’, in relation to a credit union, means the analysis of its cash flows under various headings and the placing of such cash flows in pre-determined time periods subject to specified conditions, including monetary limits where appropriate, to estimate the extent to which a credit union may have a maturity mismatch in respect of its assets and liabilities.

• (2)

  • (a) Pending the prescribing by the Bank of minimum liquidity requirements for the purposes of section 85A in respect of a category of credit unions, the liquidity requirements applicable to credit unions under section 85 shall continue to apply to such category of credit unions in respect of matters so prescribed.

  • (b) Where minimum liquidity requirements have been prescribed by the Bank for the purposes of section 85A in respect of a category of credit unions, then section 85 shall cease to apply to that category of credit unions in respect of the matters so prescribed.

• (3) The Bank may, from time to time, require any credit union or credit unions (either generally or a particular category of credit union) to undertake stress tests into what would be the consequences for its liquidity if one or more scenarios were to arise. The terms of the stress test shall be laid down by the Bank including without limitation requirements on the frequency of stress tests, reporting arrangements for stress test results and requirements to develop contingency plans.

• (4) In requiring a credit union to undertake any matter for the purposes of this section, the Bank shall have regard to the need to ensure that the requirements are effective and proportionate having regard to the nature, scale and complexity of the credit union.”.

31. Bank’s power to require appointment of additional director of credit union.

31.— The Principal Act is amended by inserting the following after section 95:

“95A.— (1) Where the Bank is of the opinion, after an inspection under section 90 or after an investigation under section 92, that it is necessary to enhance or improve the expertise of the board of directors of a credit union, it may require the nomination committee of the credit union to nominate an additional person with the required skills and expertise to be a director of the board of directors of the credit union.

• (2) Any person nominated under subsection (1) shall be subject to the approval of the Bank prior to that person being nominated for appointment to the board of directors.

• (3) A person shall be appointed to the board of directors for the purposes of this section by being co-opted by the board of directors and such director 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 members of the board of directors.

• (4) Any director appointed under subsection (1) shall have the same rights, duties and responsibilities as any other director appointed under section 53.

• (5) Any period of appointment under this section shall not be reckoned for the purposes of calculating the number of years that a person has served in aggregate for the purpose of section 53(12) or section 76N(5).”.