Some credit union executives are fearing for the sector and particularly smaller credit unions as the movement faces the challenge of implementing International Financial Reporting Standard 9 (IFRS 9), a new set of rules and regulations intended to tighten up on accounting for funds of members in such cooperatives.
However, others are convinced credit unions can still survive but at lobbying for a postponement of the application of IFRS 9, which all credit unions must comply with by January 1.
President of the Co-Operative Credit Union League Joseph Remy called on credit union leaders to join with him and approach Labour Minister Jennifer Baptiste-Primus to reach out to the Institute of Chartered Accountants of Trinidad and Tobago (ICATT) to have the implementation of the standard postponed.
This is to give credit unions time to familiarise themselves more closely with requirements of the new rules. Asked whether IFRS 9 would mean the death of credit unions, Remy said the impending implementation of the new standard is a challenge yet an opportunity for the movement to demonstrate its resilience.
“I don’t see anything killing credit unions. I see these adverse situations as giving us opportunities to do things differently, to do things better and to do things collaboratively,” Remy said.
Kyle Rudden, managing director of KR Consulting, said the IFRS 9 is, “a nasty standard”, adding that while accountants are accustomed to making loan loss provisions for bad loans, the new standard requires credit unions to make provisions for both bad and good loans. Besides, Rudden said, credit unions must make the provisions as soon as they approve the loan, even before any money is given to the applicant.
Rudden added that some of the measures in the standard represent an existential threat to credit unions and are “quite damaging.”
However, he expressed confidence that the movement would be able to work out something relevant to this country, though he said external shocks suggest that there will be bigger problems in the future.
Dwayne Rodriguez-Seijas, a partner at PricewaterhouseCoopers (PWC) said the credit union sector has a half million members and $13 billion in assets.
As such, the movement should be looking at ways of achieving compliance in a way that is appropriate for this country. Haseeb Mohammed, technical partner at PWC, suggested that credit unions approach ICATT for a discussion on the implementation of the standard.
Rudden said “the standard was designed to deal with the problems of the big banks which collapsed during the global financial crisis, so it is not bad.”
However, he questioned whether it was the appropriate standard for regulating a small credit union in Diego Martin.
“I think there are many good principles behind it but it is implementation. And that is not just a problem for Trinidad and Tobago, it is not just the credit union sector, but developing countries around the world. Because we don’t have the capacity to develop our own standards, usually we just take what other people give us, unfortunately. And the only thing we can do is make sure that we implement and tailor to our specific needs.”