CRED 9.1 Application, purpose and interpretation

This chapter amplifies Principle 4 under which a credit union must maintain adequate financial resources and the threshold condition for permission that a credit union's resources must be adequate in relation to the regulated activities that it carries on.

A central feature of credit union business is maturity transformation. That is taking short term deposits (in the form of share accounts) from members and making comparatively long-term loans. It is important, in order to maintain confidence and protect members, that a credit union has adequate liquid assets (liquidity) to enable it to fulfil members' withdrawal requests within expected timeframes.

The liquid assets held by a credit union should be sufficient to meet its day-to-day business needs and to provide an appropriate cushion in the event of pressure arising from unexpected events.

1. (1)

   Under section 7 of the Credit Unions Act 1979, if a withdrawal of shares would reduce the member's savings with the credit union to less than his total liability (including contingent liability) to the credit union whether as borrower, guarantor or otherwise then:

   1. (a)

      if there is a loan to the member which is treated as under section 11A of the Credit Unions Act 1979, the withdrawal is not permitted; and

   2. (b)

      in any other case, the withdrawal is permitted only at the discretion of the committee of management of the credit union.

2. (2)

   'Unattached shareholding' is intended to refer to that portion of a member's savings the withdrawal of which is not restricted by section 7.