Credit Unions: Philosophy, Policy and Regulation

This presentation discusses the philosophy, policy and regulation of credit unions (CUs), focusing on the Central Eastern Europe (CEE) and the New Independent States (NIS).

The presentation:

• Defines CUs;
• Lists countries in Europe that have CUs as well as those that have cooperative financial institutions;
• Describes the following philosophy and operating principles of CUs:
  • Open entry/exit of member owners;
  • Equal rights, responsibilities and treatment;
  • One member, one vote;
  • Business with members only;
  • Joint holding of institutional capital and reserves;
  • Limited return on member shares without equity appreciation;
  • Liquidation of assets without profit to members.

The presentation analyzes:

• Differences between CUs and banks/ non-government organizations (NGOs);
• CU governance structure;
• Common bond amongst CUs - the diverse financial needs of open membership and commitment to help one another;
• Sources of credit union funds;
• Sustainable growth formula for CUs: promotion of thrift through incentives;
• CU services;
• Means of ensuring long-term viability of CUs through formal regulation;
• Need for regulations to reflect model CU needs;
• Sustainable development concepts for CUs;
• The ‘CU crisis’ in the Czech Republic and lessons that other CUs can learn from it;
• CU challenges in the region.

The presentation concludes by identifying the following legislative and regulatory priorities in the CEE/NIS:

• Law for CUs;
• Becoming part of the financial sector;
• An adequate regulatory and supervisory framework.