In recent times, changes in government policy have brought increasing attention to the operations of credit unions. In addition, the liberalization of the financial markets has created a situation where there is keen competition in financial areas, with organizations moving away from their traditional roles, and carving new places for themselves. In reviewing the developing trends, on its own initiative and after a detailed study, the credit union sector noted that there was an inadequate chain of support for its organizations and members as a whole.
The Trinidad and Tobago Credit Union Deposit InsuranceFund Co-operative Society Limited (TTCUDIFor the Fund) was registered in response to the need as revealed by the research. The Fund is an Independent and Autonomous Institution regulated under the Co-operative Societies Act 1971 (Chap. 81:03) and the Co-operative Societies Regulations. Our members are Credit Unions who are also regulated under this Act.
The TTCUDIF was registered as a co-operative society in July 1999 with a membership of forty-two (42) credit unions.
The TTCUDIF is one of several interrelated “lines of defense” in a fairly complex system that is designed to provide limited guarantee of all members’ funds on deposits with credit unions who are members of the TTCUDIF.
The first line of defense is the credit union itself. The two main reasons why credit unions, or other financial institutions, fail are due to a lack of liquidity and an inability to operate on a positive basis. In the first case, the credit union cannot meet its members’ demands for cash. In the second case, it does not have an adequate capital base (share equity plus retained earnings) to carry it through tough times when its financial margin is narrowed or to withstand significant loan or investment losses.
The second line of defense is a Deposit Insurance Fund, which is, in effect, a central reserve fund to which members’ contribute annually.
The TTCUDIF has a three-fold purpose, i.e.:
The Fund is built up through annual contributions from member credit unions in relation to their individual growth. The sum is calculated at ½% of incremental growth in shares and deposits.
In addition to assessments, the Deposit Insurance Fund is built up through earnings on investments.
In order for the TTCUDIF to protect the integrity of the credit union system, all credit unions should be an integral part of the system.