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Newfoundland Regulation 1999


NEWFOUNDLAND REGULATION 55/99

NEWFOUNDLAND REGULATION 55/99

Credit Union Regulations
under the
Credit Union Act

(Filed June 8, 1999)

Under the authority of section 243 of the Credit Union Act, the Minister of Government Services and Lands makes the following regulations.

Dated at St. John’s, May 12, 1999.

Ernest McLean
Minister of Government Services and Lands

REGULATIONS

Analysis


        1.   Short title

        2.   Definitions

        3.   Arrangement for services

        4.   Restriction re adjacent premises

        5.   Authorized insurance plans

        6.   Subsidiaries & associate companies

        7.   Branch offices

        8.   Share capital

        9.   Change of name

      10.   Change of address

      11.   Unclaimed balances

      12.   Payment of prescribed amount on death of a member

      13.   Loan policies

      14.   Loan requirements & restrictions

      15.   Overdrafts

      16.   Liquidity

      17.   Other investments

      18.   Allowance for doubtful loans

      19.   Equity

      20.   Borrowing

      21.   Matching

      22.   Insurance

      23.   Training

      24.   Associate members

      25.   Restrictions of directors

      26.   Internal audit

      27.   Audit committee

      28.   Credit committee

      29.   Conflict of interest

      30.   Financial reporting

      31.   Audits, examinations, etc.

      32.   Records removed

      33.   No inspection

      34.   Trade association

      35.   Trade association

      36.   Common shares

      37.   Powers of members

      38.   Default or liability

      39.   By-laws

      40.   Number of directors

      41.   Requirements of director

      42.   Investments of a trade association

      43.   Deposit insurance

      44.   Investments by guarantee corporation

      45.   Borrowing by guarantee corporation

      46.   Payments by guarantee corporation

      47.   Loans by guarantee corporation

      48.   Levies by guarantee corporation

      49.   Board of guarantee corporation


Short title

        1. These Regulations may be cited as the Credit Union Regulations.

Definitions

        2. In these regulations

             (a)  "Act" means the Credit Union Act;

             (b)  "commercial loan" means a loan by a credit union in excess of $25,000 to a business whether it be to an individual, a partnership, co-operative, or corporation or another organized body that is engaged in the development or production for sale of goods and services where

                      (i)  the loan is secured by the assets of the business other than loans fully secured by deposits with the credit union and assigned to the benefit of the credit union, or

                     (ii)  the repayment of the loan is primarily dependent on the business;

             (c)  "document" means a document required to be filed with the superintendent under the Act;

             (d)  "family member" means

                      (i)  a person's spouse,

                     (ii)  a minor child of the person, or a minor who is dependent primarily on the person or the person's spouse for financial support and toward whom the person has demonstrated a settled intent to treat as a family member, and

                    (iii)  a relative of the person or the person's spouse who lives as part of the person's household and is primarily dependent on the person or the person's spouse for financial support;

             (e)  "financial central" is a central incorporated under the laws of a province or of Canada which is permitted to provide financial services to its members and affiliates and is a member of the Credit Union Central of Canada;

              (f)  "line of credit" means a commitment on the part of a credit union to lend to a debtor, without a predetermined repayment schedule, one or more amounts, where the aggregate amount outstanding does not exceed a predetermined credit limit, which limit does not exceed the reasonable needs of the debtor;

             (g)  "officer" in respect of a credit union or a trade association, means

                      (i)  the president, vice-president, secretary or treasurer,

                     (ii)  a person who performs functions for the credit union or a trade association normally performed by a person mentioned in subparagraph (i), or

                    (iii)  another person designated as an officer by the by-laws or by a resolution of the directors; and

             (h)  "residential property" means real property, condominiums, and mobile homes, the primary use of which is residential, consisting of a building that is used, or is to be used, as no more than 3 private dwellings.

Arrangement for services

        3. For the purpose of subsection 18(3) of the Act an arrangement entered into by a credit union with a financial institution or other corporation for the provision of a service offered by the financial institution or other corporation, other than an arrangement in the normal course of business, shall be approved in writing by the guarantee corporation prior to the credit union entering into the arrangement.

Restriction re adjacent premises

        4. A credit union shall not carry on business in the province adjacent to an office of an insurance company, agent or broker, unless the credit union clearly indicates to its members that the credit union and its premises are separate and distinct from the office of the insurance company, agent or broker and there is a separate entrance and separate signage for the insurance company, agent or broker.

Authorized insurance plans

        5. A credit union may enter into the following group plans of insurance for the security of the credit union or the benefit of members:

             (a)  credit or charge related insurance;

             (b)  creditors' disability insurance;

             (c)  creditors' life insurance;

             (d)  creditors' loss of employment insurance;

             (e)  creditors' vehicle inventory insurance;

              (f)  export credit insurance;

             (g)  group accident and sickness insurance;

             (h)  group life insurance;

              (i)  personal accident insurance;

              (j)  travel insurance; or

             (k)  other group insurance plans which may be authorized by the superintendent.

Subsidiaries & associate companies

        6. (1) In this section

             (a)  "associated company" means a corporation where more than 10% and less than 51% of the voting shares are owned by a credit union; and

             (b)  "subsidiary" means a corporation where 51% or more of the voting shares are owned by a credit union.

             (2)  A credit union, with the approval of the superintendent,  may establish or acquire as a subsidiary or associated company a corporation that is

             (a)  a data processing or information management company;

             (b)  a factoring company;

             (c)  a financial leasing company;

             (d)  a foreign financial institution;

             (e)  an investment counselling company;

              (f)  a mutual fund distribution company;

             (g)  a portfolio management company;

             (h)  a real estate or real estate brokerage company;

              (i)  a management service company;

              (j)  an insurance company or insurance brokerage company;

             (k)  a securities dealer company;

              (l)  a bank

            (m)  a trust company

             (n)  a loan company;

             (o)  or the other enterprise that the superintendent may approve.

             (3)  A credit union shall not make an investment in or guarantee an obligation of a subsidiary of the credit union if, after making the investment or the giving of a guarantee, the total book value of all investments and guarantees will exceed 5% of the total assets of the credit union.

             (4)  Subsection (3) does not apply where the subsidiary is a trust company or a loan company.

Branch offices

        7. A credit union may establish or relocate a branch office of the credit union if it has obtained, prior to establishing or relocating the branch

             (a)  the approval of the directors; and

             (b)  in the case of a credit union which has not achieved the equity requirements set out in subsection 19 (1), the approval of the guarantee corporation.

Share capital

        8. (1)  A member of a credit union shall hold not less than 20 member equity shares purchased at par.

             (2)  With the approval of the board of directors member equity shares may be redeemable at par.

             (3)  Where, in the opinion of the superintendent, a credit union is in financial difficulty, the superintendent may, in consultation with the guarantee corporation, prevent the withdrawal of share capital.

Change of name

        9. (1) Every application by a credit union for approval of a change of name shall be in the form required by the superintendent and shall be sent to the superintendent for approval.

             (2)  Where a change in name of a credit union is approved or where the name of the credit union has been changed by the superintendent, the substituted name shall be entered in the register in place of the name which was changed and an altered certificate of registration shall be issued to conform with the change in name.

Change of address

      10. (1) Every application by a credit union for approval of a change of address shall be in the form required by the superintendent and shall be sent to the superintendent.

             (2)  Where a change in address of a credit union is approved, the substituted address shall be entered in the register in place of the address that was changed.

Unclaimed balances

      11. (1) Where a member has a balance in deposits with a credit union and has not transacted any business with the credit union for a period of 2 years or more, the directors, after giving notice to the member by mail sent to the last known address of the member, may, if the notice is not acknowledged, transfer the balance to a special trust fund established for the purpose of retaining unclaimed money in the records of the credit union.

             (2)  Interest on the special trust fund may be paid at rates and for periods that the directors may determine.

             (3)  Unclaimed balances may be subject to the fees for administration, notification and maintenance as prescribed in the policies of the credit union.

             (4)  All money held to the credit of a member, less an applicable fee under subsection (3), shall upon application, be paid to that member.

             (5)  The directors of the credit union shall establish a written policy respecting the management and monitoring of transactions in the special trust fund referred to in subsection (1).

             (6)  Where no claims are made on an account within 10 years of the date the balance is transferred to the trust account established under subsection (1), the credit union may transfer the balance into revenue.

             (7)  Where, subsequently, a claim is made on an account taken into revenue by the credit union under subsection (6), the credit union shall, if the claim is legitimate, pay to the person out of general revenue the balance in the account less an administrative fee that may be provided for in the policies of the credit union.

             (8)  In the event that a credit union makes an extraordinary sale, lease, or exchange under section 137 of the Act or is liquidated or dissolved, the special trust fund and all records pertaining to it shall be transferred to the guarantee corporation.

Payment of prescribed amount on death of a member

      12. For the purpose of section 45 of the Act, the maximum amount that may be paid is $5,000.

Loan policies

      13. (1) The loan policies established by a credit union under section 47 of the Act shall provide for

             (a)  the maximum amount of the loans that may be made to a member of the credit union and that may be outstanding at any time;

             (b)  the manner in which loans to directors, officers and employees of the credit union and their family members are to be administered;

             (c)  the manner in which loans made by the credit union are to be considered and approved;

             (d)  the extent to which, and the manner in which, loans made by the credit union are to be secured;

             (e)  the circumstances in which unsecured loans may be made to a member of the credit union and the maximum amount of the unsecured loans that may be made to a member and that may be outstanding at any time;

              (f)  entering into an agreement for the purpose of participating in a loan to a member of another credit union;

             (g)  the acquisition from another credit union of its interest in a loan made to a member of the other credit union; and

             (h)  the terms, conditions, restrictions or limitations established by the guarantee corporation in relation to the lending activities of the credit union and other matters that may be required by the guarantee corporation.

             (2)  The loan policies established by a credit union under subsection (1) may provide for matters in addition to those required under subsection (1) in relation to the loans that may be made by, and the lending activities of, the credit union, if the loan policies so established are not inconsistent with the Act, these regulations and any terms, conditions, restrictions or limitations established by the guarantee corporation.

             (3)  The loan policies established by a credit union shall, subject to the terms, conditions, restrictions or limitations established by the guarantee corporation, be in accordance with prudent lending policies, standards and procedures that a reasonable and prudent person would apply in respect to making loans to avoid undue risk of loss and to obtain a reasonable rate of return.

             (4)  The loan policies established by a credit union shall be reviewed annually by the credit committee or if there is no credit committee, the board of the credit union.

Loan requirements & restrictions

      14. (1) Loans made by a credit union to its members shall be classified and shown in the records of the credit union as:

             (a)  personal loans, including personal line of credit loans;

             (b)  loans secured by mortgages on residential and commercial property that are insured under the National Housing Act (Canada) or that are insured by an insurer that is licensed to carry on business in the Province under the Insurance Companies Act;

             (c)  loans secured by mortgages on residential property that do not exceed 75% of the fair market value of the property mortgaged;

             (d)  loans secured by mortgages on residential property that are not included in paragraphs (b) and (c);

             (e)  loans to the government of the province or a Crown corporation or agency of the province, or to a municipality, school board, hospital corporation or a university in the province, and loans the repayment of which are insured by CMHC or are guaranteed by the government of Canada or a province or territory of Canada;

              (f)  commercial loans in accordance with subsection (2);

             (g)  loans secured by mortgages on property other than residential property;

             (h)  loans to non-profit organizations including charitable, religious, fraternal and labour organizations provided these are not engaged in any commercial enterprise wherein income would accrue to any partner, proprietor, member or shareholder.

             (2)  A credit union shall require the prior approval of the superintendent to commence making commercial loans described under paragraphs (1) (f) and (g) to its members which shall be given provided the credit union meets the following criteria:

             (a)  the liquidity requirements referred to in section 16 are met;

             (b)  the allowance for doubtful loans is calculated as required under section 18;

             (c)  the equity requirements referred to in section 19 are met;

             (d)  expertise in commercial lending has been identified to the satisfaction of the guarantee corporation;

             (e)  a comprehensive commercial lending policy has been established and the policy has met with the approval of the guarantee corporation;

              (f)  competence has been demonstrated with respect to  sound consumer lending practices; and

             (g)  other criteria the superintendent may establish.

             (3)  The superintendent shall establish a limit on the amount of commercial loans that a credit union, approved under subsection (2), may grant to its members and have outstanding but the value of commercial loans granted and outstanding at no time shall exceed 25% of the credit union assets.

             (4)  No additional loans shall be made to a member who

             (a)  has failed to repay a previous loan with the credit union;

             (b)  is in arrears in the payment of a loan with the credit union.

             (5)  Notwithstanding paragraphs (4)(a) and (b),  the board of a credit union may consider extenuating circumstances, if the member defaults, provided the credit union is not exposed to further risk of loss with respect to the member and the member has made arrangements to meet his or her existing commitments to the credit union.

             (6)  A credit union shall not make a real estate mortgage loan on the security of property referred to in paragraphs (1)(b), (c) and (d) for the purpose of purchasing, renovating or improving the property or to refinance a real estate mortgage loan on the property unless,

             (a)  the amount of the indebtedness, together with the amount of the indebtedness under other mortgage loans on the security of the property mortgaged that rank equally with or in priority to the real estate mortgage loan

                      (i)  in the case of the purchase of the property, does not exceed 75% of the purchase price or the fair market value of the property, whichever is less, at the time the real estate mortgage loan is granted,

                     (ii)  in the case of the renovation or the improvement of the property or the refinancing of a real estate mortgage loan, does not exceed 75% of the fair market value of the property after the renovations or improvements have been made,

                    (iii)  exceeds 75% of the amount determined under subparagraph (i) or (ii) and the excess secured by an assignment of money on deposit with a financial institution or is guaranteed or insured by the government of Canada or of a province or territory of Canada, or agency of either, or is otherwise guaranteed or insured in a manner and to an extent approved by the guarantee corporation; and

             (b)  the income from all sources that is available to the borrower is sufficient to repay the principal and interest of the real estate mortgage loan and fees and taxes related to it.

             (7)  A credit union shall not make a loan to a member if the amount of the loan, together with the aggregate balances outstanding on other loans, including interest, to the member, or a family member of the member or a corporation in which the member or a family member of the member or any of them together have ownership interest greater than 10%, exceeds 2% of the assets of the credit union.

             (8)  Notwithstanding subsection (7), upon application by a credit union, the guarantee corporation may vary the maximum loan set out in subsection (7) upon the terms and conditions that may be determined by the guarantee corporation.

             (9)  For the purpose of subsection (7), a credit union may exclude a loan classified in accordance with paragraphs (1)(b) and (e) and a loan which is secured by a duly executed assignment of deposits or an assignment of securities or a guarantee by the government of Canada, a province or a municipality in Canada, or agency of either, or by an agency approval by the corporation.

           (10)  All shares and deposits of a member pledged as security for a loan shall not be withdrawn to an amount which would reduce the security below the outstanding balance remaining on the loan.

           (11)  A loan shall not be made to an employee or a director of a credit union or to a family member of an employee or a director of a credit union without approval of the members of the credit committee, or, in the  absence of a credit committee, the board.

           (12)  Interest rates on loans shall be those set in accordance with the loan policies approved by the board of directors.

Overdrafts

      15.  A credit union shall not permit overdrafts unless its directors have established a written policy respecting overdrafts.

Liquidity

      16. (1) For the purpose of section 51 of the Act, a credit union shall maintain liquidity of not less than 6% of the total amount of deposits in, and borrowings of, the credit union.

             (2)  Qualifying investments for the purpose of this section are

             (a)  demand or unencumbered deposits with a financial central, or its subsidiary, that are redeemable without penalty as to the amount of principal invested; and

             (b)  deposits in a financial central or its subsidiary with a maturity date of one year or less.

             (3)  A credit union shall not borrow for the purpose of establishing and maintaining liquidity other than from its members.

             (4)  A credit union shall report at the end of each month to the guarantee corporation the position of its liquidity.

             (5)  For the purpose of this section, every credit union shall be a member or an affiliate of a financial central.

             (6)  A credit union shall participate in the National Liquidity Pool established by the Credit Union Central of Canada and a credit union shall do those things required by the Credit Union Central of Canada to assure its participation.

             (7)  A credit union shall not be permitted to draw on deposits maintained for the purpose of this section without informing the guarantee corporation of its intent to draw on these deposits.

Other investments

      17. (1) For the purpose of section 52 of the Act, a credit union shall establish a policy for investments which will permit investments in accordance with prudent investment standards and may only make investments in accordance with this policy.

             (2)  For the purpose of subsection (1) and section 42, prudent investment standards are those that a reasonable and prudent person would apply in respect of a portfolio of investments so as to avoid undue risk of loss and to obtain a reasonable return on investments made.

Allowance for doubtful loans

      18. (1) For the purpose of section 53 of the Act, the allowance for doubtful loans shall be an amount equal to the total net of the fair market value of a security held by the credit union, of

             (a)  a loan to a member who has filed for bankruptcy and who has not been discharged;

             (b)  a loan that has been rewritten due to the borrower's inability to make regular payments until the member has demonstrated an ability to meet the payments, outlined in the rewritten payment schedule, for a period of 6 months;

             (c)  a loan overdue 90 days or more and considered uncollectable;

             (d)  a loan to a commercial enterprise that has ceased operations or has gone into receivership or liquidation;

             (e)  any other amount which, in the opinion of the guarantee corporation or the external auditor of the credit union, would be necessary to comply with generally accepted accounting principles as defined in the CICA Handbook.

             (2)  Within 30 days after the end of each quarter, every credit union shall prepare and submit to the guarantee corporation a copy of a schedule for doubtful loans for the quarter, in the form prescribed by the guarantee corporation.

Equity

      19. (1) For the purpose of section 54 of the Act, a credit union shall maintain a level of equity that is not less than 5% of its assets with not less than 3% of its assets in the form of retained earnings.

             (2)  The 10 year implementation period for equity commenced in 1991 shall remain in effect.

             (3)  A credit union, on an annual basis, shall file an updated equity plan with the guarantee corporation, not later than 90 days after the end of the credit union's fiscal year, in the form prescribed by the guarantee corporation.

             (4)  A credit union shall not declare nor pay a cash dividend or a patronage refund unless it complies with the equity requirements in subsection (1) or is in keeping with the plan filed with the guarantee corporation under subsection (3).

             (5)  Notwithstanding the requirements under subsection (1), the superintendent may, under those terms and conditions, that the superintendent may require, permit a credit union to include in its calculation of equity, shares issued in accordance with section 32 of the Act provided these shares meet the requirements for equity, as outlined in the CICA Handbook.

Borrowing

      20. The amount that may be borrowed by a credit union under section 55 of the Act shall not exceed 20% of the total amount of deposits of its members unless authorized by the guarantee corporation to borrow a greater amount.

Matching

      21. (1) The directors of a credit union shall

             (a)  establish a policy and procedures for matching the terms and return of investments and loans made by the credit union with the terms and return of deposits in and other interest sensitive liabilities of the credit union; and

             (b)  file a report with the guarantee corporation, not less than once in each quarter of each financial year of the credit union, or more frequently if required by the corporation, showing

                      (i)  investments and loans with variable interest rates matched with deposits and other liabilities with variable interest rates, and

                     (ii)  fixed rate investments and loans with a term to maturity matched with fixed rate deposits and other liabilities that are of a comparable term.

             (2)  A credit union shall file a copy of the policy required under subsection (1) with the guarantee corporation and shall make the changes to the policy that are directed by the guarantee corporation.

Insurance

      22. (1) For the purpose of section 57 of the Act, the guarantee corporation may establish and set guidelines for insurance programs for credit unions that provide indemnification for liability under law and for loss or destruction of property including

             (a)  fire insurance;

             (b)  bonding of officers and employees;

             (c)  insurance against burglary and theft;

             (d)  deposit insurance; and

             (e)  public liability insurance.

             (2)  Participation by all credit unions in an insurance program established under subsection (1) is compulsory.

             (3)  All directors, officers, committee members and employees of a credit union, a trade association, the guarantee corporation shall provide a bond in the form required by the guarantee corporation.

             (4)  The bond required under subsection (3) shall, in the case of employees, be a condition of employment and in the case of directors, officers and committee members, a condition of holding office.

             (5)  The guarantee corporation may assess premiums to cover the cost of insurance programs including the cost of administering the program.

             (6)  The superintendent may, subject to those terms and conditions the superintendent may require, grant an exemption to a trade association from the requirements of subsection (3).

Training

      23. The guarantee corporation may prescribe the minimum level of training that a director, officer or staff member of a credit union must acquire in order to hold office.

Associate members

      24. (1) An associate member of a credit union or a trade association, for the purpose of subsection 59(4) of the Act, is a person other than a member who has rights as set out in the by-laws and these regulations but that person shall not have a vote at a meeting of a credit union or a trade association or become a director of a credit union or the trade association.

             (2)  A credit union may not make a loan to an associate member.

             (3)  An associate member of a credit union or a trade association may be subject to those other restrictions that the superintendent may direct.

Restrictions of directors

      25.  For the purpose of section 83 of the Act and section 41, a person shall not serve as a director if he or she is 90 days or more in arrears on the payment of a loan to a credit union and that is considered uncollectable.

Internal audit

      26. (1) A  credit union shall have an annual internal audit conducted into its affairs, completed by a person qualified to do these audits.

             (2)  A credit union shall file a copy of the internal audit report with the guarantee corporation within 30 days after receipt of the report.

Audit committee

      27. (1) An audit committee established under section 120 of the Act shall be composed of not less than 3 members of the credit union who may be either elected by the members or appointed by the board as provided for in the by-laws of the credit union, for a term not to exceed 3 years, none of whom are employees or officers of the credit union or members of the credit committee, if a credit committee has been established under section 28.

             (2)  The duties of the audit committee are to

             (a)  review the reasonableness and significance of the financial position and reported results in the audited financial statements of the credit union for the purpose of recommending to the directors that the audited financial statements be approved under section 107 of the Act;

             (b)  review the accounting principles and practices followed by the credit union during the fiscal year of the financial statements reviewed under paragraph (a), and all significant changes from the principles and practices followed during the preceding fiscal year;

             (c)  review the audited financial statements of the credit union's subsidiaries, if there are subsidiaries;

             (d)  review every financial report that requires the approval of the board of directors of the credit union prior to being submitted to a regulatory body;

             (e)  discuss with the auditor the audit findings,  restrictions on the scope of the auditor's work and problems that the auditor may have experienced in performing the audit;

              (f)  review the nature and extent of the auditor's evaluation of the internal control systems of the credit union;

             (g)  review the recommendations made by the auditor to the management of the credit union and the response made by management to the recommendations;

             (h)  review the organization and independence of the internal auditors of the credit union, including the internal auditors' goals and work plans and any problems that they may have experienced in performing the internal audit;

              (i)  review recommendations made by the internal auditors respecting the improvement of accounting and internal control practices and the response made by management to the recommendations;

              (j)  monitor compliance by the directors and officers of the credit union to the requirements of section 98 of the Act;

             (k)  inquire into all alleged contraventions of the requirements of section 98 of the Act and into all circumstances that the committee considers might indicate that the credit union or any of its directors, officers or employees may have contravened the Act, the Securities Act, the Income Tax Act (Canada) or the regulations made under those Acts;

              (l)  inquire into a change in circumstance of the credit union that might reasonably be expected to materially and adversely affect the financial position of the credit union;

            (m)  report and make recommendations to the board of directors of the credit union arising from its duties under paragraphs  (b) to (l) that the committee considers appropriate in the circumstances;

             (n)  report to the board of directors of the credit union a conflict between the auditor and the management of the credit union that the committee has been unable to resolve within a reasonable period of time; and

             (o)  report in writing to the members at the annual general meeting of the credit union on activities of the committee during the year.

             (3)  The audit committee shall ensure that a full and correct record of all proceedings of the audit committee is made and kept available for examination by the superintendent or a person authorized under the Act to examine the records of a credit union.

Credit committee

      28. (1) Where a credit committee is established under section 92 of the Act it shall be composed of not less than 3 members of the credit union, who may be either elected by the members at the annual meeting or appointed by the board as provided in the by-laws of the credit union for a term not to exceed 3 years, none of whom are employees directly involved in the lending activity, officers of the credit union or members of the audit committee.

             (2)  In addition to other duties that may be given to the committee by the directors of the credit union, the duties of the credit committee shall be

             (a)  to receive and to review a report prepared by the manager of the credit union, at least quarterly, which shall include, on a comparative basis,

                      (i)  the total of all loans and other accounts past due as well as details, including security, of those loans and accounts past due over 90 days,

                     (ii)  the total of all outstanding loans in each loan classification

                    (iii)  the total and the manner of calculation of the allowance required for doubtful accounts,

                    (iv)  a listing of employee, audit committee member, credit committee member and director loans outstanding that are in arrears and the extent of the arrears, and

                     (v)  the details of all loans previously in arrears that have been restructured during the period;

             (b)  to recommend to the directors, policies and procedures to be followed by the credit union for approving and granting loans made by the credit union;

             (c)  to approve all loans to employees and directors of the credit union and to family members of employees and directors of the credit union prior to the loans being granted;

             (d)  to ensure that all loans by the credit union are in compliance with regulatory requirements and the credit union's loan policies established under section 13;

             (e)  to report in writing at least quarterly to the board of directors on the activities of the committee including matters included in clause (a) and including loans made in accordance with paragraph 13(1)(b); and

              (f)  to report in writing to the members at the annual general meeting of the credit union on the activities of the committee during the fiscal year, then ended.

             (3)  The credit committee, or the management of a credit union where there is no credit committee, may recommend to the directors that a loan should be written off.

             (4)  The credit committee shall ensure that a full and correct record of all proceedings of the credit committee is made and kept available for examination by the superintendent or any person authorized under the Act to examine the records of a credit union.

             (5)  The board of directors of a credit union shall assume the duties of the credit committee where the credit union has not established a credit committee under this section, or may delegate these duties provided the decision to delegate is not in conflict with these regulations.

Conflict of interest

      29. All credit unions and trade associations shall make provision in their by-laws for a policy respecting conflicts of interest.

Financial reporting

      30. (1) Each credit union shall provide to the guarantee corporation a copy of its financial statements together with the report of the auditor, and a copy of the auditor's management letter, if there is one.

             (2)  Each credit union shall provide to the guarantee corporation periodic reports, that the guarantee corporation may require, within the time frames established by the guarantee corporation.

Audits, examinations, etc.

      31. (1) For the purpose of ensuring that a credit union or a trade association is complying with the Act, the superintendent or person that the superintendent may authorize, may do the following:

             (a)  enter and inspect commercial premises used by the credit union or the trade association;

             (b)  enter premises containing records or property required to be kept, under the Act or related to the affairs of the credit union or the trade association of whatever records and inspect those records or property and make those copies he or she considers necessary;

             (c)  require the credit union or the trade association, including a representative, agent, director, officer or employee of the credit union or the trade association, to provide the superintendent, or person authorized by the superintendent, with all reasonable assistance;

             (d)  make inquiries of the credit union or the trade association mentioned in paragraph (c);   

             (e)  require the representatives of the credit union or the trade association to attend a meeting at a place and time set by the superintendent; and

              (f)  after giving receipt, remove records or property and retain the records or property for the period the superintendent, or person authorized by the superintendent considers appropriate.

             (2)  The superintendent may serve a written demand on a person, including a trustee, or a director, officer or employee of a credit union or a trade association, requiring that person to produce records or property required to be kept under the Act or these regulations or related to the affairs of the credit union or the trade association.

Records removed

      32. (1) Where records are removed under section 31, the superintendent, or person authorized by the superintendent, may make copies of those records.

             (2)  The superintendent, or a person authorized by the superintendent, shall

             (a)  make those copies within a reasonable period of time; and

             (b)  promptly return originals of the records to

                      (i)  the place from which they were removed, or

                     (ii)  another place that may be agreed to by the superintendent, or the person authorized by the superintendent, and the person who furnished them or from whom they were seized.

             (3)  A record certified by the superintendent to be a copy made under this section

             (a)  is admissible in evidence without proof of the office or the signature of the person making the certificate; and

             (b)  has the same probative force as the original record.

No inspection

      33. (1) The records and information submitted or provided to the superintendent or obtained under section 31 are not open to inspection except by

             (a)  those members of the public service whose responsibilities require them to inspect the records and information; or

             (b)  those persons who are authorized in writing by the superintendent to inspect the records and information.

             (2)  Unless authorized by the Act or another law or with the consent of the person to whom a record or piece of information relates, no person employed by the guarantee corporation and no person engaged, appointed or retained by the superintendent shall

             (a)  communicate or allow to be communicated any record or information obtained under the Act to a person who is not legally entitled to the record or information; or

             (b)  allow a person who is not legally entitled to the record or information obtained under the Act to inspect or have access to it.

             (3)  Notwithstanding subsections (1) and (2), the superintendent may authorize the release of, or allow the inspection of or access to, records or information mentioned in those subsections to or by any person employed by the government or regulatory authority of a jurisdiction inside or outside Canada where,

             (a)  the record or information will be used solely for the purpose of administering or enforcing a law of that jurisdiction that is similar to the Act; and

             (b)  the superintendent believes that it is in the public interest to allow the release, inspection or access.

             (4)  Notwithstanding subsections (1) and (2), the superintendent may authorize the release of, inspection of or access to, records or information mentioned in those subsections to or by a law enforcement agency or jurisdiction inside or outside Canada.

Trade association

      34. (1) Membership in a trade association continued under section 154 of the Act shall be open to all credit unions on a voluntary basis.

             (2)  A trade association may in its by-laws, permit persons who are not members to become associate members upon those terms and conditions that are set in its by-laws.

Trade association

      35. (1) The purpose of a trade association is to provide services consistent with a trade association that the members may provide for in the by-laws of the trade association and the superintendent may approve, and the powers of a trade association are so limited.

             (2)  A trade association shall not have the capacity to carry out services which may be considered by the superintendent to be those associated with a financial central and specifically shall not have the power to provide the services to carry out the activities including

             (a)  clearing and settlement services;

             (b)  the acceptance from members of deposits or investments, of any kind, other than equity share capital prescribed under section 36;

             (c)  electronic financial services;

             (d)  the lending of money and granting of credit facilities to members or associate members;

             (e)  holding investments of members;

              (f)  financial intermediary services, including those which would be usually carried out by a financial central; and

             (g)  the other services that, in the opinion of the superintendent, are of a financial nature.

Common shares

      36. (1) A trade association may issue an unlimited number of common shares to its members that shall have an issue price of $5 each.

             (2)  Members and associate members of a trade association shall purchase and hold those numbers of shares in the trade association that may be required in the by-laws.

             (3)  A trade association shall not be required to issue share certificates.

             (4)  In addition to the common shares provided for in subsection (1) a trade association may, with the approval of the superintendent, issue a class of shares to its members to raise capital to finance the purchase of shares in the Credit Union Central of Canada which may be required by the Credit Union Central of Canada as a condition of membership.

             (5)  A trade association shall not pay a dividend on or redeem shares where there are reasonable grounds for believing that

             (a)  a trade association is, or would be, unable to pay its liabilities as they become due, or

             (b)  the realizable value of a trade association's assets is, or would be less than the aggregate of its liabilities.

Powers of members

      37. (1) The powers of the members of a trade association are vested in delegates who shall be elected or appointed by the credit union members in the manner prescribed in the by-laws of a trade association.

             (2)  Delegates who are elected or appointed in accordance with the by-laws of a trade association shall exercise fully and completely the powers of the members of a trade association and a meeting of the delegates of a trade association has the same effect as a meeting of the members of a trade association.

             (3)  A delegate has only one vote on a question that may be voted at a meeting of a trade association.

Default or liability

      38. A member or an associate member is not responsible for a default or liability of a trade association or for the engagement, claim, payment loss, injury transaction, matter or thing relating to or connected with a trade association.

By-laws

      39. (1) The by-laws of a trade association shall provide for a matter required by the Act and these regulations to be included in those by-laws and shall provide for the

             (a)  qualification, conditions and method of applying for or terminating membership or associate membership;

             (b)  location of meetings of delegates, the mode of holding meetings and the quorum at meetings;

             (c)  procedure by which members or delegates call a special meeting of delegates;

             (d)  enactment, amendment or repeal of by-laws at an annual or general meeting called for that purpose;

             (e)  right of delegates to vote by ballot, mail or other means and the manner, form and effect of votes at meetings;

              (f)  election or appointment, term of office, removal of and filling of vacancies among directors, committee members and officers, their powers, duties and remuneration;

             (g)  procedure and quorum at meetings of the board of directors;

             (h)  establishment, maintenance and relocation of a registered office and branch offices for a trade association, wherever it is considered necessary and appropriate;

              (i)  establishment of a fiscal year end of a trade association;

              (j)  investment and use of the assets of a trade association;

             (k)  borrowing or raising or securing the payment of money;

              (l)  charging, hypothecation, mortgaging or pledging the real and personal property of a trade association;

            (m)  issuing of debt obligations by a trade association; and

             (n)  other matters which by the Act or these regulations are required to be dealt with in the by-laws of a trade association.

             (2)  Section 64 of the Act applies, with the necessary changes, to the adoption of by-laws by a trade association.

             (3)  The superintendent may approve by-laws enacted by a trade association if the superintendent is satisfied that the by-laws conform with this Act and is consistent with the purpose of a trade association.

             (4)  The by-laws of a trade association bind a trade association and its members.

Number of directors

      40. (1) A trade association shall, in its by-laws, establish a fixed number or a minimum and maximum number of directors for a trade association.

             (2)  The directors of a trade association shall

             (a)  exercise the powers of a trade association through the employees and the agents of a trade association; and

             (b)  direct the management of the business and affairs of a trade association.

Requirements of director

      41. (1) A citizen of Canada who is nominated by a credit union and 19 years of age or older, except

             (a)  an undischarged bankrupt person;

             (b)  an employee, auditor or solicitor of a trade association or the guarantee corporation;

             (c)  a person who is not bondable;

             (d)  a public employee whose official duties are concerned with the affairs of a trade association or credit unions; and

             (e)  a delegate of a member which fails to comply with the requirements set out in the by-laws of a trade association

may be a director of a trade association.

Investments of a trade association

      42. A trade association may make investments based on prudent investment standards as defined in subsection 17(2) as are authorized by the investment policies established by a trade association and filed with the deposit guarantee corporation.

Deposit insurance

      43. The maximum amount that may be paid by the guarantee corporation in respect of the deposits of a person shall be set at an amount equal to the maximum amount insured by the Canada Deposit Insurance Corporation.

Investments by guarantee corporation

      44. (1) The guarantee corporation may make investments only in accordance with the investment policy established by the directors.

             (2)  The guarantee corporation may not make an investment in a credit union whose members are insured by the Corporation except for the purpose of providing assistance for stabilization of credit unions in financial difficulty.

Borrowing by guarantee corporation

      45. The guarantee corporation may

             (a)  borrow sums of money for its purposes it considers necessary and may pledge security for the sums borrowed; and

             (b)  draw, make, accept, endorse, execute, and issue promissory notes, bills of exchange, warrants, and other negotiable or transferable instruments.

Payments by guarantee corporation

      46. The guarantee corporation may pay or direct the payment from the fund of all expenses necessarily incurred in performing its functions.

Loans by guarantee corporation

      47. The guarantee corporation may

             (a)  make loans, advances, grants and guarantees it considers necessary in performing its functions; and

             (b)  charge interest on loans and advances.

Levies by guarantee corporation

      48. (1) The guarantee corporation shall annually assess and levy upon every credit union an amount not less than

             (a)  1/6 of 1% of total insured deposits if the credit union has met the equity requirements under subsection 18(1), and;

             (b)  1/5 of  1% of total insured deposits where the credit union has not met the equity requirements under subsection 18(1).

             (2)  The amount assessed upon each credit union shall be determined on the basis of the audited financial statements prepared under section 106 of the Act.

             (3)  Each credit union shall pay to the guarantee corporation the full amount of the assessment within 30 days from the date of the invoice or within an extended time that may be permitted and the guarantee corporation may levy interest on an overdue assessment at rates that may be determined by the board of the guarantee corporation.

             (4)  An assessment required to be paid by a credit union under this section shall be charged and reported as an expense of the credit union.

Board of guarantee corporation

      49. (1)  For the purpose of section 180 of the Act, the board of directors of the guarantee corporation appointed by the minister shall consist of the following:

             (a)  the superintendent;

             (b)  the deputy superintendent;

             (c)  one other member appointed by the minister;

             (d)  3 members appointed by the minister from a list of nominees of the credit union system, to serve for a term of three years, unless removed by the minister; and

             (e)  one other member, at the minister's discretion, where the minister believes the appointment would be in the public interest.

             (2)  The superintendent shall serve as chairperson of the board and in the case of an equality of votes has a casting vote.

             (3)  The vice-chairperson shall be appointed by the board from the members who were nominated by the credit union system.

             (4)  The deputy superintendent shall serve as secretary treasurer to the board and shall be the executive director for the guarantee corporation, as established under subsection (5).

             (5)  There shall be established the office of the executive director for the guarantee corporation who shall direct the affairs of the guarantee corporation on behalf of the board.

             (6)  The board shall

             (a)  appoint committees it considers necessary for the purpose of the board;

             (b)  do all things necessary for the attainment of the purpose of the board;

             (c)  pay to members of the board remuneration that may be approved by the minister; and

             (d)  pay to members of the board all reasonable travelling, living and out of pocket expenses, including salary and obligatory loss of annual leave incurred in the course of their duties as members.

             (7)  Employees required for the exercise of the powers and the performance of the duties of the guarantee corporation shall be appointed by the board and the board may determine their duties,

             (8)  Every person, who was an employee of the guarantee corporation immediately before April 1, 1994, retains his or her salary and benefits unless otherwise directed by the minister and is considered to have been employed in the manner provided by law.