PROPOSED AMENDMENTS TO NEW CO-OPERATIVES BILL 2005
Amend 5(2) to read "This Act applies to be a financial services co- operative that registers with the Supervisor of co-operative banks in terms of legislation applicable to co-operative banks: Provided that legislation governing an fsc that is registered as a co-operative bank will prevail over this Act". In addition, kill the proviso because it gives the impression that the constitution of an fsc that registers to become a co-operative bank must only comply with Chapters
1 and 2 of the Co- operative Bill, when it is the case that such a constitution must comply with the entire Co-operatives Bill.
2. No amendment required, however, Sections 55. 59. 60. and 61 (i.e., no exemption from fsc having an auditor while registered as a co-operative bank, and no division of a fsc into another person while registered as a co- operative bank) must not apply to an fsc that registers as a co-operative bank. However, for purposes of clarity, it would not hurt to state such a fact under Schedule 1: Part 3: Financial services co-operatives.
3. Amend section 62: "Conversion of co-operative to any other kind or
form of juristic person"
Section 62 will not apply to a fsc that is a co-operative bank that converts under the Co-operative Bank Act into a savings and loans co-operative bank - throughout the conversion, such a co-operative still remains an fsc However, an exception needs to be created for a fsc that is a savings and loans co-operative bank that converts itself into a bank, mutual bank, or dedicated bank, thereby becoming a company. For purposes of clarity, it would not hurt to state such a fact under Schedule 1: Part 3: Financial services co-operatives.
4. Chapter 12.-Section 80 "Co-operative Advisory Board"
Consider having this advisory board jointly informing the Minister overseeing co-operatives and Minister overseeing co-operative banks fsc issues, especially fscs that would register to become co-operative banks.
5. Section 91: "Transitional Provisions" - amend subsections 2,3,4,5,6 include fscs that currently take deposits under an exemption to the Ban Act and that are required to register as co-operative banks (i.e., village banks and credit unions) to be time bound in relation to submitting a revised constitution to the Registrar of Co-operatives (i.e., not three years).
Note: for purposes of deposit taking exemption notices under the Banks Act, effective dates would have to provide such fscs with sufficient time to submit (section 2) and revise their constitutions (if necessary, sections 3(b) and 4). Recommendation: village banks and credit unions will submit their revised constitutions to the Registrar of Co-operatives within a time period less than the three years referred to in the Co-operatives Bill.
Under subsection 5, time bind an fsc that fails to revise its constitution with respect to such failure compelling the fsc to becoming another person or winding-up.
Why the time-binding? Deposits with such fscs (i.e., not co-operative banks) are currently illegal and at risk because not covered by deposit insurance.
6. Schedule 1: Part 3: "Financial Services Co-operatives"
This section may create confusion because if an fsc can "deposit" meney received from members, then by implication, did it receive a "deposit". Deposit is not defined in new Co-op Act. "Deposit" is a banking word - better to keep fscs that would not register to become a co-operative bank from using banking terms
This whole section creates difficulties for the Co-operative Bank Bill-
This section should only stipulate that an fsc that registers with the Supervisor of co-operative banks in terms of legislation applicable to co- operative banks will no longer have to belong to a secondary co-operative that will act as a self-regulatory body, in compliance with any requirement for exemption form any provision of the Banks Act, Long and Short term Insurance Acts, or Medical Schemes Act
This section should specify:
1) Fscs, whether they take deposits under an exemption to the Banks Act or not (i.e., stokvels), may have to belong to a secondary co-operative that will act as a self-regulatory body, in compliance with any requirement for exemption form any provision of the Banks Act, Long and Short term Insurance Acts, or Medical Schemes Act.
2) However, fscs that are registered co-operative banks under the Co-operative Banks Act will not require an SRO or an exemption to the Banks Act, Long and Short term Insurance Acts, or Medical Schemes Act. This section should exclude wording that refers to fscs that are registered co-operative banks.
Replace wording -
Registrar of Banks with "Minister of Finance"
Subsection 9: Definitions
1) For purposes of this section, the definition of financial services will only apply to Fcs that are not registered as co-operative banks
2) Remove from definition of financial services provided by an fsc "banking service" as such services will only be offered by a registered co-operative bank