Recommendations
74. It is recommended that the Committee:
1 Note that Manchester Unity and the New Zealand Association of Credit Unions have developed a joint proposal on four aspects of the Friendly Societies and Credit Unions Act (the "Act") that they wish to see reformed: membership qualifications, legal status and validity of action, capital-raising, and trust deed "duplications".
2 Note that most of those proposals are significant and give rise to governance and competitive neutrality issues that could only be resolved by comprehensively reviewing the Act.
3 Note that a comprehensive review has been proposed previously by officials but not supported by the credit union movement. A comprehensive review is not a priority at present.
4 Note that the following amendments would provide some additional flexibility and efficiency for credit unions, without introducing new governance risks.
5 Agree to the following changes to the Act:
5.1 the statutory requirements for membership qualifications should be modified to permit credit unions to have a dual bond in the form of a combination of two permitted membership qualifications, each of which gives rise, in itself, to a common bond for those who meet the qualification;
5.2 the statutory requirement that credit union associations obtain Ministerial approval for the provision of new services to their members should be replaced with a provision enabling associations to provide any services that are permitted by the Act and specified in their rules;
5.3 the statutory requirement that each member must hold a minimum of $10 "shares" should be a default provision and credit unions should be permitted to determine and specify a higher minimum deposit requirements in their rules;
5.4 each credit union should be permitted to determine and specify in its rules its own process for setting service fees; and
6 Direct the Ministry of Economic Development to develop a detailed proposal for facilitating credit unions' conversion to alternative governance regimes, for reporting back to Cabinet by February 2005.
7 Note that, in the context of a review of the Securities Act, the Ministry of Economic Development will explore the possibility of giving the Securities Commission wider authority to oversee trustees and trust deeds under the Securities Act, for all public issuers, including credit unions, and will report back on that issue in 2006.
8 Direct the Ministry of Economic Development to examine in detail the possibility of making statutory restrictions on borrowing, investment and reserves default provisions that can be varied by the Securities Act trust deeds, taking into account the feasibility of specifying minimum requirements in regulations rather than primary legislation, for reporting back to cabinet by February 2005.
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