SYSTEM OF SUPERVISION OVER CO-OPERATIVE

SAVINGS AND CREDIT UNIONS

COOPERATIVE FINANCE:GLOBAL GOOD PRACTICES

WASHINGTON DC, APRIL 10 - 11

Paweł Grzesik Representative of Management BoardNational Association of Co-operative

Savings and Credit Unions

Foundations of development

of Poland's credit union system

• Cooperative Savings and Credit Unions (CSCU) make up a part and parcel of the formal financial sector in Poland, and no part of credit union operation can be conducted other than under relevant laws and supervisory regulations.

• Poland's co-operative savings and credit unions would emerge mostly at large industrial companies. This enabled their quick and safe growth.

Foundations of development of Poland's credit union system

• Since the very beginning it has been independence and self sustainability that counted. The assumption was that relying on aid funds would be wrong – the aid resources were used only to initiate the operation of the credit union movement.

Foundations of development of Poland's credit union system

• Sound business rules – the employment of market principles. CSCUs are self-supporting financial institutions relying only on the bond of membership. The interest rates paid/charged by the credit unions count among the most advantageous ones on the market (high interest rates on deposits, low on loans), yet the operation of CSCUs is subject to the operation of market forces.

Model of supervision and regulation

The model of supervision and regulation of credit union system, as followed in Poland, is carried out in a delegated supervision model under the law on credit unions. The state delegates it supervision authority over the credit unions to the NACSCU. The NACSCU is not directly supervised by the state authorities

• National Association of Co-operative Savings and Credit Unions, entrusted with the task and thus establishing standards and regulations is, at the same time, a mandatory association of credit unions and a central financial facility for Polish credit unions. It also is a co-operative audit association.

Role of NACSCU as a supervisory body

• Mandatory membership in the NACSCU is a risk reducing mechanism. The whole CU system is standardized ( e.g. accounting, reporting, software). No risk exists of undermining reputation of the system by non performing individual CU non – member of NACSCU as all CU are NACSCU members following uniformed standards.

• The objective of the National Association of Co-operative Savings and Credit Unions is, first of all, to provide financial stability and to exercise supervision of CSCUs for safety of the savings pooled in the credit unions and conformity of credit union operations with law.

Types of activitiesperformed by the National Association

• representing credit unions towards agencies of central/local government

• expressing opinions on draft legal acts concerning credit unions

• exercising supervision of credit unions• performing audits of credit unions• setting forth prudential standards• specifying qualifications required from

members of credit union management boards to make sure that they are capable of running the credit union business safely, protecting member savings pooled therein

Types of activitiesperformed by the National Association

• providing loans and credits to credit unions

• working out uniform procedures of services rendered by credit unions and the documentation kept by them

• development of uniform IT systems

• providing legal, organisational and financial counselling to credit unions

• accepting fixed-time deposits of credit unions

• arranging tranining and running the publishing activity related to credit union business

System of supervision over Poland's credit unions

A broadly termed system of supervision of credit unions covers the following groups of issues:

• system- and institutional monitoring• control performed as a part of supervision • regulation (prudential standards)• KAPER programme of early warning and

reacting • standardisation

Organisation of supervision within the National Association

• The process of supervision of Poland's credit unions includes two sub-processes:

• Monitoring of credit union operation, covering also review of rehabilitation programmes, capital-building programmes, operation plans and development plans

• Inspection activities and operation of mandatory administrators within credit unions, achieved via the procedures of : ad hoc inspections, audits, establishment of the said mandatory administrators

• Within the organisational structure the process is carried out by the Monitoring and Control Department. It is the Vice-President for Monitoring and Control that is responsible for the activities in question within the Management Board.

REPORTING TO THE STATE AUTHORITIES

• The Main Inspector of Financial Information in the area of:

- money laundering and financing of terrorism- co-operation in the field of training• National Bank of Poland- structure of deposits, credits, assets,

liabilities • The Main Statistical Office - information

about membership base, finance of the system

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