News

Review of CO-OP Regulation 
Posted on Thursday, April 26, 2007 - 04:00 PM

The Registry of Co-operative Societies, MCYS is seeking views from the public on the proposed changes to co-op regulation.

Co-op background

2. Co-ops can be considered business entities with social purposes. There are currently 91 registered co-ops out of which the NTUC co-ops are among the more widely known. The total number of individual members in the Singapore co-op movement is about 1.6 million.

Need for review

3. Co-ops are regulated through the Co-operative Societies Act which has been largely unchanged since the last major amendment in 1979. Co-op legislation should be updated to better reflect today's environment and to help the sector further increase its level of accountability and governance. There is also scope to review co-op legislation to remove outdated regulatory requirements and provide co-ops with greater flexibility to operate.

Interagency team

4. An interagency team comprising representatives from the key stakeholders of the co-op movement has reviewed the regulation of co-ops. The co-op review team comprised staff of NTUC, the Singapore National Co-op Federation, the Monetary Authority of Singapore, Ministry of Finance, Attorney-General's Chambers and MCYS (chair).

5. The team adopted a risk-based approach when reviewing the regulation of co-ops. Co-ops of greater regulatory risk, for example credit co-ops due to their deposit-taking activities, should be subject to greater regulatory supervision. In line with this approach, 2 sets of recommendations have been released, one of which applies to all co-ops and another set of additional recommendations for credit co-ops. (The detailed recommendations and the reasons for the proposals are at the Annex.)

Key recommendations

6. Some of the key recommendations of the co-op review team include:

a)For all co-ops:

(i)Increasing co-op flexibility: The need for investment approvals by the Registrar is to be removed. The quorum requirements for conducting a general meeting are to be reduced to provide greater flexibility for co-ops to hold such meetings.

(ii) Greater accountability: Co-op legislation should be updated to provide for higher standards of co-op accounting, audit and reporting. In line with other entities, it will be made mandatory for co-ops to comply with Financial Reporting Standards ('FRS').

(iii) Registrar's powers and penalties for offences: Together with increased governance and accountability requirements, the Registry's powers should be updated so that the Registrar will have a broader range of options to adopt calibrated responses towards non-compliance.

b)Additional Recommendations for Credit co-ops:

(i) Credit co-op governance: As credit co-ops are stewards of members' deposits, they should be subject to a higher level of governance at board and management levels. This would include board independence, audit committee and clarity on remuneration policy to serve the interests of members and depositors.

(ii) Credit co-op membership: Credit co-ops are not regulated to the same level as financial institutions and should only play a niche role in the Singapore financial system. They should not open their membership to the general public, but should only serve a defined group of members which share a pre-existing affiliation to each other.

(iii) Prudential measures: The regulator should be empowered to issue notices to prescribe guidelines for internal control, capital adequacy, liquidity and other prudential measures. As credit co-ops should focus on serving their existing membership base, they should not be allowed to advertise in the mass media.

Public consultation

7. The co-op review paper and the detailed recommendations will be posted online at the REACH portal www.reach.gov.sg from 26 April 2007 for a month. The public and co-ops can send their inputs through the portal till 25 May 2007. Focus group discussions with the co-ops were conducted earlier and the recommendations have already been refined to incorporate some of the feedback.