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Proposed Code of Governance and Good Practice for Credit Unions in Ireland Draft Dated: 16 th September 2011
Proposed Code of Governance and Good Practice for Credit Unions in Ireland
Draft Dated: 16th
September 2011
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Contents: Page No
1. Why a Code of Governance and Good Practice? 3
2. What is meant by “Governance”? 4
3. About this Code 6
4. Using this Code 7
5. The Principles: A Summary 9
6. Draft Code of Governance and Good Practice 11
Statement of Commitment
7. Next Steps 42
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1. Why a Code of Governance and Good Practice?
Corporate governance is high on the agenda in all sectors; public, commercial and voluntary as it
is a basic form of accountability for all bodies. As Financial Co-operatives working for the
benefit of members, credit unions are increasingly expected to demonstrate how well they are
governed. Good governance is a vital part of how credit unions operate and are held accountable.
In credit unions, directors take ultimate responsibility for the governance of their credit union.
However governance is not a role for directors alone. It is the way directors work with
supervisors, managers and employees, volunteers, auditors and members to ensure that their
credit union is effectively and properly run and meets the needs of the members.
Other sectors have already developed codes in recent years. The public sector has a Code of
Practice in the Governance of State Bodies published by the Department of Finance, the private
sector has its Combined Code on Corporate Governance applying to companies quoted on the
Irish Stock Exchange and in 2010 the Central Bank published their Corporate Governance Code
for Credit Institutions and Insurance Undertakings applying to credit institutions and insurance
undertakings licensed or authorised by the Central Bank.
As readers will be aware, there is no existing Corporate Governance Code for credit unions in
Ireland. The legislative framework for the governance of credit unions is contained in the
following:
Credit Union Act, 1997/Credit Unions (Northern Ireland) Order 1985;
Standard Rules for Credit Unions (Republic of Ireland/Northern Ireland) and;
Other applicable legislation such as Data Protection Legislation , Equal Status Legislation
Health & Safety Legislation, Taxation Legislation etc.
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However, while the above sets out the legislative framework within which any governance code
for credit unions must sit, they do not provide detail as to the components of good governance
within credit unions. In addition, governance related matters are dealt with in Guidance Notes
from the Registrar of Credit Unions and the Irish League of Credit Unions.
A movement lead development of a Code of Governance and Good Practice for Credit Unions
will ensure that the unique Operating Principles of credit unions are recognised and that the
voluntary ethos of credit unions is fully reflected in any such Code rather than the possible
imposition on credit unions of a Code drafted with other financial services providers in mind.
2. What is meant by Governance?
Good governance has been defined by the Central and Eastern European Working Group on
Non-Profit Governance as “A transparent decision making process in which the leadership of a
non-profit organisation, in an effective and accountable way, directs resources and exercises
power on the basis of shared values”.
The concept of corporate governance has been given increasing importance and prominence in
recent years, particularly in the financial services industry, in light of the acknowledged failures
in this area which contributed to the collapse of the banking system.
Sound corporate governance relies on compliance with all applicable legislation and regulation
and also a healthy Board culture that safeguards policies and processes and delivers strategy. A
Board make-up that reflects knowledge, experience, expertise and a willingness to challenge is
also important in the development of good corporate governance.
Recent years have seen the development of Codes of Corporate Governance to cover many
sectors as mentioned above. However, many of these Codes are not directly relevant or
appropriate to credit unions as they are often aimed at large Public Limited Companies and do
not take into account the unique voluntary ethos and co-operative nature of credit unions. In
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credit unions, corporate governance is the responsibility of the voluntary Board of directors with
the supervisory committee overseeing the performance by the directors of their functions.
The governance structure in credit unions is comprised of four main elements as outlined in the
diagram below:
FIGURE: Governance Structure in Credit Unions
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3. About this Code
The Code will help to lead credit unions by example and to achieve excellent governance. The
Board of directors sets the long term vision and protects the reputation and values of the credit
union. The purpose of the Code will be to assist credit union Boards in providing strong
leadership, enhancing their decision making and demonstrating their accountability. The Code
will also be of importance to supervisors, employees and volunteers in understanding their roles
in achieving good corporate governance within the credit union and will also be of benefit to
members in knowing that their credit unions aspire to the highest standards of governance.
The Code will aim to:
Clarify what effective governance entails and how Boards of directors can govern
effectively;
Demonstrate to members the standards of governance within the credit union; and
Maintain and enhance public confidence in credit unions and in the movement generally.
The Code draws from other appropriate domestic and international Codes and guidelines and
aims to be compliant with legal and regulatory requirements relating to credit unions in both the
Republic and Northern Ireland.
The principles of good governance listed below provide the heading for each section within the
Code and are accompanied by supporting principles which define in detail what can be
considered as best practice in the operations of an effective Board.
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Main Principles of good governance:
- Board Leadership
- Board Accountability
- Board Roles and Responsibilities
- Board Review and Renewal
- Board Delegation
- Board Integrity
- Board Transparency
The role of committees, employees, the supervisory committee and other volunteers within a
good governance structure in the credit union are also addressed in the Code.
4. Using this Code
The main and supporting principles of the Code are relevant to all size and type of credit union.
The Code is not mandatory but sets out best practice in its main and supporting principles. It is
expected that credit unions will benchmark themselves against the principles outlined in the
Code in a “comply or explain” basis. This approach is used widely in the field of corporate
governance and it means that credit unions subscribing to the Code should make a statement to
that effect in their annual report, website and other published material. In this statement, the
credit union has to either confirm that it complies with the Code or where it does not, the credit
union must provide an explanation-“comply or explain” approach. Providing the explanation
means that the credit union complies with the overall Code. Furthermore, on an annual basis the
Board will sign the statement in the Code to affirm their commitment to implementing the
principles of good governance in their credit union.
While it is anticipated that credit unions will implement the Code’s guidelines, the League are
cognisant that such implementation will be progressive. It is important to note that this Code and
its associated documentation is not a management guide. In order to fully comply with the
principles set out in the Code, credit unions may need to refer to resources already available for
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various aspects of management practice such as League Guidance Notes, Guidance Notes from
the Central Bank and the Financial Services Authority, the Standard Rules for Credit Unions, the
Act and the Order. Credit Unions using the Code are advised to review their current policies and
procedures and amend them so as to reflect and facilitate implementation of the Code. Below
listed are links to websites whereby credit unions can access the resources mentioned above.
Useful Websites:
http://www.creditunion.ie/
http://www.centralbank.ie/regulation/industry-sectors/credit-unions/Pages/guidance.aspx
http://www.fsa.gov.uk/Pages/library/index.shtml
http://www.finance.gov.ie/viewdoc.asp?fn=/documents/publications/main5.htm&m=86
http://www.irishstatutebook.ie/home.html
http://www.legislation.gov.uk/browse/ni
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5. The Principles: A Summary
A. Board Leadership
The Board of Directors will provide good governance and leadership by setting and
safeguarding the vision, values, objects and strategic direction of the credit union.
B. Board Accountability
The Board of Directors will provide good governance and will be collectively responsible
and accountable both internally and externally by ensuring the credit union is performing
well and compliant with legal and regulatory obligations.
C. Board Roles and Responsibilities
The Board of Directors will provide good governance by exercising their collective
responsibility through Board meetings that are efficient and effective.
D. Board Review and Renewal
The Board of Directors will provide good governance by ensuring that there are suitable
Board development, recruitment and retirement processes in place and by periodically
reviewing its own and the credit union’s effectiveness.
E. Board Delegation
The Board of Directors will provide good governance by clearly setting out and ensuring
that Officers, Committees, Employees and Volunteers understand their role, legal duties
and their delegated responsibility for decision making.
F. Board Integrity
The Board of Directors will provide good governance by behaving with integrity, acting
in accordance with high ethical standards and by identifying, understanding and
managing conflicts of interest effectively.
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G. Board Transparency
The Board of Directors will provide good governance by leading the credit union in being
open and accountable by identifying those with a legitimate interest in the work of the
credit union and ensuring that there is regular and effective communication with them
about the credit union to its members and others with an interest in the credit union’s
work.
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6. Draft Code of Governance and Good Practice for Credit Unions in Ireland
The main principles of good corporate governance set out below have been used in drafting
the Code and provide the main headings for each section of the Code:
A. Board Leadership
B. Board Accountability
C. Board Roles and Responsibilities
D. Board Review and Renewal
E. Board Delegation
F. Board Integrity
G. Board Transparency
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Key Terminology
The following is a list of definitions of the key terms used in the Code*:
“Act” means the Credit Union Act, 1997, (as amended)
“Board of Directors” means the committee of management or other directing body of a credit
union
“Governance” means procedures, processes and attitudes according to which a credit union is
directed and controlled. The governance structure specifies the distribution of both rights and
responsibilities among the different participants in the credit union such as the board, supervisory
committee, employees, volunteers, members and other stakeholders and lays down the procedure
for decision making
“Order” means the Credit Unions (Northern Ireland) Order 1985 (as amended)
“Rules” mean the Standard Rules for Credit Unions (Republic of Ireland) 2011 Version and the
Standard Rules for Credit Unions (Northern Ireland) 2011 Version
*Definitions of further terms used throughout the Code can be ascribed the meaning
given to them by the Interpretation Section of the Act, Order and Rules and can be
found by consulting same.
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A. BOARD LEADERSHIP
Main Principle:
The Board has and accepts ultimate responsibility for the general control, direction and
management of the affairs, funds and records of the credit union and has primary responsibility
for corporate governance within the credit union at all times.
Supporting Principles:
Role of the Board
The Board of the credit union is responsible for:
The effective, prudent and ethical oversight of the credit union.
Setting the strategic direction of the credit union.
Ensuring the proper management of risk and compliance with the objects, purposes
and values of the credit union (Appendix I) and with all relevant laws, regulations
and requirements of the Central Bank and Financial Services Authority.
The Board has a clear statement of its roles and responsibilities and of key functions which
cannot be delegated and this provides that the Board:
ensures compliance.
sets or approves policies, plans and budgets.
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ensures the solvency, financial strength and good performance of the credit union.
ensures compliance with applicable laws, regulations and Central Bank and
Financial Services Authority requirements.
appoints and evaluates the performance of senior management.
defines and documents the responsibilities of the Board, committees of the Board
and senior management so as to set and maintain a framework of delegation and
internal control to ensure that no single person has unfettered control of the credit
union.
clearly articulates and communicates to all officers and volunteers of the credit
union the corporate governance structure and policies.
The Board has:
the necessary knowledge, skills, experience, expertise, competencies,
professionalism, fitness and probity and integrity to carry out their duties.
a full understanding of the nature of credit union business, activities and related
risks.
a full understanding of their overriding duty, individually and as a Board, to act
reasonably at all times in the interests of the credit union and of its present and
future members.
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demonstrated due diligence in understanding the level of time and commitment
they as individuals will be expected to commit as part of the governing body of
the credit union. Each Director is satisfied that they are provided with sufficient
training to equip them for their role to allow them to give strategic direction to
credit union business at both times of growth or periods of challenge.
an understanding of the credit unions’ financial statements.
The Board:
may delegate authority to committees or senior management to act on behalf of
the Board in respect of certain matters.
has the requisite mechanisms in place to document any delegation and monitor the
exercise of delegated functions.
cannot abrogate its responsibility for any function delegated.
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B. BOARD ACCOUNTABILITY
Main Principle:
The Directors are collectively responsible and accountable for ensuring and monitoring that the
credit union is performing well, is solvent and complies with all its legal and regulatory
obligations and as part of this collective responsibility:
the credit union strives to ensure compliance and transparency with the requirements of
the law, the Central Bank, the Financial Services Authority and the members of the credit
union and, in doing so, takes steps to safeguard the financial stability of the credit union
into the future.
the Board recognises the vital role of members within the credit union. Members have
clearly defined rights and responsibilities and hold the Board to account for the policies
and performance of their credit union.
Supporting Principles:
Compliance
The Board will ensure that the credit union complies with:
the Standard Rules, relevant legislation and the requirements of any regulatory bodies
and in particular that it submits regulatory returns, reports and accounts as required by
Law.
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The requirements of all other authorities and regulations governing its work e.g. Data
Protection Commissioner, Revenue Commissioners, Employment Law, Health and
Safety Legislation. Equality and Equal Status Legislation. The Board has policies,
procedures and reporting mechanisms in place to ensure compliance with applicable
legislation.
The Board will ensure that it is up to date with all legal and compliance requirements and will:
appoint a person to act as Compliance Officer/Committee who maintains a checklist
of requirements in order to comply with its regulatory and legal obligations as well as
internally generated policies and who reports regularly to meetings of the Board on
that compliance as well as any changes to the law or regulation and how those
changes can be implemented.
appoint an experienced member of the Board or senior member of staff to act as
Money Laundering Reporting Officer, to whom all reports of suspected money
laundering offences will be directed, assessed and passed to the relevant authorities,
in accordance with Anti- Money Laundering Legislation.
conduct an assessment of whether it has adequate financial resources proportionate to
the size of the credit union and in accordance with the appropriate regulatory
requirements as part of its strategic planning.
Risk
The Board understands the risks to which the credit union is exposed and:
will take action to mitigate risks identified and monitor risks on an ongoing basis.
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develops and maintains a risk assessment strategy and a disaster management and
recovery plan for the credit union in the event of unforeseen disaster or loss of
key persons.
has a risk assessment policy and business continuity plan in place which outlines
the way in which the credit union could continue to operate and meet its
regulatory requirements in the event of an unforeseen interruption that may
otherwise prevent the credit union from operating normally. The policy will be
thoroughly reviewed on an annual basis.
avoids undertaking activities which might place at undue risk the credit union’s
members, volunteers, staff property, assets or reputation.
obtains advice from professional advisors on all matters where there is a
significant risk to the credit union.
will appoint a Risk Officer/ Risk Committee with sufficient experience and
qualifications having responsibility for oversight and advising the Board on
current risk and future risk strategy.
the risk management function will include identifying, measuring, monitoring,
controlling or mitigating and reporting to the Board on risk exposures.
will ensure through its planning and budgeting processes that the risk
management function has adequate resources necessary to asses risk, including
personnel, access to information technology systems and systems development
resources.
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Internal Audit Function
The Board will act prudently to protect the assets of the credit union and ensure that they
are used to deliver the credit union’s objectives (Appendix I).
The credit union will maintain a sound system of internal control arrangements and
external verification that should be proportionate to the size, complexity and risk profile
of the credit union.
The Board maintains and regularly reviews the credit unions systems of internal controls,
performance reporting, policies and procedures and its own performance as reviewed by
the Supervisory Committee.
The members of the Supervisory Committee shall have no other role within the credit
union.
The Supervisory Committee will report regularly to the Board on any internal control
issues that need to be addressed and will report to members in the Annual Report of the
credit union on same.
The Supervisory Committee:
Monitors the integrity of the financial statements of the credit union ensuring
they give a “true and fair view” of the financial status of the credit union
Monitors compliance with legal and regulatory requirements
Reviews the credit union’s internal controls
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Reviews and monitors the effectiveness of the internal audit activities
Regularly receives and reviews relevant financial information to enable it to
monitor and assess the credit unions financial position
Reports its activities and decisions to the Board and in extenuating
circumstances may notify the Central Bank or Financial Services Authority of
any concern it may have as to the operation of the credit union.
The Supervisory Committee is satisfied that:
the number of members is sufficient to handle the size and complexity of its
business and as prescribed by the Standard Rules, Act/Order
at least one member of the Committee has recent and relevant financial
experience
meetings are held at regular intervals and to coincide with important financial
reporting dates
it is compliant with its main roles and responsibilities which are set out in written
terms of reference and the Standard Rules and Act/Order.
The Board, on receipt of the Auditor's report each year, will discuss the content of the
report and implement any actions necessary. In particular, the Board will action the issues
raised in the “Letter to Those Charged with Governance” as soon as is practicable.
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A review of the provision of external audit services will be conducted at least every five
years with a view to rotation as appropriate.
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C. BOARD ROLES AND RESPONSIBILTIES
Main Principle:
Directors fully understand their duties and responsibilities and the roles and responsibilities of
committees, employees and volunteers are established clearly and included in the policies and
procedures of the credit union.
Supporting Principles
Roles and Responsibilities
All Directors have signed and returned a statement setting out their fiduciary duties and
statutory obligations and the credit union’s expectations of Directors.
Such a statement contains the Director’s obligations to:
Know and support the mission of the credit union
Uphold and value the Operating Principles (Appendix I)
Devote sufficient time to the role of Director and associated responsibilities
Prepare in advance for meetings
Attend each Board meeting unless they are unable to attend due to circumstances
beyond their control and their attendance at meetings shall be evidenced in the
minutes
Maintain confidentiality, act with integrity, and avoid or declare where there may
be a conflict of interest
Fulfil fiduciary and statutory duties
Participate in committees
Promote the credit union in the community and
Comply with the Code
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The Board meets as often as it is appropriate to fulfil its responsibilities
effectively and prudently, ensuring that it makes the most effective use of the
time, skills and knowledge of Directors.
The Board ensures it conducts it work efficiently and receives any information
and advice needed to make sound decisions.
The Board will strive to have a diverse range of skills, experience and expertise to
run the credit union effectively and respond to the challenges they face. The
Board assesses the skills required for any senior post within the credit union and
ensures that senior managers appointed to the credit union have sufficient skills
and qualifications to enable them to properly fulfil the role to which they are
appointed.
Board and Committee members are made aware that they must ensure that they
have at least the basic financial and business skills including the ability to
interpret financial statements. Within three months of taking up their role, each
elected member, volunteer and employee of the credit union is given a formal
induction into the credit union and an ongoing personal and professional
development plan relevant to their role and consummate to the resources available
to the credit union.
The Board appoints a Training Liaison Officer whose duties include carrying out
a training needs analysis for credit union officers and volunteers and to assist in
co-ordinating training programmes.
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Directors receive continuing training at an appropriate League recommended
level, within 18 months of holding office and within a year, will be able to
interpret the management information received as part of their role.
Board papers are received in advance of Board meetings. A detailed agenda of
items for consideration at each Board meeting together with minutes of the
previous Board meeting are circulated to allow the Board adequate time to
consider material. Sufficient and clear supporting papers are also furnished in
advance.
Detailed minutes of all Board meetings are prepared with all decisions,
discussions and points for further actions documented in full. The minutes provide
sufficient detail to evidence appropriate Board attention, the substance of
discussions and outcomes and shall be adopted at the subsequent Board meeting.
Minutes also document the attendance or non attendance of members of the
Board.
Directors are jointly and severally liable for their decisions and any decision
should be taken together and recorded accurately in the minutes of the meeting.
The Board ensure professional advice is sought where necessary in advance of
making significant decisions.
Information of a confidential nature must remain within the confines of the Board
meeting.
The Board has established a conflict of interest register and where a conflict
arises the Board shall ensure that this is noted in the minutes and register.
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The Chairperson
The Board appoints a Chairperson from its own number whose responsibility it is
to provide leadership to the Board and act as a link between elected committees,
employees, volunteers and members.
The position of Chairperson is voted upon by the Board each year at the first Board
meeting following the Annual General Meeting.
The Chairperson attends and chairs all Board meetings.
The Chairperson ensures effective and timely implementation of Board decisions.
The Chairperson leads the Board, encourages active engagement and participation
by all members of the Board.
The Chairperson ensures that new Board members are given a formal induction
into the credit union and are provided with a “mentor” (experienced Board
member) for the first six months who ensures that new directors are provided with
adequate training so that they have the skills and expertise to run the credit union
effectively and respond to the challenges they face as a Board member.
The Chairperson ensures that sufficient time is allowed for discussion of complex
issues.
The Chairperson promotes effective communication between committees,
employees, volunteers, members and stakeholders and upholds the highest
standards of integrity and professionalism in carrying out their obligations.
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The Chairperson will ensure that they are equipped with the necessary knowledge,
skills and experience and/or training required to comprehend each of the
following:
The nature of the credit union’s business, activities and related risks
The credit unions financial statements
Their individual responsibilities and that of the Board.
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D. Board Review and Renewal
Main Principle:
The Board regularly reviews and assesses its own performance and the credit union’s
effectiveness taking any necessary steps to ensure both continue to work efficiently.
Supporting Principles:
Performance evaluation
The Supervisory Committee regularly reviews and assesses Board performance and that of the
Board and committees.
The Board should ensure that:
at least every two years it reflects on its own performance and functioning as a
Board. The Chairperson acts on the results of the performance evaluation by
recognising the strengths and addressing the weaknesses of the Board and
planning accordingly.
the results of the performance evaluation are used as a mechanism to
implement necessary changes and improvements, to highlight appropriate
training programmes and as a guide for director renewal and recruitment.
they, together with Senior Management afford all those involved in the
operation of the credit union the opportunity to develop the skills and
knowledge necessary to operate the credit union successfully.
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Recruitment and Renewal
The Board has a strategy for its own renewal which includes:
a Nominating committee that ensures timely replacement of Directors
resigning or reaching ends of terms of office.
open and transparent recruitment which focuses on the creation of an effective
Board.
Formal and transparent election procedure as prescribed by the Standard
Rules, Act and Order to determine the composition of the Board of Directors.
Directors being subject to election by members and to re-election thereafter at
intervals of no more than three years. A letter of appointment and terms of
reference is provided on election with a broad indication of the time involved
and the expected work load and responsibilities of directors. When a vacancy
arises, the Board may wish to co-opt a Director with particular skills and
experiences *{Cap on length of service akin to that of League Board}.
a Board size that reflects the nature, diversity and scale of the enterprise and
the complexity of the risks faced by the credit union. The Board has the
minimum number of members in line with the Standard Rules and Act/Order.
periodic determination of what new attributes and knowledge are needed and
documented in the form of a role description.
clear documented procedures for joining and stepping down from the Board.
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The Board and Senior Managers take a long term view of the future of the credit union and plan
accordingly. They will ensure that all individuals involved in the running of the credit union
understand the strategies developed and ensure successful implementation of same and will:
implement a succession plan for both elected members and senior management which
will ensure the continuity of the business strategy and smooth operation of the credit
union.
ensure the strategic direction of the credit union is documented and outlines the business
objectives, the actions necessary to carry out the plan and the resources required to do
this.
hold a strategic planning meeting at least once a year.
The Board will periodically carry out strategic reviews of all aspects of the credit unions
operations and use their findings to promote change and innovation and ensure that the credit
union is continuing to meet member needs and the needs are being met in the most effective way.
Such reviews will cover areas mentioned in the Code including:
Board effectiveness
staff and volunteer structures
Internal controls
committees.
The results of such reviews will be used by the Board to:
inform strategic planning
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make necessary changes and improvements to operational activities
enhance the overall effectiveness and governance of the credit union.
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E. Board Delegation
Main Principle
The Board has set out the functions of committees, officers, volunteers and employees in clear
delegated authorities and monitor their performance.
Supporting Principles:
Clarity of Roles and Effective Delegation
The relevant legislation partly defines the role of the Chairperson, Vice
Chairperson, Treasurer and Secretary.
Where the Board has delegated specific responsibility to officers of the credit
union, ultimate responsibility rests with the Board collectively.
Delegations comply with the Standard Rules and Act/Order.
Delegations are always in writing and clearly set limits on matters such as
expenditure, power to make decisions and decisions that can be made.
Delegations are written in Board minutes, committee terms of reference and
job descriptions and volunteer code of practice.
The Board will ensure that they have the requisite human resource policies
and procedures in place.
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The Board may set up panels or other bodies to assist its work and any such
body so established must have clear written terms of reference.
Any authority delegated remains in ultimate control of the Board and is
subject to regular monitoring by the Board to include the receipt of regular
reports and minutes from committee meetings.
the Board has established a formal schedule of matters specifically reserved to
it for decision in accordance with best practice and applicable legislation.
Committees of the Board
In relation to activities of committees of the Board:
Agendas and all relevant materials for meetings are circulated to all
committee members in a timely manner and in advance of the meeting.
Detailed minutes of all committee meetings are prepared recording time of
meeting, location, attendees, key discussions and decisions.
In appointing committee members, the Board shall satisfy itself as to the
relevant expertise, skill of members and ability to commit appropriate time to
the committee.
Committee members shall attend meetings regularly.
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Cross committee membership shall be managed by the Board to ensure
compliance with legislation and that no one individual exercises excessive
influence or control.
Committee members shall be reviewed by the Board and are subject to
appointment on an annual basis.
Committees shall report regularly to the Board and minutes of committee
meetings shall be circulated to the Board in advance of Board meetings.
The authority, functions, membership and reporting lines of committees as
well as meeting frequency are clearly outlined in written terms of reference
established by the Board and as prescribed by relevant legislation.
These terms of reference shall be reviewed annually by committees to ensure
continuing appropriateness and any recommended revisions shall be provided
to the Board.
The Board has established clear lines of communication and reporting
procedures to enable an accessible and participative structure.
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F. Board Integrity
Main Principle
The credit union strives to maintain the integrity of elected officers, volunteers, employees and
the credit union as a financial co-operative and in doing so aims to maintain accountability to all
of its stakeholders.
The Board acts in accordance with high ethical standards and ensures that any conflicts of
interest are declared and properly dealt with.
Supporting Principles:
Limit on Remuneration
Legislation precludes Directors from making any personal gain from their role
on the Board and any conflict of interest arising must be declared and entered
on the register kept for this purpose.
Directors must ensure to avoid remuneration, private benefit or profit from
their position on the Board.
The Board have procedures for Directors and committee members to claim
reimbursement of expenses necessarily incurred by a Director or committee
member in the course of performing any service on behalf, or for the benefit,
of the credit union.
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Conflicts of Interest
The Board and senior management will act at all times in the interest of the credit union by
complying with legal duties and behavioural standards, avoiding conflicts of interest and acting
honestly and in good faith.
Directors identify and promptly declare any actual or potential conflict of
interest.
The Board have procedures for Directors to declare actual or potential
conflicts of interest and such declarations are made at the earliest possible
opportunity and recorded in Board minutes.
The credit union maintains a conflict of interest register that documents all
potential conflicts of interest between officers and the credit union/ members
of the credit union.
Probity
The Board have clear guidelines for receipt of gifts or hospitality by directors to include a written
policy that:
defines what is and is not acceptable
requests that directors declare all gifts received or hospitality accepted while
on credit union business or from people or organisations connected with the
credit union
such declarations are to be recorded in the Board minutes
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states that directors should under no circumstances accept any gifts or
hospitality where in doing so could be perceived as being likely to influence
the decisions of the Board.
Code of Conduct
The credit union provides a standard Code of Ethics (Appendix II) for all elected Directors,
Supervisors, employees and volunteers which:
outlines what is proper and improper behaviour
provides Directors with clear guidelines as to their collective standard of
behaviour, responsibilities and best practice in fulfilling their obligations
reflects the powers of the Directors contained in the Act/Order and Standard
Rules.
All elected officers, employees and volunteers of the credit union have signed a
Declaration of Fidelity and Secrecy Pledge (Appendix III).
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G. Board Transparency
Main Principle
The Board are open, responsive and accountable to their members and other stakeholders and
will maintain a formal and transparent strategy for engaging its key stakeholders in the decisions
and development of the credit union as a financial co-operative.
Supporting Principles:
Communication and Consultation
The Board identifies stakeholders and ensures that:
it conducts a regular review of who the key stakeholders in the credit union
are and how their needs are to be met.
stakeholders have a clear understanding of the Boards role in upholding the
operating principles (Appendix I) and social goals of the credit union.
there is a strategy for regular and effective communication with shareholders
to ensure that:
their views are taken into account in the Board’s decision making
they are informed and consulted on the Boards plans and any
developments affecting them
there is a procedure for dealing with feedback and complaints
a fair system is in place for dealing internally with accusations from
whistle blowers so that honest individuals do not feel threatened in the
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event that it is necessary to make an allegation. Employees and
volunteers are made aware of these procedures
the credit union’s performance is reported to stakeholders.
The credit union must hold an Annual General Meeting as required by the
applicable legislation and the Board ensures that the Annual General Meeting
of the credit union is actively promoted to members to ensure the highest
possible level of member participation.
Openness and Accountability
The Board is open and accountable to stakeholders about the work it does and the governance of
the credit union by:
ensuring that the credit union produces an Annual Report and accounts that
comply with relevant legislation which are circulated to members and widely
available and accessible.
reporting attendance figures for Board meetings, details of committee
membership, a summary of training progress and achievements in the annual
report of the credit union.
The Board ensures that the credit union upholds a commitment to be open and accountable at all
levels by:
being clear about what information is available and that which must remain
confidential.
complying with reasonable requests for information about the credit union and
any access request made under Data Protection Legislation. Whilst the minutes
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of the Board remain confidential to the general membership, the credit union
will comply with all reasonable outside requests for information in line with its
statutory obligation to do so.
being open about any strategic reviews conducted by the Board.
ensuring that all codes and standards to which the credit union subscribes are
publicly stated and available upon request.
appointing one or more of its number to oversee the credit union’s
implementation of the Code of Governance and Best Practice for Credit Unions
and will produce an annual statement outlining its implementation of Code to be
made available to members in the Annual Report, website or any other
published material.
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The Code: Principles of Governance and Good Practice [TO BE EXECUTED ANNUALLY BY THE BOARD OF DIRECTORS OF THE CREDIT UNION]
We, the Board of Directors, of XYZ Credit Union Limited, commit to:
1. Providing Leadership by:
Setting and safeguarding the vision, values, objects and strategic direction of the
credit union.
Managing, supporting and holding to account officers, volunteers and all who act
on behalf of the credit union.
2. Being Accountable by:
Internally and externally ensuring the credit union is performing well and is
compliant with legal and regulatory obligations.
Identifying major risks for the credit union and deciding on ways to manage the
risk.
Identifying those with a legitimate interest in the work of the credit union and
ensuring that there is regular and effective communication with them, the
members and any others with an interest in the credit union’s work.
3. Working Effectively by:
Exercising our collective responsibility through Board meetings that are efficient
and effective.
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Clearly setting out and ensuring that Officers, Committees, Employees and
Volunteers understand their role, legal duties and their delegated responsibility for
decision- making.
Ensuring that suitable Board development, recruitment and retirement processes
are in place and by periodically reviewing its own and the credit union’s
effectiveness.
4. Behaving with integrity by:
Acting in accordance with high ethical standards.
Identifying, understanding and managing conflicts of interest effectively.
Signed:
Dated:
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7. Next Steps
With regard to progressing on the development and implementation of the Code, the
following steps are recommended:
The consideration of a draft Code by the League Board at the Strategy meeting scheduled
for September 24 2011.
Consultation with stakeholders/external review.
Formal documentation of the Code and presentation to League General Meeting with
appropriate motion.
Implementation of Code.
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APPENDIX I
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CREDIT UNION OPERATING PRINCIPLES
Statement of Credit Union Operating Principles as adopted at Annual General Meeting of the
Irish League of Credit Unions 1984.
INTRODUCTION
These Credit Union Operating Principles are founded in the philosophy of co-operation and its
central values of equality, equity and mutual self-help. At the heart of these principles is the
concept of human development and the brotherhood of man expressed through people working
together to achieve a better life for themselves and their children.
1. OPEN AND VOLUNTARY MEMBERSHIP
Membership in a credit union is voluntary and open to all within the accepted common
bond of association that can make use of its services and are willing to accept the
corresponding responsibilities.
2. DEMOCRATIC CONTROL
Credit union members enjoy equal rights to vote (one member, one vote) and participate
in decisions affecting the credit union, without regard to the amount of savings or
deposits or the volume of business. The credit union is autonomous, within the
framework of law and regulation, recognising the credit union as a co-operative
enterprise serving and controlled by its members. Credit union elected officers are
voluntary in nature and incumbents should not receive a salary for fulfilling the duties for
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which they were elected. However, credit unions may reimburse legitimate expenses
incurred by elected officials.
3. LIMITED DIVIDENDS ON EQUITY CAPITAL
Permanent equity capital where it exists in the credit union receives limited dividends.
4. RETURN ON SAVINGS AND DEPOSITS
To encourage thrift through savings and thus to provide loans and other member services,
a fair rate of interest is paid on savings and deposits, within the capability of the credit
union.
5. RETURN OF SURPLUS TO MEMBERS
*The surplus arising out of the operations of the credit union after ensuring appropriate
reserve levels and after payment of dividends belongs to and benefits all members with
no member or group of members benefiting to the detriment of others. This surplus may
be distributed among the members in proportion to their transactions with the credit
union (interest or patronage refunds) or directed to improved or additional services
required by the members.
* Expenditure in credit unions should be for the benefit of all members with no member
or group of members benefiting to the detriment of other.
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6. NON-DISCRIMINATION IN RACE, RELIGION AND POLITICS
Credit unions are non-discriminatory in relation to race, nationality, sex, religion and
politics within the limits of their legal common bond. Operating decisions and the
conduct of business are based on member needs, economic factors and sound
management principles. While credit unions are apolitical and will not become aligned
with partisan political interests, this does not prevent or restrict them from making such
political representations as are necessary to defend and promote the collective interests of
credit unions and their members.
7. SERVICE TO MEMBERS
Credit union services are directed towards improving the economic and social well-being
of all members whose needs shall be a permanent and paramount consideration rather
than towards the maximising of surpluses.
8. ON-GOING EDUCATION
Credit unions actively promote the education of their members, officers and employees,
along with the public in general, in the economic, social, democratic and mutual self-help
principles of credit unions. The promotion of thrift and the wise use of credit, as well as
education on the rights and responsibilities of members are essential to the dual social
and economic character of credit unions in serving member needs.
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9. CO-OPERATION AMONG CO-OPERATIVES
In keeping with their philosophy and the pooling practices of co-operatives, credit unions
within their capability actively co-operate with other credit unions, co-operatives and
their associations at local, national and international levels in order to best serve the
interests of their members and their community. This inter-co-operation fosters the
development of the co-operative sector in society.
10. SOCIAL RESPONSIBILITY
Continuing the ideals and beliefs of co-operative pioneers, credit unions seek to bring
about human and social development. Their vision of social justice extends both to the
individual members and to the larger community in which they work and reside. The
credit union ideal is to extend service to all who need and can use it. Every person is
either a member or a potential member and appropriately part of the credit union sphere
of interest and concern. Decisions should be taken with full regard for the interests of the
broader community within which the credit union and its members reside.
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APPENDIX II
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Code of Ethics
1 Introduction
This Code of Ethics outlines the fundamental principles of personal and business conduct for all
directors, supervisors, committee members, employees and volunteers in credit unions affiliated to the
Irish League of Credit Unions (League) Based on the co-operative values of equality, equity and mutual
self-help as specified in the Credit Union Operating Principles, credit unions are directed towards serving
the best interests of their members and in achieving the credit union’s mission and goals at all times.
The essential components of this Code are:
Service to Members
Democracy
Integrity
Confidentiality
Social Responsibility
While individual credit unions may adopt additional measures as they see fit, the standards established
in this Code are the minimum standards of ethical behaviour to be observed by all League affiliated
credit unions and their directors, supervisors, committee members, employees and volunteers.
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2 Service to members
In the spirit of the core co-operative principles of equality, equity and mutual self-help, the credit union
and its directors, supervisors, committee members, employees and volunteers will act with integrity,
openness and honesty in all relationships, dealings and transactions with members.
Every director, supervisor, committee member, employee and volunteer will perform their duties
and act with utmost professionalism in a courteous manner, and will treat all members equitably
and with respect at all times.
Every director, supervisor, committee member, employee and volunteer will maintain member-
confidence in both the credit union and in the position to which the person has been elected or
appointed and will undertake any training necessary in order to gain the skills, qualifications,
knowledge and experience to perform their duties in a competent manner.
Credit union services are directed towards improving the economic and social well-being of all
members, whose needs shall be a permanent and paramount consideration, rather than towards
the maximising of surpluses.
3 Democracy
Democracy is a central feature of the co-operative philosophy. The credit union’s directors and
supervisors are elected to their posts by the members of the credit union, and such positions are
voluntary in nature.
The credit union is non-discriminatory in relation to gender, marital status family status, race,
nationality, religion or political opinion, sexual orientation, disability, age, socioeconomic status, or
membership of the Traveller community in all dealings with members and in all business dealings.
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In order to encourage open and voluntary membership, all elections to fill vacancies on the Board of
directors or supervisory committee will be conducted in an open and transparent manner, in
accordance with the law and standard rules.
Membership of the credit union’s Board of directors, supervisory committee and other committees,
insofar as possible, shall reflect the diversity of the credit union’s common bond and of the wider
community.
The credit union’s policies and procedures will:
Encourage representation and participation in credit union affairs from all demographic sections
of the credit union’s common bond;
Actively seek to recruit new volunteers to participate in committee and other volunteer work;
Respect the work that individuals and committees carry out in fulfillment of their legal and
moral duties;
Encourage different perspectives and respect diversity of opinion.
No director, supervisor, committee member or volunteer will publicly utilise their credit union
voluntary work, and no employee shall utilize their position, in connection with the promotion
of partisan politics, religious matters, or positions on any issue not in accordance with the
official position of the credit union.
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4 Integrity
The credit union’s directors, supervisors, committee members, employees and volunteers will
behave with dignity, respect and honesty in dealings:
— with members of the credit union;
— with any others with whom the credit union interacts.
The credit union’s directors, supervisors, committee members, employees and volunteers will
behave with dignity, respect and honesty in respect of all internal credit union matters.
Each director, supervisor, committee member, employee and volunteer will avoid
circumstances in which personal interests conflict, or appear to conflict, with the interests of
the credit union or its members.
In some circumstances a director, supervisor, committee member, employee or volunteer may
directly or indirectly hold an interest that conflicts/may conflict with the credit union’s interest.
In all such circumstances, and in order to protect both the individual and the credit union in
exercising objective decisions, such interest must be declared in advance. The director,
supervisor, committee member, employee or volunteer shall be required to absent themselves
from any meeting at which a decision may be taken by the credit union that relates to this
personal conflict.
Where a director of the credit union has a personal relationship¹ with an employee of the credit
union, he or she will absent themselves from all meetings or discussions that relate to
employee matters.
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External positions held or involvement by a director, supervisor, committee member, employee
or volunteer in outside activities must not:
— give rise to any real or apparent conflict with the members’ interests;
— adversely reflect on the credit union; or
— interfere with an individual’s job/role performance.
The credit union’s members entrust the resources used by the credit union to the Board of
directors. The Board is responsible for ensuring that all of the credit union’s resources,
including the credit union’s name, emblem, physical property, services, time, information, and
intellectual property, are properly allocated and used.
.
The credit union’s directors, supervisors, committee members, employees and volunteers shall
endeavour to ensure that the credit union maintains its books and records with integrity,
recording in an accurate and timely manner all transactions.
Directors, supervisors, committee members, employees and volunteers will conduct their own
financial affairs in a prudent manner, and will avoid financial situations that could reflect
unfavourably on themselves, the credit union or its members.
No director, supervisor, committee member, employee or volunteer may solicit
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or accept gifts, sponsorships, hospitality or service that would compromise, or give the
appearance of compromising, their position or any decision taken by or on behalf of the credit
union.
All directors, supervisors, committee members, employees and volunteers will be reimbursed
for legitimate expenses incurred in the course of carrying out their duties on behalf of the
credit union.
The credit union’s directors, supervisors, committee members, employees and volunteers will
comply with all laws, standards rules, the Credit Union Operating Principles and other
regulations applicable to credit unions and their operations.
Where it is suspected that a breach of any law, standard rule, code of practice or other
regulation has occurred, it must be reported to the appropriate individual or committee in
accordance with the credit union’s policies and procedures. If it is appropriate to do so, the
matter should also be reported to the League and to the Central Bank or Financial Services
Authority or other relevant statutory authority.
5 Confidentiality
Confidentiality applies to all information obtained from members and those with whom the
credit union does business and from those within the credit union. All such information may
only be used for the purpose for which it is intended in the course of credit union business and
must not be used for the personal benefit of any individual(s).
The credit union’s directors, supervisors, committee members, employees and volunteers have
a duty to safeguard confidential information obtained
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in the normal course of business, and, therefore, will not disclose or permit to be disclosed any
information that concerns an account or transaction of a member with, or any other business
of, the credit union.
Confidentiality applies to all information obtained during the course of working with the credit
union, and shall continue to apply after the relationship with the credit union has ceased
(whether that relationships in the capacity of employee, volunteer or otherwise).
This duty of confidentiality involves not divulging information to third parties, (including
a member of the family of the member), other than in the following circumstances:
if or to the extent that it is necessary for the proper conduct of the business of the
credit union; or
which is required by a court in connection with any proceedings; or
which is made with the consent of the person to whom the information relates and,
where not the same person, of the person from whom the information was obtained;
or
which, in a case where the credit union is acting or has acted as an agent for a person, is
made to that person in respect of that capacity; or
where the information is in the form of a summary or collection of information and is so
framed as not to enable information relating to a particular member to be ascertained
from it; or
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which, in the opinion of the Registrar or the relevant regulatory authority, is necessary
for the protection of the funds of shareholders in or depositors with the credit union or
to safeguard the interests of the credit union; or
which is made to the Registrar or the League for the purposes of their functions in
relation to credit unions.
The credit union’s directors, supervisors, committee members, employees and volunteers must
sign a declaration of confidentiality and secrecy in accordance with the standard rules, and
must comply with the credit union’s policies and procedures.
6 Social Responsibility
In accordance with the Credit Union Operating Principles, credit unions seek to bring about human,
social and community development. Since every person is either a member or a potential member,
decisions taken by the Board of directors will be made having full regard for the interests of the broader
community within which the credit union and its members reside.
7 Compliance with Code
The credit union’s directors, supervisors, committee members, employees and volunteers are fully
committed to ensuring that all business decisions and actions comply with applicable laws, standard
rules, codes of practice and regulations, and to observing the highest standards of behaviour in
accordance with best practice.
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The credit union will ensure that:
All directors, supervisors, committee members, employees and volunteers will be made aware
of this Code.
No director, supervisor, committee member, employee and volunteer will be asked to do
anything that would contravene this Code.
Queries and concerns arising under this Code will be dealt with promptly in accordance with
the credit union’s policies and procedures.
8 Consequences for breach of Code
Compliance with this Code protects both the credit union’s members and those working within the
credit union. All credit unions must have internal procedures in place to facilitate compliance with this
Code and in pursuing breaches of this Code. Breach of this Code will be dealt with in accordance with
the credit union’s policies and procedures.
9 Monitoring
This Code shall be reviewed from time to time, taking into account developments in the credit union
movement, the wider financial services sector, member expectations and input from other relevant
bodies and institutions.
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APPENDIX III
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I R E L A N D
DECLARATION OF FIDELITY AND SECRECY
................................................................................................ Credit Union Limited
[TO BE EXECUTED ANNUALLY BY EVERY OFFICER AND VOLUNTARY ASSISTANT OF THE CREDIT UNION]
I, (print name) ..............................................................................................................................................
of (print address) .......................................................................................................................................
do hereby solemnly and sincerely declare that:
(a) I will at all times keep secret and never divulge, save in accordance with law or these rules,
any of the affairs of the credit union or of its members or officers that may come to my knowledge;
(b) I will never do or say anything likely to injure the credit union;
(c) I will endeavour to make myself acquainted with the law in relation to the credit union
and the rules of the credit union;
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(d) I will make known without delay to the Board of directors or to the supervisory committee any
fraud or irregularity against the credit union; and
(e) I will diligently perform, to the best of my ability, the duties of any office assigned to me in
the credit union.
Signed: .............................................................. Date:.................................................
Print name:.......................................................
Witnessed:......................................................... Date:..................................................
Print name:......................................................
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