General

The Centrale Bank van Suriname (CBvS) strives to maintain the stability of the financial system, as stated in Article 9 of the Central Bank Act 2022. It aims to achieve this goal by carrying out the supervisory tasks stated in Article 10 of the aforementioned law. According to this article, the CBvS has, among other tasks, the duty of supervising the banking and credit system, the pension and insurance system, currency exchange providers, money transfer remittances from and to foreign countries and the capital market, with the applicable legislation and regulations taken into account. Supervision focuses on the soundness and integrity of the institutions in these sectors, for which the Supervision Directorate is responsible.

This Directorate consists of:

• a secretariat;
• a Staff Unit;
• the Credit Union Supervision Department;
• the Pension Funds Supervision Department;
• the Banking, Money Transaction Offices and Capital Markets Supervision Department;
• the Insurance Supervision Department;
• the Financial Stability Department.

The Banking and Credit System Supervision Act 2011 (BCSS 2011) forms the basis for the technical implementation of the supervision on credit institutions. According to the BCSS 2011, a credit institution is a legal person whose business mainly consists of obtaining immediately or repayable funds, whether or not in the form of savings or against the issue of one or more types of debt securities, and the extension of loans or investments on its own account. Based on this definition, credit unions are classified as credit institutions and supervision on credit unions has been delegated to the Credit Union Supervision Department.

Considering the definition, a credit union is more than a financial institution. A credit union is a democratically managed organization on a cooperative basis and does not have a profit as main goal. Members pay an entrance fee to become a member. This enables the members to take ownership of the credit unions and grants them the right to elect a Board that sets the policy. An executive director may also be appointed.

Subsequently, the names of the supervised Credit Unions are published annually in the first half of January in the National Gazette Of The Republic Of Suriname.

Establishment of a credit union

The establishment of a credit union must be done through a legal process.

Pursuant to the BCSS 2011, a license from the CBvS is required to carry out the activities of a credit union, with the legal form of a cooperative association. With regard to Article 3 of the BCSS 2011, this license must be requested from the CBvS by registered letter.

In addition, the documentation listed in Article 3 of the BCSS 2011 must be submitted for approval of the CBvS. Besides, the documents mentioned in Article 3, the CBvS may also require further information to be provided. Articles 2, 4 to 11 must also be considered for the establishment of a credit union. Furthermore, The Cooperative Associations Act 2017, the Annual Accounts Act 2017 and the Act on preventing and combating Money Laundering and Terrorism Financing 2022 must also be taken into account.

The license application process

Before a credit union is established, documents will have to be prepared. This may take some time. In addition, a Board must be formed consisting of at least five members. A Supervisory Committee (supervisory body) will also have to be formed. Only members of the credit union can staff these bodies. The names and functions of these persons must also be provided to the Bank. In accordance with Article 19 paragraph 2 of the BCSS 2011, permission from the CBvS is required for the staffing of the aforementioned bodies. Before permission is granted, the members of the Board and the Supervisory Committee and if present the director will undergo a fit and proper test, in which the availability and time, the importance of the institution and independence, professional competence, financial soundness, personal characteristics and the integrity are tested by completing an application. Also, assessment and introductory interviews are held.

Furthermore, a preliminary investigation must be carried out, demonstrating that the credit union will be viable. The results of this investigation must be included in a business plan, among other things. This plan should also include the following:

• The goal and vision, including the need for establishment, activities and target groups.
• The staffing.
• The segregation of duties (front office, back office, internal audit and compliance officer).
• An organization chart.
• The procedure regarding the manner and frequency of reporting to management.
• A minimum number of members of 250 to establish a viable credit union.
• Financial projections for the first three years of operation, consisting of a balance sheet, income statement and cash flow statement. This must also include a forecast of the expected solvency and liquidity position in accordance with the applicable standards of the CBvS.
• Risk management process (including automation and security).
• The competitive position of the credit union.
• Name of the external auditor.

After all documentation is submitted in accordance with Article 3 of the BCSS 2011, the CBvS will proceed with the assessment. Furthermore, costs will be charged with regard to the license application.

When the documents have been approved and the members of the Board and the Supervisory Committee have received permission from the CBvS, the license is issued by means of an order.

Hereafter, the credit union will have to comply with the monthly/quarterly and annual reporting obligation. Credit unions are also institutions of public interest, which means that annual accounts must be prepared in accordance with the Annual Accounts Act 2017.

Supervision on credit unions

The supervision on credit unions consists of:

• prudential supervision that focuses on the financial structure. The aim is to create a healthy credit union sector in order to protect the entrusted funds and to enhance the trust of the members in the institutions;
• integrity supervision that focuses on:
  • corporate governance (good governance), which relates to honest and expert directors, who formulate and implement responsible policy for the institutions based on provided guidelines;
  • combating Money Laundering and Terrorism Financing (ML/FT). The aim here is to provide credit unions with a minimum framework to adequately and proactively combat ML/FT by identifying, assessing, investigating and taking actions to mitigate these risks.

Furthermore, supervision is conducted through off-site monitoring and on-site inspections:

• Off-site monitoring

After a credit union is granted a license to, the institution must report on a regular basis, in a form prescribed by the CBvS (off-site monitoring). The off-site monitoring consists of analyzing these reports, which is carried out periodically (monthly, quarterly, semi-annually, annually) based on the prescribed reporting statements, instructions and guidelines. The results of these analyses act as a warning signal for possible problems, whereas, it may be necessary to write a letter or arrange a meeting. In addition, periodic meetings are held with the aim of keeping the supervisor abreast of developments within the institutions.

• On-site inspection

During the on-site inspections, the business operation and management of the institution are assessed on the spot based on its books and records. The basis of this is the off-site monitoring.

Termination of supervision

Liquidation of a credit union

If a credit union is no longer viable and/or will no longer achieve its purpose, it must be liquidated. A credit union can be dissolved by administrative decision or by a decision of the sub district court. Once all formalities have been complied with, in accordance with the laws and regulations as well as the articles of association, the supervision is terminated and the credit union is dissolved, followed by the removal of the credit union from the register of the CBvS.