Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697629696005.pdf (Antigua and Barbuda)
OVERVIEW Sectorial Overview P1 Capacity Building P2 PERFORMANCE FACTORS P3 Protection P3 Effective Financial Structure P3 Asset Quality P3 Liquidity P 4 Risk Factors P5 WAY FORWARD P5 APPENDICES P6-P8 SECTOR OVERVIEW VOLUME .

1 MARCH 2023 OVERVIEW (CREDIT UNIONS) Sectoral Overview For the period ended December 31, 2022, there were eight (8 credit unions registered within the jurisdiction of Antigua and Barbuda.

Of these institutions, six (6) were considered to be open bond and two (2) closed bond.
Total membership within the sector as at December 31, 2022 amounted to 43,298 up from 41,681 the previous comparable period.
For the period under review, the total asset base within the sector amounted to $558.5M an increase of $69.8M or 14.3% over the previous REG # NAME OF CREDIT UNION 20 3 6 4 23 9 25 24 Antigua Public Utilities Authority Co- operative Credit The Christian Co-operative Credit Union Community First Co-operative Credit Union Antigua and Barbuda Police Co-operative Credit Union The Antigua and Barbuda Seventh Day Adventist Co-operative Credit Union St John’s Co-operative Credit Union People’s Co-operative Credit Union Wesleyan Holiness Co-operative Credit Union year.
Of the consolidated outturn for the period under re- view, two institutions accounted for approximately 95% of the asset base.

Based on the Financial Services Regulatory Com- mission’s Risk Based Supervisory Framework, these two credit unions were considered systemically important financial insti- tutions (SIFIs).

CO-OPERATIVE SECTOR NEWSLETTER 1 THE FINANCIAL SERVICES REGULATORY COMMISSION NEWSLETTER SECTOR OVERVIEW VOLUME .
1 MARCH 2023 Capacity Building In 2022, the Commission facilitated a training in corporate governance for board members and other volunteers within the sector.

This training was spearheaded by the Antigua and Barbu- da Co-operative League.

Performance Factors Protection In accordance with legislative require- ments, the PEARLS Framework was used to assess the performance of the sector during the review period.
In relation to Protection, the P6 (solvency ratio) on a consolidated basis, was above the mini- mum 111%.

Indicatively, on a consoli- dated basis the minimum standard was met in that there was protection for member savings and shares in the event of liquidation as at December 31, 2022.

BANKS AND NON-BANKS DIVISION NEWSLETTER 2 THE FINANCIAL SERVICES REGULATORY COMMISSION NEWSLETTER SECTOR OVERVIEW VOLUME .
1 MARCH 2023 Effective Financial Structure Regarding the Effective Financial Struc- ture, the E1 ratio of net loans to total assets was within the Pearls ratio range of 70-80%.

Other Effective Financial Structure ratios which showed compli- ance with the Pearls standard included both the institutional and net institu- tional capital to total asset ratio.
Outli- ers though were observed in relation to the savings deposits to total assets as this amounted to 84.3% or 4.3 percent- age points above the Pearls E5 ratio maximum.

Another outlier was ob- served in relation to the E7 ratio, Mem- bers Shares/Total Asset which was 6.9 percentage points below the Pearls Minimum.

This latter development can be considered positive and was indica- tive of the fact that members’ deposits remain the primary funding source for the credit unions’ assets.
Asset Quality Lending was the significant activity with- in the sector for the period under re- view.

Indicative of this development the sector remained susceptible to credit risk.

This risk factor though appeared to be satisfactorily managed at the consoli- dated bases.

As at December 31, 2022, loans and advances amounted to $422.1M or 75.5% of the total asset base.
The majority of the credit was granted to private households and these credits were concentrated in the categories house and land purchases and other personal loans.

Credit for distributive/wholesale retail trade was the second largest economic sector to which loans were granted.

Deposits at other financial institutions which ac- counted for 14.1% of the total assets was the second largest asset compo- nent followed by investments which accounted for 7.8%.
On a consolidated basis, the level of delinquent loans to the gross loans portfolio was slightly above the 5.0% maximum.

Rate of Return Performance indicators showed that for the period ended December 31, 2022, BANKS AND NON-BANKS DIVISION NEWSLETTER 3 THE FINANCIAL SERVICES REGULATORY COMMISSION NEWSLETTER SECTOR OVERVIEW VOLUME .

1 MARCH 2023 the sector recorded an unaudited surplus of $8.3M up from $6.0M the previous year.
This development was indicative in part of a lower level of provisioning expense for doubtful debt in 2022.

Of the rate of return ratios, R1- Loan Income to Loan Portfolio of 8.0% was consistent with what obtained in the market.

Further the Operating Ex- pense to Total Assets ratio (R10) of Liquidity Over the review period, the sector maintained satisfactory levels of li- quidity.

No immediate liquidity stress points were observed as at December expense 3.2% was below the limit of 5.% or less.
In relation to gross income, the represented operating 49.8% or 5.2 percentage points below the tolerable limit of 55%.

The Return on Assets (R13) and the Return on Equity (R14) ratios were 1.5% and 12.3% respectively.

Shares was 25.5% or 10 percentage points above the Pearls recommend- ed total.

Further, the L2 ratio which measures Liquid Reserves/ Total De- posits & Withdrawable Shares was 22.9% or 12.9% above the recom- mended level.
The Non-earning liquid Assets/Total Assets ratio (L3) of 1.2% was 20 basis points above the maxi- mum level of 1.0%.

31, 2022.

Of note for instance , the L1 ratio Liquid Assets -Short term Paya- bles/ Total Deposits & Withdrawable BANKS AND NON-BANKS DIVISION NEWSLETTER 4 THE FINANCIAL SERVICES REGULATORY COMMISSION NEWSLETTER SECTOR OVERVIEW VOLUME .

1 MARCH 2023 Risk factors Credit risk remain the primary risk fac- tor affecting the sector as lending is the significant activity.
Though the level of delinquency was above the prudential standard, indications are that on a con- solidated basis, there is a primary framework to monitor and manage this particular risk factor.

On a consolidated basis, credit risk was assessed as having a moderate inherent risk level.

Market risk was assessed as low as at the period under review.
Of note for- eign exchange risk was low given the Way Forward The credit union sector will continue to play a critical role fostering financial in- clusion within the jurisdiction of Antigua and Barbuda.

Further growth is envis- aged in relation to increased member- ship as well as financial activities within the sector.

This growth will be driven in part by the ongoing post covid-19 recov- primary currency exposure both for the assets and the liabilities.
Notwithstand- ing the holding of government issued treasury bills and bonds both govern- ment and corporate, price risk was as- sessed as low.

Interest rate risk was also assessed as low given the pricing structure for the assets and liabilities of the credit unions which is within the institutions control.
Further, rates with- in the domestic financial market are not volatile and there is a large degree of convergence in pricing structure for both loans (except in the case of money services business) and deposits across all financial institutions.

ery of the macroeconomy of Antigua and Barbuda.

Internally work is expected to continue on the review of the primary legislation and regulations governing the sector.
BANKS AND NON-BANKS DIVISION NEWSLETTER 5 THE FINANCIAL SERVICES REGULATORY COMMISSION NEWSLETTER SECTOR OVERVIEW VOLUME .
1 MARCH 2023 APPENDIX A ASSET ITEMS ( $M) ASSET ITEMS DEC-19 DEC-20 DEC-21 DEC-22 Cash on hand Deposits at other Financial Institutions 7.2 8.9 7.7 6.5 31.1 41.3 52.4 78.7 Loans Investments Fixed Assets Other Assets 311.8 339.2 385.2 422.1 39.6 38.0 37.8 43.5 16.4 16.6 7.6 24.5 2.4 3.3 4.2 4.0 Provision for Loan Loss 12.6 7.6 16.1 20.9 TOTAL ASSETS 396.0 439.8 488.6 558.5 APPENDIX B SELECTED LIABILITIES AND CAPITAL ITEMS ($M) CAPITAL & LIABILITIES DEC-19 DEC-20 DEC-21 DEC-22 Deposits Borrowings Capital and Reserves TOTAL CAPITAL & LIABIL- ITIES Did you know….. 333.3 368.0 414.5 470.7 3.9 3.8 3.7 8.8 55.4 64.5 66.5 75.0 396.0 439.8 488.6 558.5 The risk profile of a credit union or its level of systemic importance impact the frequency of onsite visits by the Commission.
BANKS AND NON-BANKS DIVISION NEWSLETTER 6 THE FINANCIAL SERVICES REGULATORY COMMISSION NEWSLETTER SECTOR OVERVIEW VOLUME .
1 MARCH 2023 APPENDIX C SELECTED INCOME AND EXPENSE ITEMS ($M) INTEREST INCOME AND EXPENSE Interest Income Interest on Loans Interest on Investments Interest Expense Interest paid on Deposits Interest paid on Borrowings Regionally Net Interest Income Non-Interest Income Fee and Commission Income Dividend Income Other Income Non-Interest Expenses Salaries and Benefits Occupancy & Maintenance Expenses Provision for Losses NET SURPLUS/(DEFICIT) DEC-19 28.0 27.2 DEC-20 25.5 DEC-21 33.0 DEC- BANKS AND NON-BANKS DIVISION NEWSLETTER 7 THE FINANCIAL SERVICES REGULATORY COMMISSION NEWSLETTER SECTOR OVERVIEW VOLUME .
1 MARCH 2023 APPENDIX D SELECTED PEARLS RATIOS SELECTED PEARLS RATIOS GOAL DEC-22 Protection Effective Financial Structure Net Loans/Total Assets Liquid Investments/Total Assets 70-80% 16% Financial Investments /Total Assets Max 2% Non-Earning Assets/ Total Assets <=5% 8.2% Savings Deposits/Total Assets Member Shares /Total Assets Institutional Capital /Total Assets Net Institutional Capital /Total As- sets Asset Quality Rates of Return (Annualized) Loan Income/Loan Portfolio Financial Investment Income/ Financial Investments Interest paid on Deposits/Total De- posits 71.9% 20.7% 1.2% 84.3% 3.1% 10.3% 70-80% 10-20% Min 10% Min 10% 14.1% Market Rate 7.6% Market Rate 20.3% Market Rate 1.7% 3.2% 49.8% Operating Expense/Total Assets Operating Expenses/Gross Income <5% <55% Return on Assets Return on Equity Enough for E9 1.5% Market Rate 12.3% Liquidity Liquid Assets -Short term Payables/ Total Deposits & Withdrawable Shares Liquid Reserves/ Total Deposits & Withdrawable Shares Non-earning liquid Assets/Total As- sets 15% 10% 1% 25.5% 22.9% 1.2% BANKS AND NON-BANKS DIVISION NEWSLETTER 8 P E 1 2 3 5 7 8 9 A 2 R 1 3 5 10 12 13 14 L 1 2 3 THE FINANCIAL SERVICES REGULATORY COMMISSION NEWSLETTER SECTOR OVERVIEW VOLUME .
1 MARCH 2023 BANKS AND NON-BANKS DIVISION NEWSLETTER 9