rick houenipwela : credit unions – legal & compliance opening address by mr rick houenipwela, governor of the central bank of solomon islands, at the credit unions legal & compliance workshop, honiara, 16 - 17 april 2008. * * * introduction salutations : presidents, managers, board & committee members of respective credit unions ; general manager of sicul ; media representatives ; ladies and gentlemen : i am pleased to welcome you all this morning to mark the opening of your workshop on the topic “ credit unions : legal & compliance ” that you will cover in the next two days. this is the second workshop that cbsi and the office of registrar of credit unions have conducted in the past 12 months for credit unions that are members of the solomon islands credit union league. the first was held for the board of directors and management of the central malaita credit union limited in september 2007, on the topic : “ strategic planning and loan delinquency control. ” this is yet another example to demonstrate the central bank ’ s long term commitment to support the development of credit unions in our country. let me now turn to the subject of this morning ’ s topic, which you will be covering in the next two days. in emphasizing the importance of this workshop, i would like to make three points. legal compliance first, i want to stress that it is vital for credit unions to comply with the legal requirements in their operations. it is important for you as a board or a member of the management team to understand that your credit union is set up under a legal framework. that legal framework requires you to conduct and manage your business in accordance with the provisions of the credit union act and its standard by - laws and regulations. while some credit unions are trying to comply, it is sad to note that non - compliance is still a wide spread problem in many credit unions. some examples of areas for compliance include submission of timely audited financial statements and reports, holding of annual general meetings, proper election of officer bearers and paying your dues to the solomon islands credit union league ( sicul ). i hope as a result of this workshop, we will see more effective compliance with the legal requirements under the credit unions act 1986. role of credit union in the development the financial system i turn to my second point : where do credit unions fit in the financial system and what is their role in the development of the financial system? let me reiterate that the cbsi takes

##r of good governance in the financial system, therefore recognizes the need to constantly enhance its supervisory tools if it is to effectively perform this balancing act. a step towards this goal is the issuance of the guidelines on pillar 2 of the basel 2 capital adequacy framework or the internal capital adequacy assessment process ( icaap ) and the supervisory review process ( srp ). this would give the bsp a better handle on how well the board of directors and senior officers understand their own risk management systems and capital allocation policies, as the icaap is bank - determined and should provide rules for implementing the bank ’ s risk appetite. in sum, the bsp has created an environment of good governance among banks by 1 ) setting the tone of governance from the top by choosing only fit and proper directors ; 2 ) equipping the board of directors to make smart risk decisions through appropriate information and disclosure tools ; and 3 ) allowing bank management to implement those risk decisions in a framework that protects the stakeholders. by creating this environment, we hope that banks would move from “ mere compliance, to performance ”. corporate governance scorecard for banks before i conclude my remarks this morning, allow me to share with you the issuance by the bsp of the corporate governance scorecard ( cgs ) for banks. i am quite pleased to mention this, as i have been told this is the first of its kind in the world. the cgs for banks initially covers universal and commercial banks and their subsidiary and affiliate banks. it was made possible through our partnership with the icd and representatives from the banking industry. the cgs for banks was broadly patterned after the scorecard for publicly listed companies, which was customized and refined to make it suitable for banks. in addition to the five corporate governance categories that we have adopted from the organization for economic cooperation and development ( oecd ), the cgs for banks includes a category on control environment and processes in recognition of the importance of risk management in banks. the 20 u / kbs involved in this project were asked to rate themselves using the questionnaire issued by the bsp. the “ person - on - the - street ” approach was adopted in evaluating the corporate governance practices of the concerned banks. this takes on the perspective of a depositor or investor that has no other access to information aside from those available to the public, including those posted in banks ’ website. based on the evaluation of the submitted cgs of u / kb