Agreement between regulators aims to address issues facing island’s cooperatives.
The NCUA and Puerto Rico’s regulator for island-insured credit unions have signed a Memorandum of Understanding to collaborate on staff training, enhanced supervision approaches and to develop methods to promptly resolve troubled cooperatives.
Those issues are among the problems facing the Public Corporation for the Supervision and Insurance of Cooperatives of Puerto Rico (COSSEC), according to the Financial Oversight and Management Board for Puerto Rico. That board was established by Congress in 2016 to assist the island government in improving economic development and opportunity on the island.
In addition to federally chartered and insured credit unions, Puerto Rico has—according to the governing board in 2022—109 locally chartered, regulated and insured credit unions (referred to as cooperatives or cooperativas) holding about $8.2 billion in shares and deposits.
They serve about 1.1 million people and, similarly to the NCUA, COSSEC insures accounts of up to $250,000.
Inside the Agreement
The memorandum between the NCUA and COSSEC represents a commitment for the two agencies to work together for the benefit of all cooperative members, NCUA board Chairman Todd Harper said.
“The NCUA-COSSEC relationship will strengthen COSSEC’s supervision of the cooperativas and lead to a stronger system to benefit all Puerto Ricans,” he added.
“With this agreement we seek to provide the necessary tools to optimize the supervision of the cooperatives and successfully guide employees in their professional development,” said COSSEC Executive President Mabel Jiménez Miranda.
The memorandum calls for the agencies to collaborate on examiner educational initiatives, including webinars, training events and written material. The agreement will remain in effect for three years.
In May 2022, the governing board noted that improving COSSEC’s operations was crucial, stating in an annual review that, “The cooperative system must improve its long-term resilience by moving toward higher national standards for governance and transparent accounting.”
The board noted further that the cooperativas are essential to the island’s low-income population and they have proven to be particularly resilient.
For instance, only 15 days after Hurricane Maria, 90% of the cooperativas were serving members of their communities and, 30 days after the storm, they were the only functioning financial institutions in 17 cities.
In the review, the board called for the island government to take action to ensure the stability of the cooperative system.
“Many cooperatives have accumulated losses that threaten their long-term viability and solvency,” the board said. “Those include a number of insolvent and undercapitalized cooperatives that have accumulated millions in losses not solely related to losses related to investments in Puerto Rico bonds.”