Credit Union Annual Report 2022 - Flipbook - Page 79
THE CAYMAN ISLANDS CIVIL SERVICE ASSOCIATION (CICSA)
CO-OPERATIVE CREDIT UNION LIMITED
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 2022
22. Financial risk management (continued)
In order to ensure continued safeguard of the value of the collateral offered, buildings and motor vehicles are
required to hold valid comprehensive insurance policies in order to ensure that the colla teral is not compromised after
the initial grant of the loan. For all insurances at the time of credit origination, the Credit Union registers its interest in
the property with the insurance provider.
The Credit Union only accepts collateral in the form of assets located in the Cayman Islands.
Notwithstanding the requirement for collateral, the Credit Union does offer loans to members which are unsecured,
which are termed “Xpress or Overdraft Loans.”
These loans are only granted to members subject to the satisfaction of strict lending criteria including assessment of
borrower’s past credit history, ability to repay, confirmation of employment status. The maximum value of the
unsecured element on any one loan is limited to $15,000.
In addition to the “Xpress or Overdraft Loans”, the Credit Union also offers cash advances to members which are also
unsecured. Cash advances are issued for a period of one month. In February 2017, the repayment term for overdraft
loans were extended, by Board approval, to 36 months. These lending products are only offered to members after
careful consideration of the members’ repayment ability and assessment of credit status.
Management of credit risk, post credit origination
Loans to members constitute the Credit Union’s principal asset and source of income and as such must always be
protected against loss, by firm, decisive and quick action. The prompt identification of delinquent loans and
quantification of credit risk, coupled with a detailed action plan, are essential to ensure full collection and to ensure the
Credit Union is maintaining adequate reserves for possible credit and settlement losses.
The Board has established effective Delinquency Control and Collections policies in order to minimize the risk
associated with default. The application and implementation of these policies affect the cash receipts and ultimately the
amount of cash available for new loans and other purposes including undistributed surplus from which dividends are paid.
By establishing and enforcing a firm credit and delinquency policy the Credit Union teaches members to respect both
their obligations and the founding principle of the Credit Union. Failure to apply these policies would significantly
increase the risk of default and could lead to serious financial problems for the Credit Union, and therefore its
membership as a whole.
The Credit Union has established a number of different functions in order to manage the level of delinquent loans,
including, a Debt Collection Department (“DCD”) and a team of debt collection officers (collectively, the “debt
collection team”).
The debt collection officer will make collection strategy recommendations based on the facts as they are verified and
developed, in order to return the loan to a current status as soon as possible. Loans lacking a defined strategy, for
whatever reason or, credit relationships where the borrower is not fully cooperating, are referred to the DCD for further
action. The supervision of the DCD is controlled by the Senior Credit Risk Manager.
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