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Co-operative Banks Act, 2007 (Act No. 40 of 2007)

Regulations

Regulations in terms of Section 86

Part 4 : Prudential requirements of co-operative bank [Section 20]

 

4.

(1) A co-operative bank must meet and maintain the following minimum prudential requirements—

Requirements
(a) minimum capital adequacy ratio
(i) 6 percent of total assets held by co-operative bank.
(b) loan loss provision for delinquent loans
(i) 2 percent in respect of all loans in addition to the  minimum capital adequacy ratio; plus
(ii) 35 percent in respect of all loans delinquent for a period of 1 month but not longer than 6 months; plus
(iii) 50 percent in respect of all loans delinquent for a period of longer than 6 months but not longer than 12 months; plus
(iv) 100 percent in respect of all loans delinquent for a period of longer 12 months.
(c) liquidity
(i) a maximum of 5 percent of total assets may be held in fixed and non-earning assets
(ii) a minimum of 10 percent of total deposits must be held in investments referred to in regulation 3.2 with a tenure not exceeding 32 days and convertible into cash at any time, without incurring any penalty or being subject to a discount rate substantially higher than the average rate that applies to liquid assets with a similar term;
(iii) a minimum of 2,5 percent of total deposits must be deposited with the Agency or a higher tier co-operative bank, in addition to the deposits referred to in paragraph 4(c)(ii);
(iv) the balance of deposits not held or deposited in accordance with paragraphs 4(c)(ii) and 4(c)(iii)—
(i) in relation to a co-operative bank that provides saving services only, must be held in investments referred to in regulation 3.2(a)(i) to (v); and
(ii) in relation to a co-operative bank that provides saving and loan services, must be held in investments referred to in regulation 3.2(a)(i) to (v) and may be granted as loans up to a maximum of 80 percent of total assets
(v) In relation to a co-operative bank that provides saving and loan services, loans granted to members that are sourced from cash donations may not exceed 15 percent of total deposits.
(d) deposits
(i) Hold no deposit from anyone member or related person, which deposit, alone or together with all existing deposits received from that member or related person, i exceeds the lesser of 10 percent of the total assets held by or 25 percent of the capital of the co-operative bank.

 

(2) For purposes of calculating the minimum capital adequacy ratio referred to in subregulation (1), only the following qualify as capital—
(a) membership shares issued by the cooperative bank;
(b) indivisible reserves as required in terms of section 3(1)(e) of the Co-operatives Act;
(c) non-distributable reserves created or increased by appropriations of surpluses (retained earnings); and
(d) any other non-distributable funds of a permanent nature held by a co-operative bank not subject to a legal claim by any person and must be approved by a supervisor in writing.