Advisories
Advisory 5
System Credit Committee Overrides
There have been a number of inquiries about the
application of the override facility on loans approved
by the System Credit Committee (SCC) as it relates
to applications which have been submitted during
1995. After discussions with Credit Union Central
staff, the following transition rules will apply
to loans approved or reviewed prior to November
1, 1995:
- The 10% override will be available to anyone
in the group of borrowers connected to an application
which has been approved by the SCC; however, the
10% will be restricted to the amount of the applicant
regardless of the amount of borrowing there may
be by related parties.
- A review of loans approved since January 1,
1995 was made by CUDIC and SCC staff. The SCC
will be advising each credit union of the amount
of override which is available on all applications
approved by them since the beginning of the year.
- The override will also be available on any existing
loan when an annual review has been completed
by the SCC. All credit unions will be advised
by the SCC as to what override is available for
all loans reviewed since the beginning of the
year.
As part of the discussions on the operation of
the override system, the following conditions will
apply:
- In order for the override to be available to
the group borrowing, adequate information must
be submitted on all group borrowing to allow the
SCC to assess the risk associated with the group.
Any loans granted under this facility must be
prudent lending and otherwise comply with the
credit union's loan policy.
- The SCC will advise credit unions at the time
the application is approved or when the annual
review is completed, as to what override is available
and whether or not it can be applied on a group
basis or is restricted in any manner.
- The override facility will expire in the following
instances:
- The subsequent annual review is not received
by the required date;
- there is any breach of the terms and conditions
established by the SCC approval; or
- the loan(s) become delinquent or there are
any material changes which adversely affect
the risk associated with the group.
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