I R E L A N D ILCU PEARLS RATIOS

Transcription

1 I R E L A N D ILCU PEARLS RATIOS Revised: Decemer 008 / Septemer 009 / January 010 1

2 ILCU PEARLS RATIOS Update The ILCU PEARLS ratios were reviewed in 008 and some changes were made for the Decemer 008 quarter end. Update Septemer Further changes were made for the Septemer 009 quarter end, see L1 Liquidity Ratio and E6(a) General Reserve Ratio (NI credit unions only). Update Decemer For the Decemer 009 quarter end a change was made to the E6 ratio (ROI credit unions only), see elow. There may e further reviews as the need arises, or following changes to the Prudential Return. P = Protection The indicators in this section measure the adequacy of the provisions for Bad Dets and Solvency of the credit union. P1 BAD DEBT PROVISION REQUIREMENTS Purpose: To ensure that the credit union is complying with ad det provisioning requirements. a. Bad Det Provision (as per financial statements). Bad Det Reserve c. League Resolution Requirements (Resolution 49/ 03) (a+) c Goal: Minimum 100% P. LOANS WRITTEN-OFF / TOTAL AVERAGE LOAN PORTFOLIO Purpose: To measure the amount of loans that have een written off from the loan portfolio in the current year as a percentage of all loans. a. Total loan alances written off year to date. Gross loan portfolio as of Current quarter-end c. Gross loan portfolio as of Last financial year-end (a) (+c) P(). LOANS RESCHEDULED / TOTAL AVERAGE LOAN PORTFOLIO Purpose: To measure the amount of loans that have een rescheduled in the current year as a percentage of all loans. a. Total loans rescheduled year to date. Gross loan portfolio as of Current quarter-end c. Gross loan portfolio as of Last financial year-end Revised: Decemer 008 / Septemer 009 / January 010

3 (a) (+c) P3. SOLVENCY Purpose: To measure the degree of protection that the credit union has for memer savings in the event of liquidation of the credit union s assets and liailities. a. Total Assets. Bad Det Provisions as per Financial Statements c. Resolution 49/ 03 requirements d. Short Term Liailities e. Total Savings Includes Shares, Deposits, Budget Accounts [(a+)-(c+d)] (e) Goal: 109% E = Effective Financial Structure The indicators in this section measure the composition of the most important accounts on the alance sheet. An effective financial structure is necessary to achieve safety, soundness and growth. E1. LOANS / TOTAL ASSETS Purpose: To measure the percentage of total assets that are invested in the loan portfolio, or to ascertain what percentage of assets the memers have orrowed. a. Total Gross Loans. Total Assets Goal: 70%+ E. TOTAL INVESTMENTS / TOTAL ASSETS Purpose: To measure the percentage of total assets which are held in investments. a. Total Investments. Total Assets Goal: < 30% Revised: Decemer 008 / Septemer 009 / January 010 3

4 E4. BORROWED FUNDS / TOTAL ASSETS Purpose: To measure the percentage of total assets that are financed y external orrowings (i.e. orrowings that the Credit Union contracts with another financial institution.) a. Total Short-term orrowings. Total Long-term orrowings c. Total Assets (a+) c Goal: 0% E5. TOTAL RESERVES / TOTAL ASSETS Purpose: To measure the total reserves of the credit union. a. Total Reserves (All Reserves excluding Bad Det Provision Required as per Resolution 49/ 03). Total Assets Goal: Minimum 1% E6: NORTHERN IRELAND CREDIT UNIONS ONLY (GENERAL RESERVE NI / PRIOR YEAR SAVINGS AND ALLOCATIONS) Purpose: To measure statutory reserve as a percentage of prior year savings plus dividends and interest refund. a. Statutory Reserve (General Reserve NI). Total Memers savings (Including Allocations) Goal: Minimum 10% E6(a): NORTHERN IRELAND CREDIT UNIONS ONLY (GENERAL RESERVE / ASSETS) Purpose: This ratio is an aid to Northern Ireland credit unions when working out how much must e transferred to the General Reserve. *See elow note from NI Year End requirements, re transfers to reserves. *Year end requirements - GENERAL RESERVES - Credit Unions (Northern Ireland) For the purpose of determining at year end how much surplus is to e transferred, the "total assets" figure is arrived at y sutracting the existing General Reserve (prior to any distriution of surplus year end) from the year end total assets figure. a. General Reserve. Assets (less existing General Reserve) Revised: Decemer 008 / Septemer 009 / January 010 4

5 E6: REPUBLIC OF IRELAND CREDIT UNIONS ONLY (REGULATORY RESERVE/TOTAL ASSETS) This ratio replaces the previous E6 Statutory Reserve Ratio. A new Regulatory Reserve Requirement was introduced for year end Septemer 009. Credit Unions are required to maintain a Regulatory Reserve Ratio of 10% of total assets. Credit Unions with a ratio elow 10%, have a numer of years to reach the 10% figure. The Regulatory Reserve includes Statutory Reserve and any additional Regulatory Reserve. a. Regulatory Reserve (Statutory Reserve + Additional Regulatory Reserve). Total Assets (per alance sheet) Goal: Minimum 10% A = Asset Quality The indicators in this section measure the impact of non-performing assets which do not generate income. A1. GROSS LOANS IN ARREARS 10 WEEKS+/ TOTAL LOANS Purpose: To measure arrears in the loan portfolio. The standard definition for loan arrears are loans in arrears for 10 weeks or more. a. Gross loans in arrears 10 weeks or more (requiring provision as per Resolution 49/ 03). Total Gross Loans Goal: Less than 5% A1 (). GROSS LOANS IN ARREARS 18 WEEKS+ / TOTAL LOANS Purpose: To measure longer term arrears in the loan portfolio. a. Gross loans in arrears 18 weeks or more (requiring provision as per Resolution 49/ 03). Total Gross Loans A1( c). GROSS LOANS IN ARREARS 53 WEEKS+ / TOTAL LOANS Purpose: To measure loans in arrears for over 53 weeks. The ILCU would recommend that all such loans e written off. a. Gross loans in arrears 53 weeks or more (requiring 100% provision as per Resolution 49/ 03). Total Gross Loans Revised: Decemer 008 / Septemer 009 / January 010 5

6 A. NON-EARNING ASSETS / TOTAL ASSETS Purpose: To measure the percentage of the total assets that are not producing income. Examples of Non-earning Assets: 1. Cash on hand and floats. Non interest earing current accounts. 3. Detors 4. Fixed assets (Land, Building, equipment etc.) 5. Prepaid expenses, stock etc. a. Total Non-earning Assets. Total Assets Goal: Less than 5% R=Rates of Return and Costs These indicators measure the average income return for each of the most productive assets of the Balance Sheet. In addition, they measure the average cost of assets employed and the dayto-day operating expenses of the credit union. R1. LOAN INCOME / AVERAGE GROSS LOANS Purpose: To measure the return on the loan alance. a. Loan interest received. Total amount paid y the Credit Union on insurance premiums for loans. If the Credit Union pays an interest refund, it should also e sutracted out of total income. c. Gross loan alances as of Current quarter-end d. Gross loan alances as of Last year-end (a-) (c+d) Goal: Return which covers operating, and provisioning expenses and uilds reserves to required levels R. INVESTMENT INCOME / AVERAGE TOTAL INVESTMENTS Purpose: To measure the return on all investments. a. Total Investment Income. Total Investments as of Current quarter end. c. Total Investments as of Last year-end. : (a) (+c) Revised: Decemer 008 / Septemer 009 / January 010 6

7 R3. TOTAL INCOME / AVERAGE TOTAL ASSETS Purpose: To measure the adequacy of earnings. a. Total Income. Total assets as of Current year-end c. Total assets as of Last year-end a (+c) Goal: Enough to cover operating, and provisioning expenses and uild reserves to required levels. R5. EXPENSES / INCOME Purpose: To measure expenses as a percentage of income. Economies of scale also come into play Total expenses / Total Income Goal: < 43%. That expenses would e kept to a minimum. R6. WAGES / INCOME Purpose: To measure wage expenses as a percentage of income. a. Salaries + Honoraria + Pensions. Total Income a Goal: 15% L=Liquidity The liquidity indicators show whether the credit union is managing funds and liquidity requirements. L1. LIQUID FUNDS / UNCOMMITTED SAVINGS Purpose: To identify level of liquid funds availale to cover withdrawals and meet unforeseen or day to day requirements. Note from Septemer 009, the funds held in current accounts is included in this calculation. This new calculation matches the Liquidity calculation used y the Registrar of Credit Unions. a. Liquid Investments (of duration of less than 3 months) + Current account alances (per alance sheet).. Unattached Savings Revised: Decemer 008 / Septemer 009 / January 010 7

8 a Goal: Minimum 0% L. PERCENTAGE OF MEMBERS WHO BORROW Numer of Borrowers Numer of Memers Goal: High as Possile S Signs of Growth The indicators of this section measure the percentage of growth in each of the most important accounts on the financial statement, as well as growth in memership. S1. GROWTH IN LOANS Purpose: To measure the % growth of the Loan Portfolio since year end. a. Loan Portfolio year to date. Loan Portfolio as of Last year-end (a-) S. GROWTH IN TOTAL INVESTMENTS Purpose: To measure the % growth of Investments since year end a. Total Current Investments. Total Investments as of last year end. (a-) S3. GROWTH IN TOTAL MEMBERS RESOURCES (SAVINGS) Purpose: To measure the % growth of Total Memers Resources (or Savings) since year end. a. Total Current Memers Resources. Total Memers Resources as of the Last year-end (a-) Revised: Decemer 008 / Septemer 009 / January 010 8

9 S4. GROWTH IN TOTAL RESERVES Purpose: To measure the % growth of Reserves since last year end a. Total Current Reserves. Total Reserves as of the Last year-end (a-) S5. GROWTH IN STATUTORY RESERVES Purpose: To measure the % growth of Statutory Reserves since last year end. a. Current Statutory Reserves. Statutory Reserves as of the Last year-end (a-) S6. GROWTH IN MEMBERSHIP Purpose: To measure the % growth in Memership of the Credit Union since last year end. a. Numer of Memers (Current). Numer of Memers as of Last year-end (a-) S7. GROWTH IN TOTAL ASSETS Purpose: To measure the % growth of Total Assets since last year end. a. Total assets year to date. Total assets as of the Last year-end (a-) Revised: Decemer 008 / Septemer 009 / January 010 9