The governor of Puerto Rico, Alejandro García Padilla, approved a law that sets out new accounting rules for credit and saving co-operatives.
The US unincorporated territory finds itself in a severe fiscal crisis and a recession entering its 10th year. The new law aims to strengthen the co-operative financial sector, which was affected by the devaluation of their investments in government bonds.
“The Senate Law 1454 gives the co-operative sector a tool to face the bonds situation. It increases the security of our people’s money, who are our members, through an adequate reserve to cope with the situation”, William Ortiz Negrón, president of the board of directors of the Co-operative League told La Fortaleza.
The new law calls for the creation of a special committee within each co-operative to constantly examine its investment portfolio.
According to COSSEC, the regulator for co-operatives, financial co-operatives currently have investments worth USD $1.5bn in government bonds and these are now considered to be high-risk investments, due to the country’s difficult financial situation. It is estimated that the value of the bonds has halved.
Puerto Rican co-operatives have 956,000 members and provide financial services to another 300,000 clients. Their loan book totals USD $4bn.
The law was passed to address the lack of liquidity in co-ops caused by the inability of the government to pay the dividends for the investments made by the sector in bonds. The measure is also aimed at reassuring members over the security of the market of special investments.
Any loss that comes as a result of special investments such as the ones in bonds will be subject to amortisation over a 15-year period.
Photo: Governor of Puerto Rico, Alejandro García Padilla