The Board of Directors of Black Star Line Co-operative Credit Union realising that it is responsible for the supervision of the credit union’s investment activities adopts this policy. The purpose of this policy is to provide operating guidance for the management of the credit union’s investment portfolio in order to maintain a high-quality, low-risk portfolio, complying with applicable credit union regulations.
The main objective of the policy is to minimise risks from interest rate changes and other factors, to maximise the yield on surplus funds, and to ensure that the types and maturity mix of all investments held are adequately diversified to provide sufficient liquidity to meet future needs. This policy will be reviewed annually by the board and record its review in a board meeting minutes and to ensure that the policy continues to meet the goals and objectives of the credit union.
Responsibility for investment activity may not be delegated to a correspondent, brokerage house, or any rating or advisory service. The investment program shall be administered by an investment committee appointed by the Board of Directors.
The committee shall consist of the Treasurer, the Manager, the Chairperson and one qualified member of the board of directors (Jawara). The committee shall delegate day-to-day decision-making authority to the Manager and one other member of the committee within the limits of this policy statement. Decision-making authority must be done by at least two people from the Committee and must be within the limits of the Investment Policy. The investment committee must consult with the Board of Directors for approval of any changes or transactions not within the limits of this police statement before implementation.
Additionally, the investment committee shall:
- Ensure that all investments are made in agreement with applicable laws and regulations, and in accordance with this policy.
- Make recommendations to the board of directors about investment policy and strategy.
- Monitor investments and submit reports to the board of directors in conformance with this policy.
- Ensure that the Board of Directors review and approve this investment policy at least annually.
All funds which are not required for immediate cash expenditures shall be invested in interest bearing investments or accounts, in conformance with the requirements and limits of this investment policy.
The composition of the investment portfolio is subject to regulatory limitations as well as the limits set by the board of directors. In allocating funds, the investment committee should aim at realising high yield without sacrificing safety and liquidity.
Safety of an investment is affected by the creditworthiness of its issuer and price sensitivity to interest rate variations. The credit union will manage its exposure to the various risks as follows:
Interest rate risk
- Defining acceptable range of maturity for each investment.
- Analysing the price sensitivity of security investments prior to purchase and periodically thereafter.
- Monitoring changes in the economy that may impact the movement and direction of interest rates.
- Evaluating the impact of adverse changes in interest rates on net capital.
- Make the necessary changes that reflect on the current changes in interest rates.
This refers to the inability to meet short-term obligations. A liquid asset is one that is easily convertible into cash at little or no loss. In view of liquidity considerations, the credit union shall allocate no less than 35 percent of the investment portfolio to assets readily convertible to cash having maturities of less than one year. For purposes of this policy, “assets readily convertible to cash” include all of the following:
- Deposits in Banks
- Deposits in Other Credit Unions
- Deposits with CUA
To reduce the credit union’s vulnerability to unforeseen market, credit and liquidity risks, the investment portfolio should be well diversified with respect to different investment categories and fund allocation to a single issue. In line with this, the Board of Directors has established limits on the maximum amounts that may be committed to a particular investment or investment category at the time that the investment is made. All investments will be in Ghana cedi.
The following outline specifies authorised investments and characteristics to which they must conform:
- Treasury securities with maturity not exceed 1 year - Funds may be invested in this category without limit, however, no single issue should account for more than 20 percent of the whole investment portfolio.
- Certificates of deposit with a single commercial bank must not exceed GH¢100,000 excluding accumulated interest. The maturity of any certificate of deposit shall not exceed 1year, while the total investment in this category shall not exceed 100 percent of the investment portfolio.
- Investments in credit unions and CUA - Shares, share certificates, or share deposits in an insured credit union shall be limited to ¢100,000 excluding accumulated interest. The maximum maturity of these investments is 1 year, and the total investment should not exceed 100 percent of the investment portfolio.
- Invest in a registered investment company or collective investment fund, as long as the product mix of the company or fund restricts the investment portfolio to investments and investment transactions that are permissible for the credit union.
- Variable rate instruments - Subject to the issuer, maturity and other investment restrictions in this policy, the credit union can invest in adjustable rate instruments, if the underlying index is tied to domestic interest rates and not tied to foreign currencies, foreign interest rates, or domestic or foreign commodity prices, equity prices, or inflation rates.
Prohibited investments and investment activities
Any investment not specifically approved by the Board of Directors, or which exceeds the established investment limits, are prohibited. Black Star Line Cooperative Credit Union may also not:
- Purchase or sell financial derivatives, such as futures, options, interest rate swaps, or forward rate agreements, except those permitted under CUA rules and regulations.
- Engage in adjusted trading, gains trading, or short sales.
- Purchase stripped mortgage-backed securities, commercial mortgage-related securities, or small business-related securities.
- Purchase a zero-coupon investment with a maturity date that is more than 10 years from the settlement date.
- Engage in “When-Issued” Trading.
- Engage in “Pair-off” transactions.
- Engage in Repositioning Repurchase Agreements.
General practices and procedures for investment transactions
- The Treasurer shall submit annually a statement of investment policy to the Board for approval. The existing approved investment policy will remain in effect until the Board approves the recommended statement of investment policy.
- Financial statement classification of investment purchases will comply with accounting requirements at the time of purchase (i.e., available for sale, held to maturity, or trading).
- The Manager will review the market value of each security and its classification monthly and recommend any necessary adjustments.
- The Treasurer will notify the Board of Directors as soon as possible, of any investment that is outside Board policy after purchase or has failed a requirement of this policy.
- The credit union will maintain documentation on each investment transaction for as long as the investment is held, audited, and examined. Documentation will include periodic updates, purchase confirmations, and other relevant disclosure documents or a description of the security from an industry-recognised information provider, financial date, and reports required by this policy.
- Investments exceeding ¢100,000.00 must be approved by the Board at its next scheduled meeting. The investment committee will prepare a written report for the Board of Directors concerning immediate and foreseeable risks. The report will be forwarded to the Board for consideration at the next scheduled meeting.
- Where this policy does not state a maximum maturity period, no financial instrument shall be purchased which has a stated maturity of more than one year from the date of purchase, unless the instrument is specifically approved by the Board as part of an investment program and such approval must be granted no less than three months prior to the investment.
- All investments will be purchased with the intent to hold them to maturity, but they may be categorised as available for sale. If investment is surrendered before agreed maturity date, then a 30% penalty on interest will be imposed.
- BSLCCU will only invest with authorised financial institutions.
Purchased investments must be held and recorded as owned by Black star line Cooperative Credit Union. The union;
- Must obtain an individual confirmation statement for each investment purchased or sold.
- Should not allow a broker/dealer to safe keep purchased investments except where the broker/dealer is an identifiable department or division of the credit union.
- Must obtain and reconcile periodically a statement of all purchased investments held in safekeeping.
- Must make payment for an investment concurrently only upon delivery.
The investment committee is responsible for maintaining current and adequate information regarding the broker/dealers with whom the credit union transacts business. The broker/dealer must be registered with the SEC under the Securities Exchange Act, or be a depository institution whose activities are regulated by a regulatory agency.
In deciding whether to buy or sell investments through a broker/dealer, the investment committee must analyse the following items:
- The background of any representative with whom the credit union is doing business.
- Information available from regulators regarding any enforcement actions against the broker/dealer, its affiliates, or associated personnel.
- The ability of the broker/dealer and its subsidiaries or affiliates to fulfil commitments, as evidenced by capital strength, liquidity, and results, considering current financial data, annual reports, reports of nationally recognised statistical rating agencies, relevant disclosure documents, and other financial information sources.
BSLCCU offers two investment options
1. Investment Plan
Minimum investment is 1000 Ghc, invested for 91 days. Members must be a shareholder with a minimum of 1 shares
2. Fixed Deposit Investment Plan
Minimum investment is 3000 Ghc, invested for 365 days. Members must be a shareholder with a minimum of 3 shares
Ratio of Interest on BSL Investment Portfolio
BSLCCU administrative documentations must show its Investment Portfolio in the following category:
Shares – ratio of interest is 90%/10%.
Investment Plan – ratio of interest is 60%/40%
Fixed Deposit Investment Plan – ratio of interest is 60%/40%.
Savings – ratio of interest is 80%/20%.