Finance Minister Paula Cox has confirmed that an illegal loan from the Bermuda Industrial Union?s (BIU) Credit Union was made without the permission of the Finance Minister.

However, she said, the Ministry is considering legal amendments which would formalise the assistance of the Bermuda Monetary Authority as a regulatory body for credit unions.

The loan, to the tune of nearly $3 million, was made to Union Assets Holding, the BIU-owned subsidiary which provided the completion bond for the contract to build the new senior secondary school.

However it contravened more than one provision of the Credit Union Act of 1982, which was put in place in an effort to prevent corruption in the Credit Union.

The Act states that the Credit Union may not make any loans which are more than two percent of its share capital. A strict interpretation of share capital (i.e. at a bank) would include only the contributed surplus and the members? equity.

However a broader definition, such as what was used at the Credit Union, is closer to the total assets of the organisation ? some $9 million.

That meant the $3 million loan was about 15 times the legal limit, Opposition leader Grant Gibbons has estimated.

For a loan of that size, the Credit Union would have needed the permission of the Finance Minister.

?The investment in question did not have the approval of the Minister of Finance,? Ms Cox said in a press statement last night.

The Bermuda Monetary Authority (BMA) alerted the Ministry of Finance to the problem in September of 2003, she said. Under the law, such an unauthorised transaction could have resulted in the suspension or cancellation of the Credit Union?s registration.

The Act also provided for those involved to be brought to court to face summary charges.

However, auditors who were auditing the Credit Union?s finances noted, to date no such action has been taken.

?On the basis of his review, the then-Minister of Finance Eugene Cox directed the officers of the BIU Credit Union to come into compliance with the Credit Union Act 1982 within a six-month period,? Ms Cox said last night.

?The Credit Union complied with this instruction within the time given.

?In addition, the Minister requested that the Bermuda Monetary Authority conduct an on-site inspection of the BIU Credit Union. The inspection was completed in November, 2003, and its findings were discussed with officers of the Credit Union in early 2004.

?The process was productive, and there has been steady progress. The Ministry of Finance values the assistance of the BMA in the regulation of credit unions, and is considering amendments to the relevant legislation to formalise the process.?