The Bermuda Monetary Authority has issued its strongest statements ever concerning the Bermuda Industrial Union Credit Union.

In its annual report and accounts -- tabled in the Senate yesterday -- the BMA said the credit union's condition had escalated to where the Authority was questioning: Whether the authority can reasonably fulfil its supervisory and regulatory obligations in relation to the credit union; whether the credit union deserves to maintain its designation as a financial institution; and whether the credit union deserves to remain licensed under the provisions of the Credit Unions Act 1982.

"Despite the temporary assistance during 1995 of three persons supplied by the Commonwealth Fund for Technical Cooperation and appointed by the Ministry of Finance in 1994 to advise the credit union in the proper conduct of its business, the Authority continues to have concerns about the ongoing operations and management of the credit union,'' the report said.

But Credit Union manager Calvin Smith said yesterday: "The BMA's report to the end of 1995 reflected their concerns because as far as they could see there was no substantial improvement, but part of that appearance of no improvement was illusory.'' He said the Credit Union had changed to a new integrated computer system in 1995 and it took several months to make it work effectively.

"When we got these problems under control, the improvements which had been taking place all along started to become apparent,'' he said. "We have shown continuous improvement since the consultants left (in 1995).'' BMA deputy general manager Marcia Woolridge-Allwood also said yesterday that the Authority continues to work with the credit union to improve standards.

"I think we are making progress (with the Credit Union),'' BMA acting chairman Walwyn Hughes added.

The credit union -- whose customers are BIU members -- also drew BMA fire in its 1994 and 1993 report of accounts.

In 1993, the BMA said it made a number of recommendations to Credit Union management on how to bring about compliance with the Credit Unions Act 1982, among them seeking assistance from the Commonwealth Fund for Technical Cooperation.

The BMA report also revealed that the BMA has recommended to the Ministry of Finance that entities other than law firms -- like banks, licensed trust companies, accounting firms, corporate services companies and management companies -- be allowed to apply for the setting up of companies and partnerships as well as granting of permits to overseas companies and overseas partnerships in Bermuda.

Currently, only law firms can apply to the BMA to have overseas companies set up in Bermuda.

The BMA also said it had recommended that "scripless'', or paperless trading of securities be legalised.