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WOCCU Urges Further Proportionality Guidance for Basel Framework

Volume 8, Number 7
September 26, 2019

WOCCU Urges Further Proportionality Guidance for Basel Framework

WOCCU urged the Basel Committee on Banking Supervision (Basel Committee) to include clearer guidance on the factors appropriate for national-level regulators to consider when developing proportionate approaches when implementing the Basel Framework. 

WOCCU noted that national-level supervisors often view the framework as a floor and either adopt the standard outright or even exceed the standard without proportionally tailoring the regulation to the size, complexity and risk of credit unions.  As such, stronger guidance that exceeds the clear statements on proportionality already included in the Basel framework are necessary.

The comments came as part of the consultation by the Basel Committee on is Consolidated Basel Framework which is designed to clearly and comprehensively set out the policy contained in the numerous published Basel standards adopted since the financial crisis.

A copy of the letter can be viewed here.

European Commission President Announces New College of Commissioners

Last week, Ursula Von der Leyen, the new European Commission President, announced the new term of College of Commissioners. The most notable new Commissioner is Valdis Dombrovskis from Latvia who will serve as one three new Executive Vice-Presidents of the European Commission, as well as coordinate the work on "An Economy That Works For People". He will be the Commissioner for financial services, which is supported by the Dictorate-General for Financial Stability, Financial Services and Capital Markets Union. President-elect Ursula von der Leyen addressed the role Executive Vice-President Dombrovskis, stating, "We have a unique social market economy. It is the source of our prosperity and social fairness. This is all the more important when we face a twin transition: climate and digital. Valdis Dombrovskis will lead our work to bring together the social and the market in our economy." 

Dombrovskis' key priorities that will impact credit unions in the EU are outlined in President-elect Von der Leyen's Mission Letter, and include: 

  • Completing the Banking Union by finalizing the common backstop to the Single Resolution Fund;
  • Agreeing on a European Deposit Insurance Scheme;
  • Speeding up the work towards a Capital Market Union;
  • Improving cross-border investments, improve the supervisory system and better harmonize insolvency and tax proceedings;
  • Developing a green financing strategy to direct investment and financing to the transition to a climate-neutral economy;
  • Devising a FinTech Strategy to support new digital technologies in the financial system;
  • Developing a new private-public fund specializing in initial public offerings for SMEs;
  • Developing a comprehensive approach to combat money laundering and the financing of terrorist activities;
  • Ensuring a common approach with the Member States on cryptocurrencies; and
  • Developing proposals to improve European resilience against sanctions by third countries, and to ensure that EU sanctions are properly enforced.

To view the European Commission's (EC) press release regarding the President-elect's team and new structure of the EC, please click here.

Basel Proportionality Study under Pillar 2 Approach to Oversight of Internationally Active Banks

In July 2019, the Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) published a study of the application of proportionality under Pillar 2 of the Basel framework. Sixteen jurisdictions were surveyed to examine their application of proportionality and how they implemented Pillar 2 principles. FSI stated that the key aim of the survey was, "to determine whether and, and if so, how supervisory authorities apply proportionality in tailoring risk management expectations and supervisory practices according to the size, complexity and risk profile of regulated entities."

The Basel Committee on Banking Supervision created a three pillar approach to the oversight of international banks, designating Pillar 1 to outline risk-based capital (RBC) rules, which are subject to supervisory review pursuant to Pillar 2 regulatory requirements and disclosure requirements set forth in Pillar 3. Pillar 2 requires an assessment of risk profile through a cumulative set of risk management requirements coupled with risk-based supervision (RBS). 

FSI's "Proportionality Under Pillar 2 of the Basel Framework", can be found here

ENCU and WOCCU Appeal to Ukraine's National Commission Regarding CRD IV Exemption

On August 26, 2019, the European Network of Credit Unions (ENCU) and the World Council of Credit Unions (WOCCU) sent letters to Ukraine's National Commission for the State Regulation of Financial Service Markets regarding the revised Regulations on Mandatory Standards and Requirements Limiting the Risk of Operations with Credit Union Financial Assets, and their relationship to the European Union Capital Requirements Directive (CRD IV). Both ENCU and WOCCU urged the Commission to adopt new regulatory norms and regulations that will help strengthen the credit union system.  If adopted the norms should pave the way for and amendment to the EU-Ukraine's Association Agreement incorporating a CRD-IV exemption for credit unions.  This exemption will bring credit unions in line with numerous other EU countries that provide a similar exemption, all of which will assist credit unions with their operations. 

Comment Letters:

ENCU Comment Letter

WOCCU Comment Letter

Andrew T. Price, Esq.
VP of Advocacy
World Council of Credit Unions (WOCCU)
99 M St., SE, Washington, DC 20003 USA
Office: +1-202-843-0704 | Mobile: +1-850-766-5699
aprice@woccu.org | www.woccu.org

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