Basel Committee Standards “Burdensome” to Credit Unions
WOCCU, CUNA Urge Committee to Reconsider Pending Guidelines
Broad application of
international financial standards without regard to size may threaten the
safety of credit unions in many countries, Dave Grace, WOCCU senior VP of
association services (left) told the Basel Committee. Grace and Bill Cheney,
CUNA president and CEO, visited the committee earlier this month.
BASEL, Switzerland — The Basel Committee on Banking Supervision should keep the "principle of proportionality" in mind when implementing international standards that could negatively affect smaller financial institutions, including credit unions. That was the message executives from World Council of Credit Unions (WOCCU), the U.S.-based Credit Union National Association (CUNA) and the World Savings Bank Institute (WSBI), based in Brussels, Belgium, shared with the Basel Committee earlier this month.
Citing concerns that the cumulative affect from blanket applications of anti-money laundering and terrorist financing obligations and other pending requirements could be "burdensome" to the continued growth and operations for smaller institutions, the delegation said those requirements already have created issues in some developing markets. The result has been an unnecessarily heavy regulatory burden for smaller institutions, including credit unions.
"We're witnessing over-application of the international standards in developing and developed markets, creating a significant regulatory burden for smaller financial institutions such as credit unions," said Dave Grace, WOCCU senior vice president of association services, who led the delegation with Bill Cheney, CUNA president and CEO. "Today, we made progress in getting this message across to financial regulators at the highest level."
Other issues causing concern include non-proportionally adjusted application of international financial reporting standards, operational risk management requirements, the application of Basel III requirements and pending liquidity standards. The delegation also raised concerns over aspects of the recently issued Microfinance Activities and the Core Principles for Effective Banking Supervision, specifically parts of the third principle that limit the maximum number of members and geographical scope that credit unions can serve.
"[These rules] will suppress financial inclusion agendas, significantly hamper institutional sustainability and sends a signal that, beyond a certain number of members, a cooperative ceases to be a cooperative," said Grace and Chris De Noose, WSBI managing director, in a follow-up letter to Stefan Walter, the Basel Committee's general secretary.
One of the strengths smaller institutions have in many developed and developing countries is access to supplemental capital, a situation from which U.S. policymakers could learn, according to Cheney.
"All other advanced CU systems have the ability to access supplemental capital," said Cheney. "The global financial standard-setters clearly see a value in credit unions having access to additional capital because of the added strength and security it provides to institutions."
Grace and Cheney were joined by WSBI staffers Judith Ay, senior advisor, and Matthias Blume, regulatory affairs manager, during their February 17 visit to the Basel Committee.
World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.
World Council has implemented more than 290 technical assistance programs in 71 countries. Worldwide, 51,000 credit unions in 100 countries serve 196 million people. Learn more about World Council's impact around the world at www.woccu.org.
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Contact: Mike Muckian
Organization: World Council of Credit Unions