As part of a continuing dialogue with the Basel Committee on Banking Supervision at the Bank for International Settlements, the World Council of Credit Unions, Inc. (WOCCU) submitted comments December 31 on the Basel Accord's most recent proposal. At the core of the most recent proposal was a question of how to treat loan loss provisions in the forthcoming Basel II capital standard.
Although the specific proposal relates to the more advanced internal rating based approaches for calculating capital under Basel II, WOCCU was concerned that it could create a disadvantage for smaller financial institutions, especially credit unions, that are more likely to use the simpler "standardized" approach to calculate capital ratios.
"Over the past couple of years that we've been working on the Basel Accord we have heard loudly and clearly from our members and Legislative & Regulatory Affairs Committee that our advocacy in this area is critical," said Arthur Arnold, President and CEO of WOCCU. He continued, "as such, it's fitting that we ended 2003 advocating for a strong and competitively fair new capital standard in Basel II which would create a level playing field for all financial institution, including credit unions, all over the world."
WOCCU's comment letter also stressed the importance of re-calibrating the various options for calculating capital ratios in Basel II (i.e., the Standardized, Internal Rating Based and Advanced Internal Rating Based) to ensure greater equality among the options. To see the full transcript of WOCCU's comment letter visit (http://www.woccu.org/pubs/docs/ Unexpected-Expected_Losses- Basle_Comment_Letter.pdf).
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.