Madrid, Spain – In a final effort to ensure credit unions interests are considered in the revisions to the Basel Accord on Capital Adequacy (known as Basel II), World Council of Credit Unions, Inc. (WOCCU) president & CEO, Arthur Arnold, meet today with Mr. Jaime Caruana, chair of the Bank for International Settlements' Basel Committee on Banking Supervision and Governor of the Bank of Spain. World Council's senior manager of the trade association, Dave Grace was also part of the WOCCU delegation.
On the foot steps of the Basel Committee's last meeting to discuss calibration of the Basel II risk-based capital standard, Mr. Arnold thanked the Basel Committee for progress made in the last four years, meeting the concerns of the credit unions expressed by WOCCU.
However, the Basel Committee's latest revision of the proposed standard still generates concern for credit unions in the mortgage and consumer lending areas. Although Basel II will likely provide credit unions capital relief in these areas, it will clearly provide large banks the opportunity to further reduce capital holdings in the key products where credit unions and big banks compete.
Mr. Caruana indicated that the Basel Committee recognizes the important role that smaller financial institutions play in financial markets and is trying to help promote, rather than hurt, smaller institutions. He also conceded that on the surface Basel II seems counter intuitive in that larger, more complex institutions presenting more systemic risk to financial systems, will receive greater reductions in capital than smaller financial institutions that present less systemic risk. Nonetheless, Mr. Caruana indicated that economic capital requirements, more so than regulatory capital requirements, seem to impact the pricing of products by banks.
Citing results of Basel Committee's own impact studies, Mr. Arnold indicated, "While credit unions subject to Basel II may see a 20 percent reduction in the capital needed to be held against mortgages, large banks will see at least a 50 percent reduction in the average capital needed for mortgages." Mr. Arnold continued, "It's hard to believe this will not impact the pricing of mortgages that big banks can offer." Mr. Caruana indicated that the next paper on Basel II would be released in June 2004. National level regulators will be encouraged to conduct impact studies of Basel II during 2005 and the new and old Accords will be tested in a parallel mode in 2006 with full implementation in 2007.
WOCCU received assurances that the Basel Committee would feel obligated to make changes to Basel II prior to its full implementation if data gathered during 2005 and 2006 demonstrates that smaller financial institutions will be disadvantaged from Basel II. In addition, WOCCU learned that the Basel Committee is working closely with the International Monetary Fund to ensure the new Accord is not forced on developing countries.
The Basel Accord on Capital Adequacy is the global standard for bank and credit union regulators which define how much capital on risk- weighted basis financial institutions are required to hold. The current Basel Accord (know as Basel I) was established in 1988 and has been adopted by financial institution regulators in over 100 countries including credit union regulators in Australia, four provinces in Canada, and parts of Latin America. The National Credit Union Administration in the United States had indicated a willingness to move towards a risk-weighted capital requirement analogous to Basel. WOCCU has been working with the Basel Committee on the revisions to Basel I since 2000.
For more information about WOCCU and The Basel Capital Accord, visit http://www.woccu.org/lrac/index.ph p?pid=2.
El Consejo Mundial de Cooperativas de Ahorro y Crédito es la asociación gremial y agencia de desarrollo para el sistema internacional de cooperativas de ahorro y crédito. El Consejo Mundial promueve el crecimiento sustentable de las cooperativas de ahorro y crédito y otras cooperativas financieras en todo el mundo a fin de facultar a las personas para que mejoren su calidad de vida a través del acceso a servicios financieros asequibles y de alta calidad. El Consejo Mundial realiza esfuerzos de defensa activa en representación del sistema global de las cooperativas de ahorro y crédito ante organizaciones internacionales y trabaja con gobiernos nacionales para mejorar la legislación y la regulación. Sus programas de asistencia técnica introducen nuevas herramientas y tecnologías para fortalecer el desempeño financiero de las cooperativas de ahorro y crédito y profundizar su alcance comunitario.
El Consejo Mundial ha implementado 290 programas de asistencia técnica en 71 países. A nivel mundial, 51,000 cooperativas de ahorro y crédito en 100 países atienden a 196 millones de personas. Obtenga más información sobre el impacto global del Consejo Mundial en www.woccu.org.