WOCCU Statement on Romania

WOCCU Expresses Concerns For Future Of Credit Unions (CARs) In Romania

Madison, WI-In an effort to keep our members and stakeholders apprised of significant issues arising within the global credit union system, the following update has been prepared concerning the Romanian credit union system.

Over the past four years World Council of Credit Unions, Inc. (WOCCU) has been working with 26 caseles adjutor reciproc (CARs) to (a) modernize their operations, so as to be able to compete in the marketplace and enable economic growth in local communities and (b) recommend a model CAR certification program. The 26 CARs registered impressive results when comparing financial indicators for December 1999 to June 2003.

WOCCU-Romania Growth Indicators for 26 Project CARs

Indicators	Dec 1999	June 2003	Absolute Growth	% Growth
Total Assets	$9,934,258	$24,908,667	$14,974,409	151%
Gross Loans	$8,820,177	$20,825,244	$12,005,067	136%
Withdrawable Savings	$2,524,892	$12,107,358	$9,582,466	380%
Share Capital	$6,636,242	$8,844,655	$2,208,413	33%
Total Savings	$9,161,134	$20,952,013	$11,790,879	129%
Institutional Capital	$647,385	$3,115,894	$2,468,509	381%
Total Membership	89,728	119,859	30,131	34%

The post-1999 performance of these project CARs is all the more noteworthy in the context of pre- 1999 financial performance trends. For the four years prior to 1999, (a) members' share capital was being eroded, due to CAR pricing practices and (b) these CARs were shrinking rapidly in terms of real asset value. Post-1999 growth has been quality growth in that consolidated net institutional capital as a percentage of total assets is nearly 13%.

During the course of the last two years, various WOCCU representatives, including present Board chairman L.R. (Bobby) McVeigh (Canada); Board member and president of NACSCU, Grzegorz Bierecki (Poland) and WOCCU president and CEO, Arthur Arnold met with representatives from the CARs, the national trade body, UNCAR and high level Romanian authorities on many occasions. During these meetings WOCCU's concerns were expressed regarding the current restrictive and proposed legislation governing CARs, the lack of supervision and the absence of minimum prudential standards to protect member savings. See http://www.woccu.org/development/pdf/pearl.pdf for WOCCU's International Credit Union Prudential Standards.

During 2003, recent legislation governing credit unions in Romania was amended. Originally proposed and negotiated by UNCAR, the enacted legislation impedes the CARs from continued development toward becoming modern, member-owned financial institutions. The new legislation limits savings mobilization, destroying the most important pillar of sound and safe credit unions— the capacity to mobilize withdrawable savings. In addition, supervision of CARs has been mandated to UNCAR. Given this turn of events, WOCCU identified two key issues for the Romanian credit union system: (1) if CARs are restricted from mobilizing withdrawable savings, they can no longer be considered as credit unions; and (2) UNCAR, to date, has not shown willingness to commit to and enforce minimum safety and soundness standards, which in turn, affects the approach of credit union supervision.

In November 2003 on behalf of WOCCU, Board chairman, McVeigh and Board member Bierecki held meetings to discuss these issues with legislators from the Romanian Parliament, with National Bank and Ministry of Finance officials, and the European Union (EU) Negotiations team members. (Romania is slated to join the EU in 2007 and is preparing for compliance with EU legislation, including that related to financial institutions). During these recent meetings, WOCCU also described how credit union movements in other member countries of the EU have dealt with the challenges of complying with EU directives, legislation that also covers the effect on credit union operations. Other significant credit union movements in the EU include the Irish League of Credit Unions (Ireland), Association of British Credit Unions, Ltd (Great Britain), and the National Association of Cooperative and Savings Credit Unions (Poland) who will officially join the EU on May 4, 2004. In addition, WOCCU further discussed how EU exemptions could be obtained in regard to certain financial sector issues by positioning credit unions, for instance, as advocates of consumers and their interests. WOCCU offered to continue to share its expertise in international credit union standards of safety and soundness and credit union legislation and supervision.

WOCCU remains gravely concerned with the Romanian credit union situation and the related impact of the new legislation on the future of CARs. In particular, the restriction on savings mobilization within credit unions and UNCAR's lack of commitment to international credit union standards of safety and soundness. WOCCU remains committed to the development of CAR's in Romania. To this end, WOCCU will continue, as it has over the past five years, to offer counsel, assistance and the sharing of best practices as applied elsewhere in the global credit union movement. Ultimately, however, the provision of any assistance by WOCCU going forward, will be contingent upon an invitation for such assistance from the Romanian credit union system. WOCCU will continue to keep its members informed as this situation evolves.

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.