G-20 Meeting Attendees Receive WOCCU Input on Financial Cooperatives
London Summit Attendees Reminded of Credit Unions’ Safety and Stability
March 30, 2009
MADISON, Wis.—When members of the Group of 20 (G-20) nations attend The London Summit 2009 on April 2, they will be armed with the knowledge that credit unions and financial cooperatives worldwide have contributed to the solution rather than cause of the struggling global economy. Communications from World Council of Credit Unions (WOCCU) delivered prior to the meeting alerted attendees to the role credit unions play in their countries, both in serving members and contributing to economic stability.
WOCCU originally made its voice heard last fall in a formal letter submitted to G-20 countries attending the Nov. 15 summit in Washington, D.C. The letter, addressed to participating finance ministers, asked the group to acknowledge the strength and safety of credit unions and financial cooperatives and to not make cooperatives part of inappropriate legislation or regulations that may restrict the very practices that give member-owned institutions their capability to serve.
As a result of its November meeting, the G-20 established four working groups, one of which focuses on supervision, enhancing sound regulation and increasing and strengthening transparency. WOCCU sent a formal letter addressed to committee co-chairs Rakesh Mohan, deputy governor of the Reserve Bank of India, and Tiff Macklem, associate deputy minister of the Canadian Ministry of Finance, outlining the role of credit unions and their supervisory structures.
"We also have been in communication with the World Bank representative who sits on the committee," said Grace. "He assured us that credit unions are not within the scope of the regulatory review."
The other three working groups have focused on reinforcing international cooperation and promoting integrity in financial markets, reforming the International Monetary Fund and reforming the World Bank and multilateral development banks. Issues involving credit unions and financial cooperatives are not expected to be considered by any of these working groups, according to Grace.
Prior to the November G-20 meeting, a letter from Pete Crear, WOCCU president and CEO, requested that three distinct steps be taken during the fall summit:
- That any future financial rescue packages implemented at global or national levels be unbiased against cooperative financial institutions relative to the commercial banking sector.
- That in any pronouncements emanating from the summit, cooperative financial institutions be recognized as secure, locally owned financial institutions that have presented safe and sound financial alternatives during the current crisis.
- That future regulations or legislation that may result from this crisis clearly recognize that cooperative financial institutions have not been the source of these problems, have been significantly less affected by the economic fallout and should not be punished by inclusion in a series of new rules designed to correct a problem they have not caused.
"We believe strongly that cooperative financial institutions must be consulted prior to any regulatory actions that may affect them," wrote Crear, "and we urge you to make this step a permanent part of your protocols."
WOCCU's current efforts support the initiatives outlined in Crear's letter. Based on discussions with committee members, WOCCU expects the London Summit to produce a principle-based approach to regulatory reform that includes the following outcomes:
- All systemically important financial entities will require supervision.
- The perimeter of regulation will expand to include hedge funds and private equity funds.
- Regulator "colleges" will coordinate cross-border supervision for systemically important financial entities.
- There will be reductions in pro-cyclicality of capital ratios that require institutions to build stronger capital bases in periods of strength.
"Throughout all our efforts we stressed our support for independent credit union regulators who are knowledgeable about financial cooperative activities and the credit union difference," Grace added. "As seen from past financial crises at national levels, during this global crisis credit unions have performed better than many other financial institutions. We are unaware of any credit union in any market that has received capital infusions from government as a result of the current crisis."
Established in the wake of the emerging markets financial crisis of the late 1990s, the G-20 is an informal forum that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. The G-20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, Great Britain, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United States and the European Union. In G-20 countries, financial cooperatives serve 621 million people and have over US$7.6 trillion in assets.
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 300+ technical assistance programs in 89 countries. Worldwide, 68,882 credit unions in 109 countries serve 231,000,000 people. Learn more about World Council's impact around the world at www.woccu.org.