WOCCU Statement on Romania

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

January 28, 2004

Phone: (608) 395-2000

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

IndicatorsDec 1999June 2003Absolute Growth% Growth
Total Assets$9,934,258$24,908,667 $14,974,409151%
Gross Loans$8,820,177$20,825,244 $12,005,067136%
Withdrawable Savings$2,524,892 $12,107,358$9,582,466380%
Share Capital$6,636,242$8,844,655 $2,208,41333%
Total Savings$9,161,134 $20,952,013$11,790,879 129%
Institutional Capital$647,385$3,115,894 $2,468,509381%
Total Membership89,728119,859 30,13134%

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 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.

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 235 million people. Learn more about World Council's impact around the world at