1) Basel Committee Significantly Revises Weak Banks Guidance in Response to World Council’s Comments
The Basel Committee on Banking Supervision incorporated significant changes urged by World Council to limit regulatory burdens on credit unions in the final version of its Guidelines for Identifying and dealing with weak banks. These changes were the most significant advocacy win for World Council and the global credit union movement over the past year because we prevented a global move to a one-size-fits-all financial regulatory environment which would have included a presumption that credit unions should become joint-stock companies.
Most significantly, at our request the Basel Committee removed proposed language from its standard which would have said that all financial institutions should be “subject to the same supervisory and regulatory framework” regardless of asset size or charter type. We vigorously opposed this statement because it would have required small credit unions to be subject to all of the same rules and regulations as large, systemically important banks. The final version of the guidance instead states that supervisory actions for dealing with weak banks “should be consistent and well understood . . . so that similar problems in different banks, large or small, private or state-owned, will receive similar treatment.”
In addition, the Committee removed proposed language that would have generally required “changes in the legal structure of the banking group” and “forced restructuring” of weak banks that World Council strongly opposed on the basis that these statements could be interpreted as requiring involuntary demutualization of credit unions. The final version of the guidance instead states that “[r]esolution instruments . . . employed when failure is imminent . . . will typically involve stronger supervisory intervention and some changes to the legal structure and ownership of the bank.”