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CUNA WOCCU to Basel Standards burdensome to CUs
BASEL, Switzerland (2/28/11)--The Basel Committee on Banking Supervision should keep the "principle of proportionality" in mind when it implements international standards that could negatively affect smaller financial institutions--including credit unions. That was the message shared by World Council of Credit Unions (WOCCU), Credit Union National Association (CUNA) and Brussels, Belgium-based World Savings Bank Institute (WSBI) shared with the Basel Committee earlier this month.
Click to view larger image Broad application of international financial standards without regard to size may threaten the safety of credit unions in many countries, Dave Grace, left, World Council of Credit Unions senior vice president of association services told the Basel Committee. He and Bill Cheney, right, president/CEO of the Credit Union National Association, visited the committee earlier this month. (Photo provided by World Council of Credit Unions)
The delegation cited concerns that the cumulative effect from blanket applications of anti-money laundering and terrorist financing obligations and other pending requirements could be “burdensome” to the continued growth and operations for smaller institutions. It also said those requirements already have created issues in some developing markets. The result has been an unnecessarily heavy regulatory burden for smaller institutions, including credit unions. "We're witnessing over-application of the international standards in developing and developed markets, creating a significant regulatory burden for smaller financial institutions such as credit unions,” said Dave Grace, WOCCU senior vice president of association services, who led the delegation with Bill Cheney, CUNA president/CEO. “Today, we made progress in getting this message across to financial regulators at the highest level.” Other issues that caused concern include non-proportionally adjusted application of international financial reporting standards, operational risk-management requirements, the application of Basel III requirements and pending liquidity standards. The delegation also raised concerns about aspects of the recently issued Microfinance Activities and the Core Principles for Effective Banking Supervision, specifically parts of the third principle that limit the maximum number of members and geographical scope that credit unions can serve. "(These rules) will suppress financial inclusion agendas, significantly hamper institutional sustainability and send a signal that, beyond a certain number of members, a cooperative ceases to be a cooperative," said Grace and Chris DeNoose, WSBI managing director in a follow-up letter to Stefan Walter, the Basel Committee's general secretary. One of the strengths smaller institutions have in many developed and developing countries is access to supplemental capital, a situation from which U.S. policymakers could learn, according to Cheney. "All other advanced credit union systems have the ability to access supplemental capital," Cheney said. "The global financial standard-setters clearly see a value in credit unions having access to additional capital because of the added strength and security it provides to institutions." Grace and Cheney were joined by WSBI staffers Judith Ay, senior adviser, and Matthias Blume, regulatory affairs manager, during their Feb. 17 visit to the Basel Committee.


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