MADISON, Wis. (3/27/09)--Members of the Group of 20 (G-20) nations attending The London Summit 2009 April will know that credit unions and financial cooperatives worldwide have contributed to the solution for, not the cause of, the struggling global economy. The World Council of Credit Unions (WOCUU) alerted attendees to the role credit unions play in their countries in serving members and contributing to economic stability. WOCCU originally submitted a letter last fall 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 practices that give member-owned institutions their capability to serve. After its November meeting, the G-20 established four working groups. One focuses on supervision, enhancing sound regulation, and increasing and strengthening transparency. WOCCU wrote 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 Dave Grace, WOCCU vice president of association services. "He assured us that credit unions are not within the scope of the regulatory review." The other three working groups are not expected to consider issues involving credit unions and financial cooperatives, Grace added. Before the November meeting, WOCCU President/CEO Pete Crear wrote a letter requesting the group take three steps 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; and * 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 several 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; and * 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 said. "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," Grace added. Established after 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 U.S. and the European Union. In G-20 countries, financial cooperatives serve 621 million people and have over US$7.6 trillion in assets.