WASHINGTON (6/24/13)--Although the Basel Committee developed its External audits of banks consultative document to apply only to commercial banks and banking system, the World Council of Credit Unions recently asked the committee to consider its impact on smaller, less complex financial institutions because national and provincial credit union supervisors frequently apply the Basel Committee's international standards to credit unions.
In a comment letter to the committee sent Friday, World Council Chief Counsel Michael Edwards noted that his organization supports the external audits proposal in most respects.
"External audits are an important element of the safety and soundness regime of many banking institutions," Edwards wrote. But he added that whether external audits under the auditing standards applicable to publicly traded companies apply to an institution should depending on the size and complexity of the institution since public company audit standards can "impose significant regulatory burdens on small and medium institutions such as credit unions."
Those burdens, he added, can negatively impact credit unions' abilities to promote financial inclusion of unbanked persons and would be inconsistent with regulatory requirements for smaller credit unions in some jurisdictions that require on-site supervisory examinations of credit unions.
Edwards cites U.S. credit unions as an example of institutions that could be unduly burdened. In this country, he says, credit unions are subject to examination by the National Credit Union Administration and, in some cases, also by state financial institution supervisors.
The Federal Credit Union Act does not require an external audit unless the credit union has more than $500 million in assets but federally insured credit unions with more than $10 million in assets that have an external audit must have the audit conducted according to generally accepted auditing standards.
"We believe that an external examination of a small credit union can limit the need for an external audit in a safe and sound manner, as is the case with smaller federally insured credit unions in the United States," Edwards wrote.