Working in concert with the World Council of Credit Unions, CU leaders from around the globe met on Thursday with Basel Committee on Banking Supervision Secretary General William Coen and other senior members of the Basel Committee Secretariat to discuss how best to reduce regulatory burdens on credit unions.
During the meeting, credit union representatives urged the committee to:
- Reduce regulatory burdens on CUs
- Carve out non-internationally active institutions like credit unions from Basel Committee standards
- Establish a working group focused on considering the potential impact of proposed Basel Committee standards on community-based financial institutions.
WOCCU recently submitted written comments to the Committee regarding its proposed “transitional” measures involved with implementation of IFRS 9 and CECL as well the Committee’s discussion paper on how to address IFRS 9 and CECL in the long term.
“We believe that carving out locally focused financial institutions from Basel Committee standards is one of the best ways to limit regulatory burdens on credit unions and other community-based financial cooperatives,” WOCCU VP and general counsel Michael Edwards said in a statement. “Credit union regulators frequently look to Basel Committee standards even if they are not required to implement Basel Committee rules on locally focused institutions per se."
The CU delegation also supported the committee’s proposal to clarify its rules on correspondent banking to help make it easier for credit unions to establish and maintain correspondent banking relationships.
Also, the credit union leaders supported the Basel Committee’s proposal to allow a capital “add-back” to reduce the impact on credit union capital from the implementation of expected credit loss accounting standards including International Financial Reporting Standard 9 (IFRS 9) and the Current Expected Credit Loss (CECL) standard under US generally accepted accounting principles.
They also discussed longer-term measures to address the de facto capital increase that will occur under IFRS 9 and CECL, such as possibly including general provisions related to expected credit losses in Basel III Additional Tier 1 capital, the second most desirable form of regulatory capital under Basel III.
WOCCU said the international credit union movement was represented by Martha Durdin, president and chief executive officer of the Canadian Credit Union Association; Ed Farrell, chief executive officer of the Irish League of Credit Unions; Pat Fay, director of the Irish League of Credit Unions; Bill Hampel, chief economist and chief policy officer of the Credit Union National Association; Daniel Frederic Van Det, executive director of credit for Banco Cooperativo Sicredi of Brazil; and Michael Edwards, vice president and general counsel of WOCCU.
