MADISON, Wis. – The World Council of Credit Unions said its analysis has found credit union shares, which are perpetual, nonwithdrawable and available to cover institutional losses, can be considered “common equity” regulatory capital under guidelines offered by the Basel Committee on Banking Supervision’s Basel III document.
In a white paper titled “Credit Union Shares as Regulatory Capital Under Basel III,” Michael Edwards, WOCCU’s chief counsel and VP-advocacy and government affairs, said many credit union systems will not implement Basel III because the complex rules are designed for large, internally active commercial banks. However, in jurisdictions that do implement Basel III for credit unions, the rules for when credit union shares qualify as regulatory capital under Basel III are of critical importance, Edwards said.
World Council’s analysis concludes that whether or not a credit union or cooperative share can qualify as regulatory capital under Basel III depends primarily on two factors: The degree to which capital is permanent, for example, perpetual and nonwithdrawable or withdrawable only after a significant waiting period; and whether the instrument is paid-in and available to cover losses on a going-concern basis.
