MADISON, Wis.-World Council of Credit Unions (WOCCU) is calling for a fundamental review of the Basel II capital framework by the Basel Committee on Banking Supervision to ensure that smaller institutions and credit unions that have fared better during the economic recession aren't subject to tougher capital requirements than larger, riskier institutions that present systemic risk.
In a series of three letters to Basel Committee Chairman Nout Wellink, Dave Grace, WOCCU's vice president of association services, urged the committee to "rebalance" inconsistencies outlined in the current series of consultative documents that classify small financial cooperatives together with large, more complex banks.
WOCCU's actions come on the heels of a Basel Committee announcement that all financial institution capital levels will need to be raised to increase resilience to future episodes of economic and financial stress. The process will include increases not only in the amounts, but also the quality of capital required; improving the risk coverage of capital structures; and enacting supplementary protective measures.
"...Existing industry risk-modeling standards have failed to keep large banks from hemorrhaging losses that have fed the global economic downturn," WOCCU said. "Smaller institutions, especially member-owned financial cooperatives, hold smaller concentrations of funds, strengthening the global financial network by reducing the risk each institution poses."
In short, added WOCCU, "Our message to the Basel Committee is, essentially, 'Don't punish us - we're not banks.'"
