WASHINGTON–CUNA and the World Council of Credit Unions (WOCCU) have sent a letter related to the implementation of a Basel III proportionality framework, which is aimed at establishing a simpler and more reasonable approach for credit unions, to the House Financial Services Committee.
Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. The measures are meant to strengthen the regulation, supervision and risk management of banks, but as the World Council emphasized numerous times, the rules that are aimed at larger FIs can come with huge compliance costs and headaches for smaller institutions such as credit unions.
“We support the Federal Reserve’s consideration of adopting the final pieces of the Basel III framework for banks under their purview,” the letter states. “However, it is important to understand the proportionality built into the framework that must allow for tailoring for credit unions. Any such amendments must allow for this approach to allow for diversification in the marketplace and to allow community-based financial institutions to continue to serve their communities.”
Letter Sent Ahead of Hearing
The CUNA/WOCCU letter was sent ahead of a committee hearing titled “Implementing Basel III: What’s the Fed’s Endgame?”
“The Basel Committee itself has noted simpler approaches and adapted regulations could be suitable for smaller, non-internationally active financial institutions, and NCUA has taken that approach even further for U.S. credit unions, tailoring certain requirement for size, risk and complexity,” CUNA Deputy Chief Advocacy Officer for Federal Government Affairs Jason Stverak said in a statement. “We believe the proportional approach ensures applicable rules and regulations are consistent with credit unions’ relative systemic importance.”
The ‘Too Big to Fail’ Problem
Added Andrew Price, SVP-international advocacy and general counsel with WOCCU, “Basel III was intended for large, internationally active banks. Without proper proportionality contemplated in the framework, the disproportionate regulatory burdens associated with Basel III will continue to exacerbate the ’Too-Big-To-Fail’ problem by increasing the market power of the largest deposit-taking institutions, while increasing consolidation among community-based deposit taking institutions.”
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