MADISON, Wis.–The World Council of Credit Unions has sent a comment letter to the Basel Committee on Banking Supervision’s Consultative Document: Stress Testing Principles in which it said it concurs that the stress testing frameworks that have been developed since the global financial crisis have evolved well beyond those that were envisaged since the publication of the current stress testing principles.
“Many of our member associations have reported ‘gold-plating’ and excess supervision involving stress testing,” WOCCU said in its letter. “To that end, the ever-increasing regulatory burdens on credit unions and other community-based mutual depository institutions continues to be of great concern.”
The World Council said it “strongly supports” the Committee’s statement that “These principles are therefore intended to be applied on a proportionate basis, depending on size, complexity and risk profile of the bank or banking sector for which the authority is responsible.”
WOCCU is calling on the Committee to finalize its statement on proportional application of stress testing principles as proposed. It added that while it acknowledges stress testing is “an important regulatory and management tool, particularly for Systemically Important Financial Institutions (SIFIs) and complex international banks, WOCCU added that its usefulness, and “corresponding regulatory burden and costs for smaller non-systemically important credit unions becomes questionable, particularly those that are only involved in deposit taking and simple retail consumer lending. As such, these principles should be implemented in accordance with the principle of proportionality such that the supervisory practices are commensurate with the risk profile and systemic importance of the supervised entity being supervised.”
The full WOCCU letter can be found in CUToday.info’s The Vault here.