MADISON, Wis.–The World Council of Credit Unions (WOCCU) has filed a comment letter with the Financial Stability Board noting that while it does not support a regulatory requirement for credit unions to obtain “Legal Entity Identifiers,” it does see some potential value in FASB’s encouragement of the increased use of the identification system.
The one caveat cited by WOCCU: FASB should respect credit unions’ freedom of choice not to register for one of these numbers if doing so would be unreasonably expensive.
WOCCU has been active with FASB on the issue for six years, when it first urged the body not to mandate use of the system for credit unions. Among the concerns credit unions have raised is such a requirement would involve credit unions needing to upgrade their IT systems to support the Legal Entity Identifier and also would require annual registration fees.
In response, FASB has for the past six years required CUs only to obtain a “Legal Entity Identifier” if it engaged in derivatives trades such interest rate swaps and caps. That requirement has meant the vast majority of credit unions have not needed such an identifier.
However, FASB is now proposing to potentially expand the use of the “Legal Entity Identifier” to other areas like payments, Bank Secrecy Act Know Your Customer (BSA KYC) due diligence, and credit reporting.
In its letter, WOCCU again called on FASB to not require all depository institutions obtain Legal Entity Identifiers, and again cited the costs involved in updating a CU’s computer systems and for any registration fees.
Some Potential Value
Where WOCCU said it does see some potential value for credit unions in the increased use of the Legal Entity Identifier is in the areas of payments, BSA KYC and credit reporting, in order to reduce potential redundancy and confusion in terms of identification of financial institution counterparties. But FASB must also respect credit unions’ freedom of choice not to register for a Legal Entity Identifier if doing so would be unreasonably expensive, WOCCU said.
The comment is also posted here.