MADISON, Wis.–The World Council of Credit Unions is urging the International Association of Deposit Insurers to look to credit union insurance funds around the world as it seeks comment on its draft research paper “Deposit Insurance Fund Target Ratios.”
To get a fuller picture of deposit insurer practices globally, especially in G20 countries, WOCCU highlighted the National Credit Union Share Insurance Fund in the U.S.; the United Kingdom’s Financial Services Compensation Scheme, and the deposit guarantee corporations insuring savings held by credit unions in the Canadian Provinces of Manitoba, New Brunswick, Nova Scotia, Ontario, Prince Edward Island, and Saskatchewan in Canada.
“The United States’ NCUSIF, the United Kingdom’s FSCS and Canadian provincial deposit insurance funds guarantee significant amounts of savings and have proved resilient during stress periods even though they can be structured differently from many of the deposit insurance funds that responded to the Association’s survey,” WOCCU wrote.
The three models make a compelling case that the target ratio should not be set any higher than 100 basis points, according to WOCCU.
“A higher fund target ratio would require levies that could erode the ability of credit unions to build capital through earnings retention, resulting in generally less well capitalized institutions that would be more susceptible to failure and, by extension, more likely to have depositors that make claims on deposit insurance funds,” WOCCU said. “Lower regulatory capital levels would also make it more difficult for credit unions to provide credit to their local communities, especially vis-à-vis small- and medium-enterprises and physical persons who are underserved by commercial banks.
A full copy of the white paper can be found in the White Papers section of CUToday.info’s The Vault. http://www.cutoday.info/THE-vault/