BASEL, Switzerland—Credit union leaders from around the world met here with Basel Committee on Banking Supervision Secretary General William Coen and other senior members of the Basel Committee Secretariat to discuss how best to reduce regulatory burdens on credit unions.
Representing credit unions at the meeting were Martha Durdin, president and CEO of the Canadian Credit Union Association; Ed Farrell, CEO of the Irish League of Credit Unions; Pat Fay, director of the Irish league of CUs; Bill Hampel, chief economist and chief policy officer with CUNA; Daniel Frederic Van Det, executive director of credit for Banco Cooperativo Sicredi of Brazil, and Michael Edwards, vice president and general counsel with the World Council of Credit Unions.
According to WOCCU, during the meeting the credit union leaders urged the Basel Committee to reduce regulatory burdens on credit unions. The credit union leaders urged the Committee to carve out non-internationally active institutions like credit unions from Basel Committee standards and to establish a working group focused on considering the potential impact of proposed Basel Committee standards on community-based financial institutions, WOCCU said.
The CU representatives also supported the Committee’s proposal to clarify its rules on correspondent banking to help make it easier for credit unions to establish and maintain correspondent banking relationships.
In addition, WOCCU said credit union leaders expressed support for the Basel Committee’s proposal to allow a capital “add-back” to reduce the impact of on credit union capital from the implementation of expected credit loss accounting standards including International Financial Reporting Standard 9 (IFRS 9) and the Current Expected Credit Loss (CECL) standard under US generally accepted accounting principles.
“Also discussed were longer-term measures to address the de facto capital increase that will occur under IFRS 9 and CECL, such as possibly including general provisions related to expected credit losses in Basel III Additional Tier 1 capital, the second most desirable form of regulatory capital under Basel III,” WOCCU said.
World Council also recently submitted written comments to the Committee regarding its proposed “transitional” measures involved with implementation of IFRS 9 and CECL as well the Committee’s discussion paper on how to address IFRS 9 and CECL in the long term.
“We believe that carving out locally focused financial institutions from Basel Committee standards is one of the best ways to limit regulatory burdens on credit unions and other community-based financial cooperatives,” said WOCCU’s Edwards. “Credit union regulators frequently look to Basel Committee standards even if they are not required to implement Basel Committee rules on locally focused institutions per se."