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Basel Committee Removes Inaccurate Claims about CUs, Thanks to WOCCU Advocacy
Tuesday, October 18, 2016 6:50 AM

The Basel Committee on Banking Supervision made major credit-union friendly revisions to the final version of its banking supervision guidance, taking into account comments and concerns expressed by the World Council of Credit Unions (WOCCU). WOCCU wrote to the committee to correct a number of inaccuracies in the proposal earlier this year.

The Switzerland-based Basel Committee is the primary global prudential standard-setter for regulation of banks around the world. Its proposal was titled Guidance on the application of the Guidance on the application of the Core Principles for Effective Banking Supervision to the regulation and supervision of institutions relevant to financial inclusion.

The final standard issued by the committee removed a number of inaccurate claims about credit unions present in the proposal, including:

  • Removing inaccurate criticisms of credit unions’ corporate governance;
  • Removing language saying that credit unions are subject to “excessive risk-taking.” In reality, WOCCU pointed out, credit unions are usually more risk-averse than joint-stock banks;
  • Removing language saying that undercapitalized credit unions should not be allowed to add new members;
  • Removing language saying that shares issued by credit unions are not eligible for inclusion in regulatory capital (some types of credit union shares and similar capital instruments, such as corporate credit union “Perpetual Contributed Capital” and natural-person credit union “supplemental capital,” can be included in regulatory capital); and
  • Clarifying that credit unions are depository institutions.

In addition, WOCCU’s advocacy efforts helped ensure that the Basel Committee’s final rule on total loss absorbing capacity does not apply to credit unions. At WOCCU’s urging, the finalized rule only applies to the 30 largest “systematically important” banks and other institutions that invest in those banks’ convertible bonds.