World Council Urges New Reg Burden Reduction Guidance
Volume 8, Number 4
April 18, 2019
World Council Urges New Reg Burden Reduction Guidance
Following a meeting between the Basel Committee on Banking Supervision and representatives of World Council of Credit Unions and its members on March 29th, World Council filed comments urging the Basel Committee to issue new guidance on when prudential regulators can use less-complex regulatory approaches to tailor safety and soundness standards and reduce regulatory burdens on credit unions and other community-based depository institutions.
In the comment letter, World Council urged the Committee to issue a set of high-level principles or weighing-factors establishing when it is appropriate for national-level regulators to tailor their rules to achieve a more proportional regulatory approach, such as:
- Whether the institution has cross-border operations.
- The complexity of the institution's assets.
- The asset-size of the institution.
- The institution's interconnectedness to the financial system.
- The degree to which the institution reports to multiple prudential supervisors.
- The extent and nature of the institution's off-balance-sheet exposures.
- The mix of business activities of the institution, such as whether it engages in community banking, commercial banking and/or investment banking.
World Council also asked the Basel Committee to issue a public consultation in the near future on tailoring regulations to achieve more proportional compliance burdens for credit unions and other less-complex depository institutions.
World Council, CCUA Meet with BC Financial Institutions Commission on Liquidity
World Council of Credit Unions and the Canadian Credit Union Association (CCUA) met on April 4th with representatives of the Financial Institutions Commission of British Columbia (FICOM) regarding FICOM’s proposed Liquidity Management Guideline. The draft Guideline, if finalized, would implement British Columbia’s version of the Basel III Liquidity Coverage Ratio, which requires institutions to hold reserves of “High Quality Liquid Assets” such as government bonds to ensure that they have access to cash and cash-equivalents during a financial crisis.
World Council and CCUA argued that credit unions in the United States and the European Union are exempt from the Liquidity Coverage Ratio and supported FICOM tailoring its version of the Liquidity Coverage Ratio to the credit union business model by allowing retail-level credit unions’ excess liquidity held by Central 1 Credit Union to count towards the Liquidity Coverage Ratio’s reserve requirements.
Basel Committee Consults on Consolidated Basel III Framework
The Basel Committee on Banking Supervision has published a consolidated version of its Basel III safety and soundness standard for public comment by August 9th. Basel III establishes risk-based capital requirements and reserve requirements for liquidity, operational risk and market risk that apply to credit unions in Australia, Canada, the United States and other jurisdictions to varying degrees. The Basel Committee has been revising aspects of its earlier safety and soundness standards for the past nine years to develop the Basel III framework but had not previously published a consolidated version of it.
The Basel Committee’s new proposal on Basel III gives credit unions and other mutual depository institutions an additional opportunity to advocate for reducing Basel III’s regulatory burdens before the standard is fully phased-in between this year and 2022. After finalizing Basel III, the Basel Committee is expected to issue fewer proposals and concentrate more on ensuring that Basel III is implemented by national-level prudential regulatory agencies.
Michael S. Edwards
Sr. VP & General Counsel
World Council of Credit Unions (WOCCU)
99 M St., SE, Washington, DC 20003 USA
Office: +1-202-508-6755 | Mobile: +1-215-668-5240
medwards@woccu.org | www.woccu.org