World Council of Credit Unions announced Feb. 1 that it will collect and present credit union input to the Basel Committee on Banking Supervision, which will make revisions to the Basel II Accord this year.
In response to the global financial crisis, the Basel Committee could make several adjustments to its capital adequacy and liquidity requirements for financial institutions worldwide. The committee released the revised documents for public comment in December.
WOCCU member organizations wishing to comment on proposed Basel II Accord revisions should email their responses to Vice President of Association Services David Grace (firstname.lastname@example.org) by April 2.
"This is the first time the Basel Committee has recognized that financial cooperatives are different," Grace said. "We want to make sure these and other standards that enable credit unions to better serve their members appear in the final version." Grace added WOCCU has already "reached out to regulators around the globe" regarding Basel II.
The reform package covers two key areas of interest to credit unions. First, the new guidelines would raise the quality, consistency and transparency of the capital base, promoting long-term stability and sustainable growth and enabling the banking system to better absorb losses.
Second, proposed rules would reduce procyclicality and promote countercyclical buffers. A countercyclical capital framework will contribute to a more stable banking system than a procyclical one, WOCCU said in a statement, which will help dampen rather than amplify economic and financial shocks. To this end, adequate capital buffers at individual institutions should be established.
The committee also is promoting more forward-looking provisioning based on expected losses, which captures actual losses more transparently and is less procyclical than the current incurred-loss provisioning model.