Under proposed Basel III guidelines, credit unions must treat shares memberscan redeem without restriction as liabilities on their balancesheets.

In a two-hour World Council of Credit Unions webinar this week,economist Glen Westley outlined the impact on credit unions of theBasel Committee on Banking Supervision's latest draft.

Although the committee has focused on the role large banksplayed in the economic crisis, credit unions and other financialcooperatives will likely be included in the mandates. The key willbe managing member shares relative to capital requirements.

“In general, Basel III narrows the definition of what's acceptable and callsfor more and higher quality capital than Basel II,” Westleysaid.

The new guidelines propose adding a capital conservation buffercomposed entirely of high-quality capital, a countercyclical bufferthat would affect institutions whose credit growth is consideredexcessive, and a leverage ratio that offers protection in casefinancial risk models prove faulty.

Westley noted shares a credit union can unconditionally refuseto redeem can be treated as capital that can remain with the creditunion in times of financial trouble.