Madison, Wis. and BASEL, Switzerland - Small financial institutions, including credit unions, around the world will have a competitive disadvantage if the provisions under the newly issued "Consultative Document Overview of The New Basel Capital Accord" (Basel II) are finalized, opined the World Council of Credit Unions. The document was...
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Madison, Wis. and BASEL, Switzerland – Small financial institutions, including credit unions, around the world will have a competitive disadvantage if the provisions under the newly issued “Consultative Document Overview of The New Basel Capital Accord” (Basel II) are finalized, opined the World Council of Credit Unions. The document was released by The Bank of International Settlements (BIS), based in Basel, Switzerland on April 29th. The BIS has asked for comments to be submitted to them by July 31, 2003. Their goal is to complete the New Accord by the fourth quarter 2003, with implementation in 2006. To formulate a response, World Council of Credit of Unions (WOCCU) has issued a call to its members to submit comments by July 15, 2003. “While we’re delighted to see that the consultative paper reflects our past input and is equalizing some key provisions, such as residential mortgages and allowing greater flexibility in measuring operational risk, we believe Basel II needs to go further to ensure a level playing field for smaller retail financial institutions, like credit unions,” Arthur Arnold, WOCCU president and CEO, said. According to WOCCU, The Basel Accord, as it currently stands allows large financial institutions with sophisticated risk analysis models to free up more capital than credit unions. In Australia, for example, large banks could reduce capital by up to 40% versus 10% for credit unions. The existing Basel Accord on Capital Adequacy is the basis from which financial institution and credit union regulators in over 100 countries have set capital standards. Originally the Basel Accord was applied to banks with international operations. Among the top 10 U.S. banks, only 7% of their collective total loan portfolio is in international assets. However, the Basel Accord benefits banks without international operations, by making it less costly to offer loans. WOCCU represents credit union interests to the BIS. In November 2002, WOCCU formed a Legislative and Regulatory Affairs Committee that includes U.S. members, Barry Jolette, president/CEO, San Mateo CU, Redwood, Calif., and Ron Hance, president/CEO, Heritage Family CU, Rutland, Vt. Marcel Chorel of Canada, and Gregorz Bierecki of Poland also serve on the committee. A BIS representative will speak at WOCCU’s Forum in Brisbane Australia in June. Comments should be sent to Dave Grace at email@example.com. WOCCU won’t be alone in sending comments to BIS. According to the April 30th “Financial Times,” authorities in some European countries are worried that skilled personnel do not exist to meet the requirements. Others are worried that it will overheat the marketplace. -
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