A new proposal regarding credit risk measurement, which was issued for comment by the Basel Committee on Banking Supervision in December, has the potential to put bank loans out of reach for smaller credit unions that are not subject to risk-based capital rules, according to the World Council of Credit Unions. The proposal could also cause credit unions without a formal RBC analysis to be rated at 10 times the current risk level when attempting to borrow from RBC-compliant banks, WOCCU said.

The Madison, Wis.-based international credit union trade organization strenuously objected to several components of the rule in its March 27 comment letter to the Basel Committee Secretary General William Coen.  The proposal’s intent to strengthen financial institutions’ regulatory capital standards by requiring greater adherence to RBC rules would cause problems for smaller financial entities, including credit unions not subject to RBC, which then would be classified as a greater borrowing risk, according to World Council VP/General Counsel Michael Edwards.

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