|Volume 7, Number 5
September 12, 2018
Basel Committee Adopts WOCCU-Recommended Disclosure Exemptions
The Basel Committee on Banking Supervision’s (Committee) recent amendment to Basel III’s disclosure requirements adopted World Council of Credit Unions’ (WOCCU’s) recommendation that Basel III’s Total Loss-Absorbing Capacity disclosure requirements be limited to global systemically important banks (G-SIBs) only. This means that all credit unions and other community-based depository institutions will be exempt from Basel III’s Total Loss Absorbing Capacity disclosure requirements.
WOCCU’s Advocacy Achieves Increased Audit Transparency
The Monitoring Group and the International Federation of Accountants (IFAC) have issued a new international standard on audits called “Perspectives on the Way Forward for Strengthening the Oversight and Operations of the International Audit & Assurance and Ethics Standards Boards”. This new standard responds to WOCCU’s comments by adopting a “multi-stakeholder” public consultative approach for amendments to auditing standards that should increase public participation and better serve credit unions and other mutual depository institutions.
Basel Committee Adopts WOCCU Recommended Amendment to Treatment of Net Stable Funding Ratio
The Basel Committee on Banking Supervision has adopted WOCCU recommended changes to the treatment of extraordinary monetary policy operations in the Net Stable Funding Ratio (NFSR). The amendment to the NSFR, which is Basel III’s medium-term liquidity management metric, reduces credit unions’ and banks’ reserve requirements for claims on central banks (such as mandatory reserves held by central banks) with a maturity of more than six months. The amendment will reduce reserve requirements for credit unions and other depository institutions in situations where central banks attempt to absorb excess liquidity in the banking system.
WOCCU Urges Continued Access to Interest Rate Swaps and Caps
WOCCU recently filed comments strongly urging the Financial Stability Board, the Basel Committee on Banking Supervision, and other international standard setting agencies to reduce Basel III’s capital requirements for issuers, clearers and users of interest-rate swaps and caps to ensure that credit unions and other mutual depository institutions continue to have access to interest rate derivatives at fair rates. We expressed concern that credit unions and other mutuals that use interest rate swaps and caps may in the future no longer be able to access interest rate derivatives at fair rates, or at all, unless revisions are made in the near future to reduce Basel III’s regulatory capital requirements for derivatives.
Our comments also argued that interest rate swaps and caps promote safety and soundness by helping community-based depository institutions hedge interest rate risks related to fixed-rate mortgage loans held in portfolio and similar fixed-rate investments. We urged the Committee to design regulatory incentives or mandates that would ensure that credit unions and other mutuals continue to have fair and affordable access to interest rate derivatives.
WOCCU Urges Proportionality in Cybersecurity Initiative
WOCCU urged the Financial Stability Board to take a proportional regulatory approach in its proposed cybersecurity guidance in order to limit unreasonable compliance burden on community-based financial institutions, such as credit unions and other mutual depository institutions.
Our comments supported the Board’s initiative to develop a Cyber Lexicon establishing common terms for cybersecurity issues as well as its efforts to improve cybersecurity and cyber-resilience in the financial sector. We urged the Board, however, to ensure that any future cybersecurity rules do not impose unreasonable compliance burdens on credit unions and other community-based depository institutions.
Michael S. Edwards