WASHINGTON (9/15/15)-National credit union supervisors, such as the National Credit Union Administration in the United States, should have the discretion not to apply a proposed international interest risk framework to credit unions, the World Council of Credit Unions stated in a recent comment letter.
In the letter sent to the Basel Committee on Banking Supervision, the World Council expressed support for a Basel Committee proposalto make the committee’s new interest rate risk framework mandatory for “large, internationally active banks,”but would give agencies like the NCUA discretion over whether to apply the standard to non-internationally active financial institutions--including credit unions.
The Basel Committee is the Switzerland-based primary global standard setter for the prudential regulation on banksand other depository institutions. It released a consultative document in June titled “Interest rate risk in the banking book” that expands upon and will eventually replace a similar 2004 document from the committee.
In its comments, the World Council outlined why it supports the Basel Committee’s proposal to give national supervisors like the NCUA discretion on whether or not to apply the framework to non-internationally active institutions.
“Credit unions rarely, if ever, operate on a cross-border basis and many of the calculations required by this standard may provide unreasonably burdensome and of relatively little supervisory value for small credit unions and other credit unions with less complex assets and liabilities,” the letter reads.
The World Council also urged the Basel Committee to work with key central banks to ensure that policymakers raise interest rates “in a controlled and predictable manner in order to mitigate interest rate shocks on financial institutions.”