The World Council of Credit Unions wrote to the Basel Committee on Banking Supervision last week suggesting changes to its proposed approach to market risk capital requirements. This is the first Basel Committee standard to be proposed as expressly applicable to non-internationally active institutions like credit unions in the United States.
Based in Switzerland, the Basel Committee is the primary global standard setter for the prudential regulation on banks and other depository institutions. Its proposed “Simplified alternative to the standardized approach to market risk capital requirements” is designed as a less complex way for depository institutions to reserve for market risks like interest rate risk for available-for-sale bonds and loans.
While the simplified alternative is much less complex and burdensome than the current approach, it is likely that U.S. community banks will be required to adopt its approach. If this is the case, the World Council believes there could be effects on credit unions via guidance issued by the Federal Financial Institutions Examination Council.
In its comment letter, the World Council urged the following changes:
CUNA and the World Council met with Basel Committee Secretary General, William Coen earlier this year, where he informed the organizations about the shift in the committee’s focus to non-internationally active institutions.