The World Council of Credit Unions opposes making demutualizations the international standard for resolving weak financial cooperatives, it wrote last week to the International Association of Deposit Insurers. The letter was sent in response to the association’s draft research paper that urges numerous changes to the hierarchy of tools available for resolution of a troubled credit unions.
Specifically, the World Council urged the association to emphasize that demutualization, when a member-owned entity converts into a shareholder-owned entity, is a disfavored resolution approach.
“Maintaining the availability of cooperative financial services to ordinary physical persons and small and medium enterprises is important for promoting financial inclusion in all types of communities, especially rural districts and poor urban areas that are underserved by commercial banks because of a perceived lack of profitability,” said Michael Edwards, vice president and general counsel of the World Council.
The World Council urged the following changes to the paper:
A link to the letter, and addition information, can be found on the World Council’s Advocacy blog.