The World Council of Credit Unions this week wrote to the Basel Committee on Banking Supervision regarding the regulatory capital treatment of investments in government-guaranteed debt. The Basel Committee is the primary global standard setter for the prudential regulation on banks and other depository institutions.
“Since NCUA’s risk-based capital rule is based on Based III standards, the new proposed standards, if finalized, would likely affect NCUA’s risk-based capital rules and could potentially require credit unions to hold additional regulatory capital against investments guaranteed by the U.S. government,” said Michael Edwards, World Council’s vice president and general counsel.
World Council’s comments argued strongly in favor of continuing to treat US-government guaranteed debt as riskless for regulatory capital purposes. The letter says governments rarely default on their obligations to domestic creditors, and that no countries with per capita gross-domestic product above US$ 25,000 have defaulted on their debts since the 1950s.
Other highlights of the letter include:
Additional information is available on the World Council’s Advocate blog.