WASHINGTON (1/13/15)--While the World Council of Credit Unions supports most of the Basel Committee on Banking Supervision revised principles on corporate governance, it is concerned about additional regulatory burden that may be placed on credit unions.
The World Council submitted a comment letter last week to the committee, which is the primary source of global financial regulation throughout the world.
The committee's revised principles build on its 2010 document covering the same topic. The new principles strengthen risk governance guidance, expand guidance on the role of boards of directors and provide guidance for supervisors in evaluating the board member and management selection process.
"World Council supports the Committee's proposed 'Corporate governance principles for banks' guidance in most respects," reads the letter, signed by Michael Edwards, World Council chief counsel and vice president for advocacy and governmental affairs. "We are concerned, however, that some elements of the proposal could be read by supervisors as requiring unreasonably burdensome compliance requirements on smaller credit unions with limited staff resources, even though that does not appear to be the committee's intent."
The World Council strongly supports the Basel Committee's recommendation of proportional implementation, which means making reasonable adjustments where appropriate for institutions with lower risk profiles, and being more alert when it comes to institutions with higher risk profiles.
One troubling issue fir the World Council raised by the Basel Committee would require financial institutions to employ a "chief risk officer." The council is concerned about the burden this might place on small credit unions with limited staff resources.
This is also the case with several other proposals from the committee, including requiring stress testing and employing a full-time internal auditor, which the World Council urged clarifications for, to ensure credit unions can still comply without tying up additional resources.
After the committee issued its guidance in 2010, the National Credit Union Administration issued an accompanying regulation, as well as a letter to federal credit unions defining duties of federal credit union boards of directors.
Edwards said it is possible the NCUA could likewise issue guidance in response to the updated Basel Committee guidance in the coming year.