BASEL Switzerland – Several U.S. credit unions and international credit union organizations, plus the World Council of Credit Unions (WOCCU) have sent their comments to the Bank of International Settlement (BIS) of the new steps in the Basel Capital Accord. The Accord was originally supposed to be published by the end of this year for 2004 implementation. At press time, over 250 comments had been received from financial institutions around the world. BIS has just announced a longer schedule. "The Committee will release a complete and fully specified proposal for an additional round of consultation in early 2002 and will finalize the new Accord during 2002. Accordingly, the Basel Committee envisions an implementation date of 2005 for the New Accord." CUNA President/CEO Dan Mica stated in his letter to BIS that "CUNA applauds the improvements that are contained in the current Basel proposal. The three pillars of the framework: Minimum Capital Requirements, Supervisory Review Process, and Market Discipline, functionally expand the scope of the Accord." U.S. credit unions are not currently operating under the old Accord of 1988 because of their Prompt Corrective Action (PCA) capital requirements and NCUA supervision. Mica did not rule out the possibility that if changes occur in the future, CUNA might consider recommending that the Accords replace PCA. Mica will recommend that CUNA review the final version of the New Accord. However, at the current time he does not feel that U.S. credit unions should be subject to the New Accord. Although the United States is not subject to either the 1988 or the New Accord, credit unions in other countries may be. The New Accord is more credit union friendly than the old 1988 Accord, WOCCU CEO Arthur Arnold stated in his cover letter, but he added that they still have a way to go to "ensure that small co-operatively owned financial institutions can operate within a framework that matches their risk profiles." Arnold's comments are part of a 20-page document sent to Basel late last month. Arnold also said that he felt that credit unions or co-operatives were not clearly defined and in place of the term "bank," "depository financial institution" be substituted. Arnold gave WOCCU's support to the use of external credit assessments pointing out that less than 0.1% of the world's 38,000 credit unions have such a system in place. He did express concern over the possible "negative impact this may have on liquidity markets." Although the Credit Union Service Corporation of Australia (CUSCAL) also sent comments, Arnold used CUSCAL as an example saying under the proposal Australian Credit Unions would have to be capitalised at 50% up from the current 20%. As a result of this, Arnold encouraged BIS to "refine the framework for assigning risk weights to depository financial institutions to properly address the needs of the small financial institutions. -

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