He urged the committee to revise the proposal to update the definition of nonbank to the standard definition from the World Bank, the European Commission, U.S. financial regulators and others to define nonbank as a non-deposit-taking institution.

“World Council strongly opposes the committee's attempt to create a new bifurcation in financial regulation that defines any institution that is not a commercial bank as a nonbank,” Edwards said. “The committee's conflation of credit unions, building societies and mutual banks with nonbanks is likely to be viewed as a symptom of regulatory capture of the committee by commercial bankers. The term nonbank should only be used to refer to institutions that do not accept deposits, which is how the term nonbank is commonly understood and defined.”

He called upon the committee to be consistent with the nonbank terminology employed by other regulators across the globe and to revise the proposed guidance to exclude credit unions and other depository institutions from the final version of the nonbank guidance.

The proposal also includes language that would subject credit unions and other mutual depository institutions to more stringent regulatory standards than joint-stock financial institutions or commercial banks.

Edwards wrote that WOCCU opposes this aspect of the proposal as it calls for favoritism toward commercial banks and joint-stock microfinance institutions and would be detrimental to credit unions and others.

“The committee's proposal to discriminate against credit unions and other mutual depository institutions is also likely to create artificial barriers to market entry for credit unions and similar mutual depository institutions that will reduce consumer choice and financial inclusion,” Edwards wrote. “Credit unions exist primarily to promote thrift and to provide their members with loans and other financial services at fair rates; credit unions exist not for profit, not for charity, but for service to their members.

Additionally, WOCCU asked the committee to remove references to initial capital requirements for credit unions. This was because the committee does not understand how credit unions have been formed traditionally, Edwards explained.

Other issues addressed by Edwards included a claim by the committee that credit unions are only for poor, unbanked individuals. Edwards writes, “Credit unions are for everyone.”

Further, Edwards wrote the proposal was only appropriate for institutions in the developing world – not in the U.S. and other jurisdictions – where supervision of most financial institutions, including banks, is lax.

WOCCU opposed several other aspects of the proposal, including statements that credit unions need to be regulated more stringently than banks and need higher capital ratios than similarly sized banks.