The World Council of Credit Unions filed two comment letters with the Financial Stability Board (FSB) on their two Consultation Documents on Key Attributes of Effective Resolution Regimes: 1. Principles on Bail-in Execution; and 2. Funding Strategy Elements of an Implementable Resolution Plan
FSB Bail-In Principles Proposal:
On the FSB Principles on Bail-in Execution WOCCU:
- Urges the FSB to limit these requirements to systemically important banks only;
- Argues that the FSB should respect the cooperative structure and not require a change in the coop’s ownership and control even in the event of a “bail-in”;
- Urges the FSB allow supervisors and institutions the option to engage more than one valuation firm to value its assets;
- Argues the FSB should not require community-based depository institutions to invest in computer programs that provide “highly granular” information about their assets and liabilities; and
- Cautions that public communications by supervisors concerning troubled financial cooperatives should be carefully crafted so as not to cause a run on that institution or on other financial cooperatives, especially since credit unions and other financial cooperatives are privately held by their member-depositors (so it is not necessary to issue communications to a broader “market” as would likely be necessary for a publicly traded systemically important bank).
FSB Resolution Funding Strategies Proposal:
WOCCU urged the FSB to apply the proposed funding strategy only to systemically important banks. Further WOCCU discusses information sharing between institutions and supervisors and provides examples of how cooperative depository institutions systems have handled past resolutions, such as the US “corporate credit unions crisis” of 2009, without demutualizing, such as by using private stabilization funds or temporary public-sector stabilization funds.