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IADI Urged to Consider Credit Union Deposit Insurance Schemes in Setting Ratios

World Council of Credit Unions (World Council) filed its comment letter on the International Association of Deposit Insurers on the Association’s draft research paper Deposit Insurance Fund Target Ratios.  WOCCU included information on the National Credit Union Share Insurance Fund (NCUSIF) in the United States, the United Kingdoms’ Financial Services Compensation Scheme (FSCS), and Canadian provincial deposit insurance funds noting that including these successful approaches taken by the respective schemes, albeit different in their approaches, can help inform the IADI’s future work on deposit insurance fund target ratios.  

The letter notes that these funding structures strike an appropriate balance vis-à-vis the costs of levies versus pro- and counter-cyclality versus maintaining readily available funds to pay for insurance losses.

A copy of the letter can be viewed here.

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IADI

WOCCU Urges Changes to IADI Research on Resolution Tools

The World Council of Credit Unions (WOCCU) filed its comment letter with the International Association of Deposit Insurers on the Association’s draft research paper on Resolution Issues for Financial Cooperative: Overview of Distinctive Features and Current Resolution Tools urging numerous changes to the hierarchy of tools available for resolution of a troubled credit union.  

Michael Edwards, VP and General Counsel of WOCCU states that, "[m]aintaining the availability of cooperative financial services to ordinary physical persons and small and medium enterprises (SMEs) is important for promoting financial inclusion in all types of communities, especially rural districts and poor urban areas that are underserved by commercial banks because of a perceived lack of profitability".

As such, WOCCU urged the following changes to the draft research paper: 

  1. Demutualization should be a last resort for resolving financial cooperatives, i.e. used only when a business combination with another financial coop is not possible;
  2. Mergers or Purchase and Assumption transactions with another financial coop should be the preferred resolution method;
  3. The Association’s paper should be updated to include recent Basel Committee, Canadian OSFI, and EU capital rules for financial coops which have increased financial coops ability to recapitalize; and
  4. Supervisory tools available before the point of non-viability, such as Net Worth Restoration Plans, should be emphasized.
A copy of the letter can be viewed here.
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IADI