The European Network of Credit Unions (ENCU) filed its comment letter on the European Banking Authority’s (EBA) guidelines on methods for calculating contributions to Deposit Guarantee Schemes (DGS) in the European Union. Michael Edwards, vice president and general counsel of ENCU made several suggestions on the guidelines as follows:
- Encouraged the continuation of the ability of national competent authorities to have continued discretion to exclude and adjust the core risk indicators for sectors, such as the credit union sector, based on the legal characteristics and reporting requirements of those sectors, noting that the EBA’s DGS methodology would likely impose excessive reporting requirements on credit unions without continued national discretion in this area
- Urged the EBA to establish DGS levy guidance that takes into account the value of an institution’s covered deposits relative to the DGS funds’ total CD liabilities or total reserves, and sets higher marginal rates of DGS levies on systemically important institutions such as G-SIBs and O-SIIs;
- Urged the EBA to recognize all private-sector Institutional Protection Schemes (IPS) in its DGS levy guidelines where the IPS has a history of providing support to its member institutions, whether or not the IPS in question is recognized officially by their national competent authority; and
- Opposed the use of Return on Assets (
RoA) as a core individual risk indicator because credit unions, as not-for-profit cooperatives, do not seek to maximise RoA. Credit unions generally also have lower RoAs than large banks because of their financial inclusion mission, lowerpercentage of fee income (as opposed to interest income) as a share of total income in a low interestrate environment, and their smaller economies of scale.
A copy of the comment letter can be viewed here.