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:
- 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;
- Mergers or Purchase and Assumption transactions with another financial coop should be the preferred resolution method;
- 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
- Supervisory tools available before the point of non-viability, such as Net Worth Restoration Plans, should be emphasized.