The Basel Committee on Banking Supervision has released new guidance on proportionality, which calls on supervisory authorities to tailor regulation for non-internationally active banks.
This is welcome news for the sector, which has been campaigning for finance sector regulations to be tailored to the needs of credit unions.
Now, Basel concedes that “depending on local circumstances, it might be appropriate to tailor regulation for non-internationally active banks”.
The guidance adds: “This includes potentially applying the Basel Framework in its current form (ie Basel III), or earlier or modified forms, for jurisdictions that have simpler banking systems, implemented in a way that is consistent with the underlying objective of the international standard.
“Such proportionate approaches preserve financial stability through bank safety and soundness. For some banks and banking systems, this might be achieved with rules that are even simpler than the Basel Framework while remaining broadly aligned with the international standards.”
The World Council of Credit Unions (Woccu), which has long been calling on the Basel Committee to work with national supervisors on the implementation of its Basel III standards, welcomed the guidance. Woccu believes national supervisors should tailor Basel III standards appropriately for the size, risk and complexity of credit unions.
Earlier this year Woccu urged the G20 to direct international standard-setting bodies to work closely with national regulators to fully adopt proportional tailoring of regulations for the purposes of advancing financial inclusion.
Andrew Price, Woccu’s senior vice president of advocacy and general counsel, said: “We have been urging the Basel Committee for years to provide further guidance and direction to supervisors on how to implement the Basel Framework for credit unions. This guidance is welcomed and will ultimately help credit unions achieve greater financial inclusion worldwide.”
The Basel Committee’s latest High-level considerations on proportionality are available here.
