On uncertainty…
Many of us are watching as the United States grapples with the failures of Silicon Valley Bank and Signature Bank, and Republic Bank receiving an infusion of USD 30 billion from 11 large banks. In the EU, Credit Suisse Bank received a USD 53 billion infusion from the Swiss central bank. It was interesting to see the European Central Bank move forward with a half point raise in interest rates given the recent events around the world.
What we see is the balancing of fiscal policy coming up against the challenges of managing a balance sheet of a financial institution during a time of turmoil. Clearly, regulators are having to prioritize financial stability in the face of inflation that is not quite under control. On top of that, there is real uncertainty over what is the true health of the system and whether the contagion is limited to a few institutions vulnerable to rising interest rates.
It is really difficult to try and look to the future to put all of the pieces together. Even the smartest people in the room cannot give us a clear answer. We are all going to have to deal with this uncertainty–and how events will play through to credit unions, who tend to shine during times of financial crisis–is also unclear. What is clear, however, is that many of the reforms put in place coming out of the last financial crisis, such as the Basel III Framework (with included proportionality), various resolution tools, stronger supervisory oversight and financial backstops, are all at work and responding to the crisis. Appropriately tailored regulations that promote responsible growth and properly managed risk are essential keys to our success in dealing with this uncertainty.
WOCCU Urges Greater Flexibility for Credit Unions in IASB Standard
World Council of Credit Unions (World Council) urged the IASB to provide greater clarity in its proposed revisions to the IFRS’ Exposure Draft for IFRS for SMEs Accounting Standard (Exposure Draft), that would clearly delineate that credit unions can used the relaxed standard for its allowance for loan and lease loss accounting (IFRS 9 or CECL). This standard is currently utilized in several countries for credit unions, however, many countries due to the current definition of “publicy accountable” contained in the current definition. Some jurisdiction tend to view credit unions as “publicly accountable” even though the term as used in the standard tend to apply to publicly traded vs. non-publicly traded entities, thus acting as a barrier to utilization of the IFRS for SME’s standard. Other countries have allowed accounting standards based on the IFRS for SME standard for credit unions.
continue reading »
