On Oct. 17, the Basel Committee on Banking Supervision issued a revised Stress Testing Principles standard that will significantly reduce the regulatory burdens of stress test on credit unions and other community-based financial cooperatives.
Earlier this year, the World Council of Credit Unions urged the “proportional” approach to stress testing adopted by the Basel Committee. Stress tests of credit unions and other community-based cooperative depository institutions are based on this Basel Committee standard and will now be implemented by regulators on a more proportionate basis, based on the size, complexity, resources and risk profile of the institution.
“World Council members have often reported ‘gold-plating’ and excessive supervision involving stress testing and the Basel Committee’s updated stress testing principles should help end those excessive compliance burdens on credit unions,” said Micheal Edwards, World Council’s senior vice president and genera counsel.
The Basel Committee’s new standard also found that national-level stress testing frameworks have evolved well beyond what the Committee envisaged when it issued its original stress testing standard after the global financial crisis. World Council applauds the committee’s new approach that will help right-size the compliance burdens of stress tests for credit unions and other community-based financial institutions.