Everyone Has a Boss…
Volume 15, Number 2
February 28, 2024
Advocacy News You Can Use
In Advocacy, it is our job to try and advance policies that are good for the industry that we represent. We often run into roadblocks trying to get policymakers to adopt a particular position or to craft rules that work for our members. When we face such obstacles, we often ask, “well who is their boss?” This is why a bit of our advocacy work for credit unions is focused at the G20 level. The G20 often provides direction to the international standard setting bodies and can shape the direction that guides the formation of the regulations. We have had success at this level with regards to financial inclusion, proportionality, sustainable finance and more. The G20 is comprised of the top officials from the most powerful countries around the world.
So, the question becomes, who is their boss? Interestingly, we don’t look to outer space or to a higher power. While many of us might pray a good bit, the answer from an advocacy standpoint is not above, but back in our respective countries. All of the heads of state and representatives to the G20 are subject to their own country’s rules, regulations and national politics. Although the G20 is essentially an international agreement on various policy issues, getting the respective countries to implement those agreements is another issue.
This has really been evident with the Basel III proposals, which some countries refer to as the Basel III endgame. The various countries send their respective finance ministers and regulators to negotiate and set the international standards, but when those standards return to the national level, they are sometimes met with resistance by the legislators charged with implementing them. Many portions of Basel III either get modified, altered or even rejected. It is rare for a country to adopt the Basel III framework wholesale.
This brings me back to the beginning. While WOCCU is the apex organization representing credit unions at the international level, ultimately, we stand on the shoulders of our national member organizations and our member countries. I am really glad, however, we have that partnership because we could not get it done without you. Everyone has a boss.
FSB Chair Highlights Key Issues to the G20
The Financial Stability Board (FSB) published a letter from its Chair, Klaas Knot, to G20 Finance Ministers and Central Bank Governors, ahead of the G20 meeting on 28-29 February.
Highlights of the letter are as follows:
- FSB Chair warns of challenging outlook to global financial stability including debt servicing burdens, stretched asset valuations in some key markets, and leverage and liquidity mismatch in non-bank financial intermediation (NBFI).
- Chair submits FSB’s revised policy recommendations to address vulnerabilities arising from liquidity mismatch in OEFs and calls on G20 members to implement them as quickly as feasible.
- Letter outlines key issues the FSB is working on in 2024, including lessons from the March 2023 banking turmoil, NBFI, climate change, digitalisation and enhancing the efficiency of cross-border payments.
In his letter, he warns of the challenging outlook for global financial stability, despite steady economic growth and signs of easing global financial conditions. Debt service challenges could increase, and exposures to sectors facing existing headwinds, like commercial real estate, bear close monitoring. Asset valuations are also stretched in some key markets. Abrupt shifts in market pricing could expose vulnerabilities in the financial system, including those related to leverage and liquidity mismatch in NBFI.
The letter lays out the FSB’s work during 2024 to monitor and address financial system vulnerabilities.
The FSB also noted that it is working to ensure the effective implementation of the international framework provided by the FSB Key Attributes of Effective Resolution Regimes, address the financial stability risks stemming from leverage in NBFI, and analyze the financial stability implications of tokenisation and artificial intelligence. To address growing financial stability risks from cyber incidents, the FSB is designing a format for incident reporting exchange (FIRE) for public consultation.
Finally, the FSB notes that it continues to coordinate international work through the FSB Roadmap to address financial risks from climate change, the G20 Roadmap for enhancing cross-border payments and the G20 Roadmap on crypto-assets. At the request of the Brazilian G20 Presidency, the FSB will also deliver a stocktake on regulatory and supervisory initiatives related to the identification and assessment of nature-related financial risks to the G20 July meeting.
A copy of the release can be viewed here.
Why this matters to your credit union: The Financial Stability Board’s agenda portends future regulatory changes. Issues they are working on, such as sustainable finance, payments, digitalization and supervisory issues, will ultimately change how credit unions operate.
World Council Submits Comment Letter on Disclosure of Cryptoasset Exposures
World Council has submitted a comment letter on the Basel Committee's public consultation Disclosure of Cryptoasset Exposure. The consultative document proposes a standardized disclosure template that would be required for financial institutions, including credit unions, with cryptoasset exposure beginning in January 2025. The Committee proposed the templates to ensure market discipline and better transparency on risks associated with exposure.
Similar to other areas of the Basel Framework, World Council requested that proportionality or a more streamlined ability to disclose also be included in the requirements and standard templates. If credit unions decide to explore or take-on cryptoasset exposure in the future it is important that the reporting requirements for community-based financial institutions not be overly burdensome to ensure they are not excluded from new opportunities.
Click here to read World Council's comment letter.
Why this matters to your credit union: Regulations around cryptoassets are an emerging and developing issue, yet they are already playing an ever-increasing role in the financial sector. It is important for the credit union perspective to be presented as this area emerges, so as to not adversely affect our ability to serve our members.
WOCCU Files Comment Letter on Digital Fraud and Banking
In response to the Basel Committee on Banking Supervision's discussion paper regarding digital fraud, World Council submitted a comment letter on behalf of the global credit union movement. The Committee's discussion paper requested comments a description of fraud and the transmission channel's into the banking system. It also requested comments on whether there are additional banking initiatives related to digital fraud that should be pursued by the Committee.
Among suggestions for a more inclusive description of digital fraud impacting credit unions, World Council urged the Committee to explore the methods and ramifications in which the most vulnerable populations are targeted. Digital fraud is another challenge credit unions face in their mission for financial inclusion. World Council requested the Committee consider additional education initiatives related to fraud activity and resources.
Click here to read the comment letter submitted by World Council.
Why this matters to your credit union: Fraud losses continue to be a source of difficulty for credit unions, including higher premiums for insurance coverage, increasing regulatory burden and direct losses to income. Ensuring that the credit union perspective is included in these policy decisions will help ensure our industry is considered as policy is developed.
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Andrew T. Price, Esq. |
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