Learning from Each Other…
Volume 15, Number 3
March 27, 2024
Advocacy News You Can Use
One of the great aspects of WOCCU is the ability to bring together our members from around the world. The comradery, the sharing, and the ability to learn from each other are truly some of the great things about our industry. This is quite evident in the recent release out of Australia where our member organization, the Customer Owned Banking Association (COBA), worked with the Treasurer of Australia to release a regulatory roadmap. This roadmap helps bring clarity to the multitude of regulations descending upon credit unions in Australia while also shedding light on the regulatory burden and costs. If it works well, it can help keep unnecessary costs under control, reduce regulatory redundancy, and reduce the ever-increasing complexity that stifles the credit union cooperative model.
This took a lot of work on behalf of COBA, and they acknowledge that they based some of their work on a model used in the United Kingdom. All of us are learning from each other. I would urge you to take a look at their approach. These types of approaches can better assist all of us in growing and strengthening our systems, and we need not look any further than our neighbor for the answers.
COBA’s Advocacy Success Leads to Australian Regulatory Roadmap
Years of diligent advocacy work by the Customer Owned Banking Association (COBA) has resulted in the Treasurer of Australia establishing a regulatory roadmap to ensure the country’s major financial service regulators coordinate and provide visibility of proposed regulatory reforms going forward. COBA, World Council’s direct member organization in Australia, spent the last several years meeting with key government officials and regulators to advocate for the creation of a financial sector regulatory grid.
Based on these efforts, the new regulatory roadmap will help regulators avoid duplication, engage with financial service businesses and improve implementation practices. This change to coordinate and provide a regulatory roadmap will particularly help medium-sized and smaller financial service providers, allowing them to better anticipate regulations that might impact their business in the future and the resources needed for compliance.
The regulatory roadmap is based on a system currently used in the United Kingdom, and will be a rolling, 24-month program of regulatory initiatives impacting the financial sector. The roadmap will be updated twice a year and include proposed legislation, rules and regulations, and standard making, consultation processes and data collection processes. This advanced planning and coordination is expected to facilitate better engagement between financial service providers and regulatory agencies with coordinated priorities and greater visibility to better discuss regulatory implementation methods.
Click here to read the Treasurer’s announcement and learn more about the key regulatory advocacy success of COBA.
Why this matters to your credit union: This approach represents an excellent model for helping with the ever-increasing problem of regulatory burden.
Basel Committee Announces Core Principles Revision and Other Updates
The Basel Committee on Banking Supervision (the Committee) recently met to discuss key items impacting the financial service markets.
The Basel Committee announced it will be revising the Core principles for effective banking supervision (Core Principles). Following comment letters from stakeholders, including the World Council of Credit Unions, the Committee approved the first revisions to the Core Principles since 2012. The final standards will be published following the International Conference of Banking Supervisors at the end of April. The Core Principles are global standards for prudential regulation and supervision. Supervisory authorities across the globe use the Core Principles as a benchmark for evaluating the effectiveness of their regulatory and supervisory frameworks. World Council strongly urged the Basel Committee to include more direct language concerning proportionality and communication with national level supervisory authorities. We also highlighted the disproportionate burden recent regulatory guidance places on credit unions in key areas, such as operational resilience, stress testing, and climate risk management. Click here to read the comment letter submitted by World Council.
During their recent meeting the Committee also discussed developing risks to the global banking system, window-dressing behavior by large banks, and the status of Basel III implementation.
The Committee discussed climate-related financial risks as one of the top ongoing and developing risks for financial institutions. It discussed scenario analysis as a tool for assessing the resilience of financial institutions business models, strategies, and overall risk profile. A discussion paper will be published in the coming months on the use of climate scenario analysis by banks and supervisors. The Committee also discussed sector risks, including segments of commercial real estate facing headwinds and banks’ interconnections with non-bank financial intermediaries.
Finally, the Committee reported on the implementation status of the outstanding Basel III standards, issued in 2017. Implementation is progressing but is uneven between countries. The Committee approved a workplan for the jurisdictional assessments of the implementation of these standards as part of the Committee’s Regulatory Consistency Assessment Programme.
Click here for more information on the updates provided by the Basel Committee.
Why this matters to your credit union: WOCCU expects the revisions to the Core Principles to include further emphasis on proportionality. They will also include updates on cybersecurity and climate risk. All of this guidance will ultimately be followed by national-level regulators, so credit unions can expect increased emphasis on and changes to regulations in the future.
WOCCU Files Comment Letter on the Disclosure of Climate-Related Financial Risks with the Basel Committee
In response to the Basel Committee on Banking Supervision's consultative document on the Disclosure of Climate-Related Financial Risks, WOCCU urged clear guidance on a proportional and risk-based approach to prevent overburdensome regulation for credit unions.
The Basel Committee is amending the Pillar 3 disclosure framework for climate-related financial risks largely as a result of the finalization of the standards adopted by the International Sustainability Standards Board (ISSB) and the Basel Framework to promote a common disclosure baseline for climate-related financial risks across internationally active banks.
While these rules are designed for those larger institutions, it is likely the concepts will filter down to smaller, less complex financial institutions such as credit unions and thus WOCCU commented on the various problems that may occur with this approach. The inclusion of proportionality is the key, but items such as access to data, the determination of materiality, contemplation of the unique model of credit unions that include fields of membership that may skew geographic service areas, and other items were raised as potential concerns.
WOCCU will continue to work on the emerging regulatory frameworks in this area as international standard setting bodies engage in their work on climate and sustainable finance.
A copy of the letter can be viewed here.
Why this matters to your credit union: With the work of the ISSB largely complete, the implementation of those standards in the financial sector is now underway. The national-level implementation is in some cases underway but is now the focus of advocacy efforts. Climate-risk and the management of those risks by credit unions is a large regulatory burden on the horizon for credit unions.
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Andrew T. Price, Esq. |
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