Global Regulatory Update

World Council's twice yearly electronic newsletter of regulatory issues throughout the world

January 2016: Issue 19


An influential Parliamentary Committee in Australia has issued a report describing Australia’s banking market as an oligopoly where the major banks have significant market power that they use to the detriment of consumers. The Committee found that a lack of competition in banking has significant adverse consequences for the economy and consumers. The primary causes of the lack of competition in Australia’s banking sector include the major banks’ lower cost structures, the banking sector’s high barriers to entry and consumer inertia.

The Committee expects that, over time, the size of the major banks’ cost advantages will decline due to a variety of factors including the Government’s commitment to clarify and strengthen the Australian Prudential Regulation Authority’s (APRA) crisis management powers, APRA’s commitment to introduce a domestic loss-absorbing capacity framework in line with international developments (both of which will reduce the perception that the major banks are too-big-to-fail) and work by the Basel Committee on Banking Supervision (that APRA expects to adopt) to address excessive variability between the capital requirements under Basel III for banks using Internal Ratings Based approaches and standardized models.

The Customer Owned Banking Association, Australia’s industry body for the customer-owned banking sector, welcomed the report as a strong message to the Government and regulators to act urgently to promote competition in retail banking.

Source: Customer Owned Banking Association



The Canadian policy landscape for credit unions once again underwent big changes in 2016.  Federally, we witnessed the first credit union (Uni Financial Cooperation) exit its provincial regulatory environment and move under federal jurisdiction, a process aided by legislative changes.  Concurrently, the Office of the Superintendent of Financial Institutions, Canada’s federal prudential regulator, adjusted its capital guidance to authorize federal credit union shares with sufficient permanence and loss absorbency as Basel III “common equity tier 1” capital—the same regulatory capital classification as retained earnings—and also to authorize non-viability contingent capital (NVCC) for federal credit unions. 

On a less positive note, the federal government moved to implement the Organization for Economic Cooperation and Development (OECD)’s Common Reporting Standard, a tax reporting framework, that unlike its progenitor, the Foreign Account Tax Compliance Act (FATCA), makes no accommodation for smaller institutions like credit unions which are low risk vis-à-vis facilitating offshore tax avoidance by foreign citizens living outside of Canada.  The ensuing regulatory burden will be a challenge for Canadian credit unions, especially smaller ones, in 2017.   The year 2016 also marked the final phase-out of the federal additional deduction for credit union (ADCU), a tax measure that gave larger credit unions access to the preferential small business tax rate and which had been in place since the early 1970s. 

At the provincial level, credit union supervisors worked to update their regulations and, in some cases, legislative frameworks to meet the end-of-year deadline for the federal government’s exit from supervising provincially chartered central credit unions.  

Several provincial governments have also begun the process of reviewing and updating their credit union statutes and regulations in other areas.  Referencing the federal phase out of the ADCU, for example, the province of British Columbia said it would phase out its own preferential tax rate for credit unions (historically geared to the ADCU), while another province signalled it might do the same in 2017.

Source: Canadian Credit Union Association


European Union

In late November, the European Commission issued proposals to exempt more European credit unions from Basel III and to give credit unions’ deposits in European banks more favorable treatment than deposits made by other financial institutions. 

Specifically, the Commission proposed adding Basel III exemptions for credit unions in the Netherlands and Croatia, which would create credit union exemptions from Basel III in nearly all European Union (EU) Member States with credit unions.  The Commission also proposed a streamlined approach for granting additional, future Basel III exemptions for credit unions located in other EU Member States that do not currently have Basel III exemptions.

Regarding credit unions’ investments in bank term deposits, the Commission’s Basel III “Net Stable Funding Ratio” proposal would reduce by 50% the liquidity reserves that banks must hold against term deposits made by credit unions that have 1 to 6 months remaining maturity.  The lower reserve levels should help credit unions achieve better yields on their term deposit investments.

Source:  European Network of Credit Unions


Great Britain

The Bank of England-Prudential Regulation Authority (PRA) has now implemented its new prudential rulebook for credit unions that provides extra flexibility and freedom for credit unions in terms of raising extra capital and enhancing their governance and business monitoring arrangements.  The Association of British Credit Unions Limited is helping credit unions meet these regulatory requirements through the launch of new services for online training of directors, management and staff, as well as a new business intelligence tool which integrates PRA standards.  The PRA is now undertaking a project to modernize and digitize credit union regulatory reporting, and is also considering how a more sophisticated and flexible capital regime might be established for larger and more ambitious credit unions.

The Financial Conduct Authority (FCA) meanwhile has adopted a more restrictive interpretation of the business activity powers of credit unions under the Credit Unions Act that threatens to stifle innovation, especially in the area of payments services.  Resolving this issue may require legislative reform.  Elsewhere, the FCA has renewed its focus on credit union procedures for the prevention of money laundering and financial crime, and continues to prioritise enhancing credit union governance.

Finally, the political process in the United Kingdom (UK) is dominated by “Brexit” and the change in Government that resulted from the UK’s surprise vote to leave the European Union in June 2016.  The implications of Brexit for credit unions are unclear—there may well be some positive deregulation—but any deregulation is likely to benefit all British financial services firms and would take a long time to take effect.  On the other hand, the economic outlook in the United Kingdom is volatile because of the high degree of regulatory uncertainty associated with the Brexit process.

Source: Association of British Credit Unions Limited



Regulations issued by the Central Bank of Ireland (CBI) came into force at the beginning of 2016 to phase-in new safety and soundness provisions of the Credit Unions and Cooperation with Overseas Regulations Act 2012. These regulations set out prudential requirements for all credit unions in a number of key areas including regulatory capital, liquidity, lending, investments, savings, borrowing, internal controls and reporting arrangements.

The new rules, among other things, established a maximum limit of EUR 100,000 on the amount of savings that an individual member can deposit at credit unions that do not have a regulatory waiver, which is equivalent to the standard maximum amount insured by the Republic of Ireland’s savings guarantee scheme. The Irish League of Credit Unions (ILCU) lobbied the CBI in relation to this rule and an application process was provided to allow credit unions to apply to the CBI up until June 27, 2016 for waivers to continue to accept savings above the insured limit. Many credit unions were successful with their applications and continue to be able to accept savings in excess of the insured amount.

The Credit Union Advisory Committee (CUAC) “Review of Implementation of the Recommendations in the Commission on Credit Unions” report was published in July 2016. The CUAC report identified that the vast majority of recommendations made by the Commission on Credit Unions have been implemented. The report also revealed that a considerable amount of work has been expended by credit union stakeholders in establishing more effective governance and regulatory requirements. An Implementation Group will be established to oversee and monitor implementation of the recommendations in 2017.

In Northern Ireland, the Credit Unions and Co-operative and Community Societies Act (Northern Ireland) 2016 received Royal assent in April 2016 and will allow credit unions to offer enhanced services to their members and prospective members including the ability to accept legal entities as members and offer interest-bearing shares.

The Bank of England-Prudential Regulation Authority and Financial Conduct Authority released their policy statement relating to the reform of the United Kingdom’s (UK) Credit Union rulebook in February 2016. Credit Unions in Northern Ireland now have two regulatory handbooks to comply with.

The UK’s Accountability Regime (which replaced the Approved Person Regime) for credit union-affiliated persons came into force in March 2016. New obligations will apply in the due diligence, appointment and ongoing fitness and propriety of credit union directors, senior managers and other key employees. New conduct rules will also apply.

A decision to raise the standard maximum amount of deposit protection provided by the UK’s savings guarantee scheme to GBP 85,000 (from GBP 75,000) has been taken as a result of the currency exchange fluctuations.  This change is effective as of January 30, 2017.

Despite the UK’s vote in June 2016 to leave the European Union (EU), implementation of key EU legislative initiatives in money laundering and data protection will continue to be transposed into UK legislation. Business for credit unions across the north and south of Ireland continues as usual.

 Source: Irish League of Credit Unions



The Republic of Macedonia is considering changes to its banking laws that would affect the prudential regulation of Macedonian credit unions.  Key provisions proposed in the new law including strengthening corporate governance through the implementation of the Basel principles, introduction of a capital conservation buffer and a counter-cyclical capital buffer, and provisions strengthening the supervisory enforcement powers of the National Bank of Macedonia.

In addition, the National Bank of Macedonia is in the process of amending its regulatory capital regulations to establish more stringent rules on what types of items qualify as bank and credit union capital instruments. 

Source: FULM Savings House


The Netherlands

The Netherlands’ Act on Supervision of Credit Unions took effect on January 1, 2016 after having been approved unanimously by the Netherlands Parliament in 2015.  The Act establishes credit unions as not-for-profit cooperatives whose members are small business owners and which provide savings deposits to a common fund from which other members can borrow.

Under the Act, credit unions with less than EUR 10 million in assets operate under a self-regulatory system carried out by their credit union association without direct examination by the Netherlands Central Bank or the Financial Markets Authority. Credit unions with assets between EUR 10 million and EUR 100 million will be examined by the Central Bank under a streamlined rulebook that focuses on liquidity, solvency and corporate governance.  Credit unions with more than EUR 100 million in assets will be subject to the Netherlands’ regulations for banks.

The European Commission’s formal recognition of the Act on Supervision of Credit Unions by the European Union (EU), as an exemption from the EU’s Capital Requirements Directive on Basel III rules, was proposed on November 23, 2016.  We expect the EU to finalize this proposal during 2017.

At the national level, in 2017 the Central Bank will publish its final liquidity regulations for credit unions with between EUR 10 million and EUR 100 million in assets. The Central Bank consulted with the Association of Credit Unions in the Netherlands on this proposal and we believe that the final version of these liquidity rules will incorporate a risk-based approach that takes into account factors including: (a) the diversification of funding sources; (b) the degree to which the credit union is funded with short-term deposits; (c) the granularity of available data on the credit union’s assets and liabilities; and (d) the extent to which the maturities of assets match the maturities of liabilities.

Source: Association of Credit Unions in the Netherlands


New Zealand

In line with the requirements of the Financial Markets Conduct Act (2013), all credit unions in New Zealand have now transitioned to a consumer protection Product Disclosure Statement as their core offer document from December 2016.  The new disclosure replaces the relatively complex prospectus and investment statement documents which were previously made available to new depositors to evaluate the risk of depositing their funds with a particular financial service provider.

The new consumer protection disclosure, available through a central online register, allows the public to compare more easily products offered by credit unions and other financial institutions.  The content and format of the disclosure are prescribed by rule, with an emphasis on using plain English and with strict limits on length. The new disclosure is required to be updated online on a quarterly basis as new financial information is generated, or within 5 days for material changes affecting the credit union’s business.

Source: Co-op Money NZ



The Registry of Co-operative Societies and Singapore National Co-operative Federation (SNCF) have been working together to update the Code of Governance for Credit Co-operatives since 2015. The objectives are to promote transparency, accountability and risk management, to guide the credit co-operatives in carrying out their duties in the best interest of their members, and to provide an objective framework to assess and improve corporate governance.

The finalized Code was jointly issued by the Registry and SNCF on October 17, 2016. The credit co-operatives are provided with a checklist to assess their compliance with the Code, and it operates on the basis of “comply or explain” currently. It is not meant to replace any legislative or regulatory obligations of the credit co-operatives.

SNCF will organize training for the credit co-operatives on the Code in 2017 at a preferential rate to encourage all credit co-operatives to attend the course.   

Source: Singapore National Co-operative Federation



The Singapore National Co-operative Federation invites tenders for a Research Study on Credit Co-operatives in Singapore.

The Invitation to Tender (“ITT”) document can be collected from 12 January 2017 Mon-Fri 09:00 to 17:30 (Singapore time) at:

Singapore National Co-operative Federation
510 Thomson Road #12-02
SLF Building

Singapore 298135

Contact person: Ms. Koh Li Lian (Tel: +65 6602 0742/ 747, Email:

Those who wish to receive a copy of the ITT document will be required to print and sign a confidentiality undertaking on their letterhead before they collect the document.

The document fee is S$50 (inclusive of GST). Please make payment by crossed cheque to “Singapore National Co-operative Federation Limited” or direct remittance to DBS Bank Ltd Singapore, account number 028-001801-0 (DBS SWIFT Bank Identifier Code (BIC): DBSSSGSG).

Closing date is 23 February 2017, 18:00 (Singapore time).



A new proposed law on credit union supervision has been prepared for submission to the Committee on Banks and Finances of the Verkhovna Rada, Ukraine’s Parliament.  This draft law was developed with participation of the Ukrainian National Association of Savings and Credit Unions (UNASCU) in cooperation with World Council’s Credit for Agriculture Producers project.  The new bill envisions transforming the Ukrainian credit union sector in stages, beginning in 2017.

In addition, UNASCU is working actively with policymakers to preserve the not-for-profit status of credit unions in Ukraine.

Source: Ukrainian National Association of Savings and Credit Unions


United States of America

In the United States, 2016 was a remarkable year on many levels.  Credit unions secured major victories at the National Credit Union Administration (NCUA) which will help ensure that credit unions will continue to be able to meet the needs of their members. 

These victories included the finalization of a new member business lending rule that removes requirements that were not required by statute, as well as changes to the NCUA’s common bond “field of membership” regulation that make it easier for consumers to become members of federally chartered credit unions.  In addition, at the Credit Union National Association’s (CUNA) urging, NCUA embarked on an overhaul of its supervisory process which will include a reduction in the frequency of on-site examinations.  And, for the first time in several years, NCUA opened its budget process to public comment. 

Progress at the Consumer Financial Protection Bureau (CFPB) is more nuanced.  For most of the year, CUNA and lawmakers urged the CFPB to exercise its statutory authority to exempt credit unions from its rulemakings.  The focus of these efforts were primarily on the CFPB’s pending proposal to regulate small dollar loans.  The CFPB also has pending rulemakings on consumer arbitration and debt collection that credit unions are concerned could impose unreasonable regulatory burdens.   

Going forward in 2017, there is considerably uncertainty about the impact that the Donald Trump administration will have on credit unions and its regulators.  The conventional wisdom is that the Trump administration will be positive for credit unions because he tends to support efforts to reduce regulatory burden.  Nevertheless, we in the United States have come to expect the unexpected these days.  CUNA remains ready to take advantage of opportunities to reduce credit unions’ regulatory burdens and to fight proposals that would increase those burdens.

Source: Credit Union National Association