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Global Regulatory Update


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Global Regulatory Update


Global Regulatory Update

The Global Regulatory Update is World Council's twice yearly electronic newsletter of regulatory issues throughout the world.

View the latest issue below or browse the archive.

January 2016: Issue 19


With the arrival of a new federal government in Canada, the Canadian Credit Union Association has been busy establishing links with new Members of Parliament (MPs) and renewing conversations with returning members. In early 2016, CCUA has planned meetings with senior staff in the Minister of Finance’s office and Treasury Board, and will work to arrange face-to-face meetings with caucus leadership and select MPs and senators to discuss high-priority issues for the credit union system. These include the system’s desire to: secure a new federal tax credit, obtain clarity on proposed transitional measures that would help credit unions adopt the new federal credit union framework, and build on recent positive developments with competitors owned by the federal government in the areas of agricultural and small business financing.

CCUA also continues to engage on these and other key policy issues at the administrative agency level. Through its Capital Working Group, CCUA developed a position statement that has since been shared with Office of the Superintendent of Financial Institutions (OSFI), the federal regulator, around the regulatory capital treatment of co-operative equity. In early discussions with OFSI, there appears to be some openness to providing common equity tier 1 (CET1) regulatory treatment—the most desirable form of regulatory capital classification under Basel III—to member and surplus shares so long as the shares have terms and conditions that establish sufficient permanence and loss absorbability.

CCUA also has been in discussions with OSFI around use of the words “bank” and “banking” in credit union promotional material. In Canada, these words are reserved for federal entities and, to date, all Canadian credit unions are still provincially chartered. CCUA will be working with OSFI over the coming months as the regulator develops a policy position on this issue. Finally, CCUA is stepping up its engagement with key officials at the Canada Mortgage and Housing Corporation (CMHC), the dominant mortgage insurer in Canada, as well as the Department of Finance, which has responsibility for key policy development in financial services, on recent changes to mortgage insurance rules.

Source: CCUA—Canadian Credit Union Association,

(CCUA was formerly known as Credit Union Central of Canada)


The Creditors and Credit Intermediaries Act, a law recently passed by the Estonian Parliament to regulate financial institutions engaged in lending, will come into force on March 21, 2016. This law will give the Estonian Financial Authority supervisory jurisdiction over most creditors and credit intermediaries operating in Estonia. This act applies to credit unions unless the credit union has fewer than 3,000 members or unless the annual percentage rate on the credit union’s loans “does not exceed, at the time of granting the credit, the average annual percentage rate of charge over the last six months of the consumer loans granted to private persons as last published by Eesti Pank (National Bank).”

Source: EUCC—Estonian Union of Credit Cooperatives,

Great Britain

The main regulatory focus of the Association of British Credit Unions, Ltd. (ABCUL) recently has been responding comprehensively to the Prudential Regulation Authority’s proposed new regulations for credit unions in the United Kingdom. If finalized as proposed, the Authority’s new credit union rulebook would place significant restrictions on credit union payments and lending activities as well as require credit unions with more than GBP 10 million in assets or more than 10,000 members to have a minimum leverage ratio of 10% capital to assets. ABCUL was able to co-ordinate comments to the Authority from a wide range of credit union organizations, and these public comments will hopefully result in the agency reconsidering the more concerning aspects of its proposal.

Elsewhere work continues in preparation for the new Senior Managers Regime which enhances personal accountability for executives and directors of banks, building societies, and credit unions. The British Government also continues to conduct exploratory work for an anticipated review of credit union legislation. At the European Union level, there is optimism that the European Commission’s Capital Markets Union proposal may help liberalize European credit union regulation to some degree.

Source: ABCUL—Association of British Credit Unions, Ltd.,


Kenyan law requires all deposit-taking Savings and Credit Cooperative Organizations (SACCOs) to maintain a minimum liquidity ratio of 15% relative to total assets. However, many SACCOs have challenges meeting this ratio and are normally forced to borrow from commercial banks to meet their financial obligations. The existing credit facilities have exorbitant rates and the end result is high borrowing costs for SACCO members because their SACCO’s high cost of funds is passed on to them. The situation is worsened by lack of suitable alternative credit lines for deposit-taking SACCOs and the fact that there is currently no central liquidity facility for SACCOs in Kenya.

The Sacco Societies Regulatory Authority (SASRA) is exploring the establishment of a central liquidity facility as a means to address this liquidity challenge on a sustainable basis. SASRA anticipates that the central liquidity facility will enhance monitoring of the SACCO system, facilitate the pooling of liquidity for deposit-taking SACCOs, and facilitate efficient access to funds in the event of temporary liquidity constraints.

Source: SASRA—Sacco Societies Regulatory Authority,


The Central Bank of Ireland’s new regulations for credit unions took effect at the beginning of 2016 when the Minister of Finance phased-in several provisions of the Credit Unions and Cooperation with Overseas Regulators Act 2012 which had not previously come into force. These regulations set forth 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 also establish a maximum limit of EUR 100,000 on the total savings that an individual member can deposit at a credit union, as well as a minimum credit union regulatory capital leverage ratio of 10% capital to assets.

At the urging of the Irish League of Credit Unions, the Minister for Finance has requested that a review of the recommendations of the Commission on Credit Unions (which issued a wide ranging report on the future of credit unions in 2012) take place following the commencement of the remaining sections of the 2012 Act. This review will be carried out by the Minister’s Credit Union Advisory Committee beginning in January 2016.

In Northern Ireland, the Credit Unions & Co-operative & Community Benefit Societies bill was introduced to the Northern Ireland Assembly and debated by the Enterprise, Trade and Investment Committee this fall. The bill would reform and update the Credit Unions (Northern Ireland) Order of 1985 by authorizing credit unions to offer interest-bearing shares and allowing corporate entities to become credit union members. The bill would also make a number of technical amendments, including a provision requiring a review within two years regarding how unincorporated entities (such as general partnerships) are treated under the legislation. The bill is expected to receive assent in early 2016.

Also of significance, deposits made by credit unions in banks are no longer insured by the United Kingdom’s Financial Services Compensation Scheme as of January 1st, and the amount of deposit insurance provided by the Scheme to credit union members also decreased from GBP 85,000 to GBP 75,000 at that time.

In addition, a Feedback Statement by the Prudential Regulation Authority is expected in February 2016 in response to the public comments the agency received regarding to its proposed rules to replace the United Kingdom’s current credit union rulebook. The Prudential Regulation Authority and the Financial Conduct Authority have already published their Feedback Statements on the introduction of the new Senior Managers Regime to replace the existing Approved Person regime regulating the fit and proper conduct of credit union executives and directors.

Source: ILCU—Irish League of Credit Unions,

New Zealand

A key legislative change for New Zealand credit unions is the imminent amendment in 2016 of the Friendly Societies and Credit Unions Act 1982 to define credit unions as legal entities. Credit unions will become corporate bodies with legal personality and will no longer need to operate through natural person trustees who hold assets and transact business on behalf of the credit union. In addition, credit unions will be able to lend directly to businesses owned by their members; in the past, all loans had to be made directly to a natural person member. 2016 presents itself as a year where credit unions will be better placed to compete with other participants in the financial services sector, with significant growth opportunities in small business lending as well as a chance to reduce costs via a more efficient internal structure.

Source: Co-op Money NZ,


The Macedonian government has established a new regulation for determining when people or organizations are considered “related” for lending purposes, such as when a natural person or legal entity has an interest in at least 50% of the equity or liabilities of another person/entity over the last twelve months. This new approach will be used to establish institutional limits on the maximum value of loans made to one borrower, in order to reduce concentration risk.

The new limit-on-loans-to-one-borrower rules have several notable exceptions, including if the credit union has indisputable evidence that the people or entities aggregated under this rule have other sources of funding available that could backstop the loan. Also, the credit union is not required to determine whether or not related parties exist if the value of borrower’s loans do not exceed 2% of the institution’s regulatory capital.

Source: FULM Savings House,


Recent parliamentary elections in Poland resulted in the Law and Justice Party winning a majority in both houses of the Parliament of Poland. The Law and Justice Party has been traditionally supportive of the Polish credit union movement. No major legislative developments have occurred lately, however, because of the elections.

The National Association of Co-operative Savings and Credit Unions is in contact with the Minister of Finance to bring credit unions’ regulatory burden concerns to the attention of the new government. In particular, Polish credit unions are urging revision or withdrawal of the Polish Financial Supervision Authority’s recently adopted Regulatory Accounting Principles for credit unions. These regulatory accounting rules adopted last year only apply to credit unions, and are generally more stringent than the International Financial Reporting Standards applicable to Polish banks.

Source: NACSCU—National Association of Co-operative Savings & Credit Unions,

United States

The National Credit Union Administration (NCUA) has proposed a major overhaul of its “field of membership” common bond rules that, if finalized, will help more consumers become credit union members. The Credit Union National Association (CUNA) generally supports NCUA's proposal but plans to submit comments to the agency on how best to liberalize its common bond rules further.

The United States has also recently adopted significant credit union regulatory relief legislation as part of a transportation bill called the Fixing America’s Surface Transportation (FAST) Act. Specifically, the FAST Act eliminated the requirement for credit unions to provide members with a paper copy of the institution’s privacy policy by mail every year (unless the credit union has updated its privacy policy), allowed “privately insured” credit unions to become members of federal government-sponsored enterprises called Federal Home Loan Banks (previously, only credit unions with a federal savings guarantee could join), and also directed the Consumer Financial Protection Bureau to establish a new definition of “rural” in order to help better promote rural lending by credit unions.

CUNA is also working closely with other financial services trade groups to advance legislation on data security. If signed into law, this bill would help to ensure that merchants who accept plastic cards for payment are held to data security standards that are similar to those applicable to credit unions and banks.

Source: CUNA—Credit Union National Association,

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