What are the New Year’s Regulatory Resolutions?
Volume 11, Number 1
January 27, 2020
Advocacy News You Can Use
It is a new year and our international standard setters are fast at work on their regulatory agenda. This year is shaping up to be a challenging year for everyone with the effects from COVID-19 continuing. I wanted to focus on a few items from the Financial Stability Board’s (FSB) 2021 workplan to keep you informed on the many regulatory items on their agenda. Several of these items include deliverables for the G20 Italian Presidency. Ultimately, the results of their work will likely filter down to changes at the national level. World Council will be engaged throughout every step of this process to make sure the credit union perspective is considered. Here are some highlights:
- International cooperation and coordination related to COVID-19. The FSB will continue to assess vulnerabilities in the global financial system; share information on policy responses; assess their effectiveness and coordinate the future timely unwinding of the temporary measures taken; and monitor the use of flexibility and consistency of policy responses with existing international financial standards.
- Cross-border payments. A number of actions under the FSB roadmap to enhance cross-border payments will be completed, including the development of quantitative targets for the roadmap, a stocktake of data frameworks and exploration of the scope for—and obstacles to—develop a global digital Unique Identifier.
- Climate change and sustainable finance. The FSB will explore ways to promote globally comparable, high-quality and auditable standards of disclosure and will review regulatory and supervisory approaches to addressing climate risks at financial institutions.
- Interest rate benchmarks. The FSB will continue to support transition away from LIBOR to more robust benchmarks.
- Cyber and operational resilience. The FSB will also explore the scope for convergence in the regulatory reporting of cyber incidents and the need for revisions to the FSB Cyber Lexicon.
World Council Comments on IASB Discussion Paper on Business Combinations
The International Accounting Standards Board requested comment on their Discussion Paper regarding Business Combinations – Disclosures, Goodwill and Impairment. World Council supported the adoption of the scheduled goodwill amortization, as well as simplifications offered for the impairment test, but urged the disclosure of scheduled goodwill amortization as a separate item outside of the operating result. World Council expressed concern that inclusion of that item would “require the disclosure of internal confidential information that, if disclosed, could operate to the detriment of a company.”
World Council’s comments on IASB’s Discussion Paper on Business Combinations – Disclosures, Goodwill and Impairment, can be found here.
Why this matters to your credit union: When credit unions merge, often the accounting standards can sometimes be disadvantageous to the final balance sheet. These changes can help alleviate some of those issues.
BIS Highlights Covid-19 Cyber Risks
The Bank for International Settlements (BIS) highlighted cyber risks in the financial sector in its recent issued BIS Bulletin. The conclusions of this document note the following:
- The financial sector has been hit by hackers relatively more often than other sectors during the COVID-19 pandemic.
- While this has not yet led to significant disruptions or a systemic impact, there are substantial risks from cyberattacks for financial institutions, their staff and their customers going forward.
- Financial authorities are working to mitigate cyber risks, including through international cooperation.
A copy of BIS Bulletin No. 37 can be viewed here.
Why this matters to your credit union: Gaining information from an international standard setter on their perspective of risks, particularly during a pandemic, can help a credit union identify and prepare for known risks.
World Council Responds to IFRS Foundation’s Consultation Paper on Sustainability Reporting
In September 2020, the International Accounting Standards Board requested stakeholders to respond to the IFRS Foundation’s questions on sustainability reporting found in their Consultation Paper on Sustainability Reporting. The consultation paper hoped to address concerns surrounding consistency and comparability in sustainability reporting. According to the IFRS, “A set of comparable and consistent standards will allow businesses to build public trust through greater transparency of their sustainability initiatives, which will be helpful to investors and an even broader audience in a context in which society is demanding initiatives to combat climate change.”
World Council supported the IFRS’ goal to implement internationally recognized sustainability reporting standards and to develop a sustainability standards board (SSB), but requested that the IFRS consider small financial cooperatives when creating sustainability reporting standards. World Council asked that these standards avoid overburdensome reporting requirements and include goals for financial inclusion as a requirement essential for the success of the SSB’s implementation.
World Council’s response to the IFRS’ Consultation Paper on Sustainability Reporting can be found here.
Why this matters to your credit union: Sustainability reporting is an emerging area and reporting requirements connected thereto can create a regulatory burden on smaller institutions such as credit unions. Ensuring proportional treatment at this stage will prevent unnecessary burdens from reaching credit unions.
Andrew T. Price, Esq.