Look for the Helpers
Volume 10, Number 3
March 25, 2020
Advocacy News You Can Use
I lamented writing anything about Coronavirus in this edition of the Telegraph for fear of adding to the mountain of information and often over-information being distributed these days. But all the stories coming in and the sheer significance of this crisis really makes that impossible. Yes, we are all hearing the stories that, frankly, shake my core, such as concerns over runs on banks, fears of depression, unemployment, economic collapses and numerous other terrible events.
Fred Rogers once said, “When I was a boy and I would see scary things in the news, my mother would say to me ‘look for the helpers, you will always find people who are helping.’” I need look no further than credit unions to find those “helpers.” People helping people is what we do and it is ingrained in our core values. The stories coming in of the extraordinary efforts that credit unions are making to keep their offices and branches up and running, providing emergency financial services to those in need and doing everything they can to help their communities give me precisely the hope to know we will come through stronger on the other side.
Check out our COVID-19 resource page where we have suggestions for your regulators to give you the needed flexibility to keep being a “helper.”
Basel Committee Discusses Banking System Risks, Supervisory Initiatives and Basel III Implementation
Between February 26-27, the Basel Committee on Banking Supervision (Basel Committee) met to discuss supervisory initiatives, review banking system risks and promote Basel III implementation. During that meeting the Basel Committee discussed, among several topics, their strategic review, which consists of consulting members and stakeholders on their priorities, structure and processes. The Basel Committee hopes to finalize the review this year. Here are some of the highlights from the meeting.
- The Committee reviewed collateralized loan obligations (CLOs) and leveraged loan vulnerabilities in the areas of “members' supervisory approaches to measuring and mitigating risks; the current regulatory treatment of these exposures; and the need to further quantify banks' direct and indirect exposures.”
- The Committee discussed the banks preparation for LIBOR (London interbank offered rate) alternatives. While waiting on the Financial Stability Board to submit survey results on LIBOR exposures and related supervisory measures to G20 Finance Ministers and Central Bank Governors in July, the Basel Committee “stressed the need for banks to dedicate the necessary resources to understanding the impact of benchmark rate reforms on their business and making the necessary preparations for a smooth transition.” The Committee’s newsletter on benchmark rate reforms and regulatory and supervisory implications can be viewed here.
- The Task Force on Climate-related Financial Risks discussed their workplan and deliverables consisting of “[a] set of analytical reports on climate-related financial risks, including a literature review, and reports on the transmission channels of such risks to the banking system and on measurement methodologies…” and "[t]he development of effective supervisory practices to mitigate climate-related financial risks."
- The Committee reviewed the implementation status of Basel III across its member jurisdictions and discussed the progress of Basel III implementation.
- The Committee considered the effects of the coronavirus on financial stability. “The Committee encourages banks and supervisors to remain vigilant in light of the evolving situation and notes the importance of effective cross-border information sharing and cooperation when dealing with such shocks.”
More information on this Basel Committee meeting and a comprehensive list of the topics covered can be viewed here.
Why this matters to your credit union: This is the Basel Committee telling us the roadmap of issues it will be working on for the foreseeable future: Implementation of Basel standards, climate change related regulation, coronavirus, Libor. Expect new or amended international standards in these areas.
ENCU Responds to European Commission’s Initiative to Combat AML/CFT
The European Network of Credit Unions (ENCU) responded to a request for feedback on the European Commission’s (Commission) action plan on money laundering & terrorism financing. According to the Commission, “Recent money laundering scandals put pressure on the EU to have a close look at the adequacy of the EU anti-money laundering framework.” This initiative by the Commission aims to address areas of needed improvement in the money laundering and terrorism finance EU framework through new proposals. ENCU responded to this request for feedback and emphasized its support for this initiative while urging the Commission to consider “a risk-based approach, proportional requirements, national-level discretion to tailor regulations, and clear guidance to national level regulators on how to apply proportional regulations so that credit unions can continue its mission to improve financial inclusion and provide affordable and necessary services to the underserved European Union community.” ENCU’s comment letter to the Commission can be found here.
Why this matters to your credit union: What the EU does on AML/CFT can influence the activities of other regulators around the world. Ensuring that a risk-based proportional approach is included will ultimately help to reduce regulatory burdens for credit unions. For those systems in the EU, this may directly impact their operations.
ENCU Comments on EBA Draft ITS on MREL and TLAC
ENCU responded to the European Banking Authority’s (EBA) consultation regarding their Draft Implementing Technical Standards (ITS) on Disclosure and Reporting of MREL and TLAC. The draft ITS consisted of the EBA’s proposals for MREL/TLAC templates and tables that implement disclosure and reporting requirements. The EBA hopes to “optimise efficiency for institutions when complying with their disclosure and reporting obligations, to facilitate the use of information by authorities and market participants, and to promote market discipline.” The EBA requested feedback on the necessity, discrepancies, and clarity of specified tables and templates. ENCU emphasized its support for the EBA’s efforts to “to maximise efficiency by institutions when complying with their disclosure and reporting obligations, and to facilitate the use of information by authorities and market participants.” ENCU’s comments on this draft ITS can be found here.
Why this matters to your credit union: While this is a rather technical issue, ensuring that regulators continue to consider the effect on credit unions is paramount. Even a small increase in regulatory burden can add up over time.
Andrew T. Price, Esq.