Basel Committee Adopts WOCCU Recommended Changes in Fintech Guidance

Volume 7, Number 2
February 26, 2018


Basel Committee Adopts WOCCU Recommended Changes in Fintech Guidance


The Basel Committee on Banking Supervision (Committee) published its paper titled Sound Practices on the implications of fintech developments for banks and bank supervisors which assesses how technology-driven innovation may affect the banking industry and banding prudential supervisors. 

The Committee’s final fintech paper reflects WOCCU’s comments on the Committee's August 2017 consultative document including that fintech companies be subject to comprehensive prudential, consumer protection, data security and anti-money laundering/countering the financing of terrorism (AML/CFT) regulation and urging the Committee to promote a regulatory level playing field by ensuring that fintech companies are subject to the same regulatory requirements that apply to authorized deposit-taking institutions such as banks, credit unions, and building societies

In particular the paper contains the following standards for fintech companies advocated by WOCCU:

  • Safety and soundness and financial stability can be enhanced by implementation of supervisory programmes to ensure that banks have effective governance structures and risk management processes that appropriately identify, manage and monitor risks arising from the use of fintech including associated new business models applications, processes or products; 
  • Safety and soundness and financial stability can be enhanced by implementation of supervisory programmes to ensure that banks have appropriate risk management practices and processes over any operation outsourced to or supported by a third party, including fintech firms, and that controls over outsourced services are maintained to the same standard as those applied to operations that the bank itself conducts; and 
  • Where appropriate, safety and soundness and financial stability can be enhanced by bank supervisors communicating and coordinating with relevant regulators and public authorities, such as those charged with data protection, consumer protection, fair competition and national security, to ensure that banks using innovative technologies are complying with the relevant laws and regulations.


WOCCU Urges Changes in Oversight of International Audit-Related Standard-Setting Boards


WOCCU filed its comment letter on the Monitoring Group’s proposal on Strengthening the Governance and Oversight of the International Audit-Related Standard-Setting Boards in the Public Interest

The Monitoring Group is a group of international financial institutions and regulatory bodies committed to advancing the public interest in areas related to international audit standard setting and audit quality. The members of the Monitoring Group are the Basel Committee on Banking Supervision, European Commission, Financial Stability Board, International Association of Insurance Supervisors, International Forum of Independent Audit Regulators, International Organization of Securities Commissions, and the World Bank.

WOCCU makes numerous suggestions for changes to the proposal as follows:

  • Supports increasing the independence of auditing standard setting from the accounting profession, but does not support issuing new auditing standards more frequently;
  • Urges the Monitoring Group to require standard setters to utilize quantitative cost benefit analyses as part of their consultative processes, and also to considering seriously the comments of community-based cooperative depository institutions, to help reduce regulatory burdens on financial cooperatives;
  • Supports the proposal for a “multi-stakeholder” international audit standard setting board that includes board members who are not accountants per se but have relevant industry experience, such as being a representative of a community-based depository institution trade association or a community-based depository institution prudential regulator;
  • Opposes the proposal that international standards be adopted through majority vote; 
  • Proposes reforming the auditing standard Consultative Advisory Group (CAG) by including a broader multi-stakeholder composition in the Consultative Advisory Group that would better serve the public interest by helping to develop standards that are more relevant and practical for a wider diversity of business enterprises, including cooperative depository institutions; 
  • Supports giving the PIOB authority to veto auditing standards or challenge technical judgments when doing so is necessary for the PIOB to discharge its responsibility to ensure that auditing standards are in the public interest; and 
  • Supports retention of the Monitoring Group’s current oversight role over how international audit-related standards are developed. 

 A copy of the letter can be viewed here.


WOCCU Urges FSB to Consider Cooperative Structure on Proposals on Resolution Regimes


The World Council of Credit Unions filed two comment letters with the Financial Stability Board (FSB) on their two Consultation Documents on Key Attributes of Effective Resolution Regimes: (1) Principles on Bail-in Execution; and (2) Funding Strategy Elements of an Implementable Resolution Plan

FSB Bail-In Principles Proposal:

On the FSB Principles on Bail-in Execution WOCCU:

  1. Urges the FSB to limit these requirements to systemically important banks only;
  2. Argues that the FSB should respect the cooperative structure and not require a change in the coop’s ownership and control even in the event of a “bail-in”;
  3. Urges the FSB allow supervisors and institutions the option to engage more than one valuation firm to value its assets;
  4. Argues the FSB should not require community-based depository institutions to invest in computer programs that provide “highly granular” information about their assets and liabilities; and
  5. Cautions that public communications by supervisors concerning troubled financial cooperatives should be carefully crafted so as not to cause a run on that institution or on other financial cooperatives, especially since credit unions and other financial cooperatives are privately held by their member-depositors (so it is not necessary to issue communications to a broader “market” as would likely be necessary for a publicly traded systemically important bank).

FSB Resolution Funding Strategies Proposal: 

WOCCU urged the FSB to apply the proposed funding strategy only to systemically important banks.  Further WOCCU discusses information sharing between institutions and supervisors and provides examples of how cooperative depository institutions systems have handled past resolutions, such as the US “corporate credit unions crisis” of 2009, without demutualizing, such as by using private stabilization funds or temporary public-sector stabilization funds.

A copy of the Bail-In Principles Comment Letter can be viewed here and the Resolution Funding Strategies Proposal Comment Letter can be viewed here.


WOCCU Supports Basel Committee Flexibility in Treatment of Liquidity-absorbing Monetary Policy Operations in the NSFR


WOCCU filed its comment letter on the Basel Committee’s technical amendment related to the treatment of extraordinary monetary policy operations in the Net Stable Funding Ratio.

In its letter, WOCCU voiced its support for the following:

  1. Reducing depository institutions’ Required Stable Funding (RSF) liquidity reserves to as low as a five percent RSF reserve factor for institutions’ claims on a central bank related to the central bank’s extraordinary “liquidity-absorbing operations,” including secured transactions with a residual maturity of more than six months.
  2. Providing depository institutions supervisors and central banks with increased flexibility vis-à-vis exceptional central bank operations to help promote financial stability, whether those exceptional central bank operations are to provide emergency liquidity or are to absorb excess liquidity in the banking system; and
  3. Providing a reduced RSF reserve factor for instruments used as collateral in connection with exceptional central bank liquidity operations.

A copy of the comment letter can be viewed here.


Michael S. Edwards
VP & General Counsel
World Council of Credit Unions (WOCCU)
601 Pennsylvania Ave., NW, Washington, DC 20004-2601 USA
Office: +1-202-508-6755 | Mobile: +1-215-668-5240 | Fax: +1-202-638-3410 |

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