Recover Together, Recover Stronger
Volume 12, Number 10
October 26, 2022
Advocacy News You Can Use
“Recover Together, Recover Stronger,” is the theme of this year’s G20 Presidency out of Indonesia. It’s great to see that they are embracing the credit union principle of people helping people with their focus on recovering together. The Leaders’ Declaration will soon be issued at the November meeting of the G20. You may notice that this Telegraph covers many issuances from the Financial Stability Board. That is not a coincidence. The international standard setting bodies often issue reports and other initiatives in advance of the G20 meeting to help shape the consensus building process, and the ultimate direction and that comes from the G20.
The issues are wide ranging from COVID-19, sustainable finance, cryptocurrency, payments, AML/CFT and many others. These declarations will shape the work of the international standards setters over the next year, and ultimately result in new rules and regulations for credit unions as they reach the national level.
We were provided with a glimpse of the G20’s language on financial inclusion through the Finance Track Chairman’s Report to the G20, where they noted that the pandemic has widened inequality for the most financially vulnerable and underserved groups—especially women, youth, and Micro, Small, and Medium Enterprises (MSMEs). As a result, it appears that the G20 will again endorse several initiatives such as the G20 2020 Financial Action Plan, the Guide for the G20 High-Level Principles for Digital Financial Inclusion, and others. These various plans note the importance of enabling and proportional regulatory frameworks.
WOCCU has been working for several years with the G20 to increase their awareness of proportionality and its link to providing enabling regulatory frameworks that allow the cooperative model to foster. When this occurs our credit unions gain the ability increase their service to marginalized and underserved communities. They are starting to get it. If they want to recover together and recover stronger, the credit union cooperative model that embraces people helping people is the example to follow.
FSB Continues Its Work on Climate-Related Risks
The Financial Stability Board released two reports on climate-related risks that were provided to the G20 Finance Ministers and Central Bank Governors ahead of their October 12-13, 2022 meeting. The reports follow the FSB’s 2021 publication of its Roadmap for Addressing Climate-related Financial Risks, and consist of recommendations for supervisory and regulatory approaches to climate-related risks, and progress made to climate-related disclosures.
The FSB’s final report on Supervisory and Regulatory Approaches to Climate-Related Risks, addresses “approaches to monitor, manage and mitigate cross-sectoral and system-wide risks arising from climate change and to promote consistent approaches across sectors and jurisdictions;” and the Progress Report on Climate-Related Disclosures assesses the progress made over the past year by the International Sustainability Standards Board (ISSB) on developing its global baseline climate reporting standard, as well as work by international standard setters (national and regional authorities), and by firms sustainability reporting. The FSB’s goal is to strengthen disclosures so they are consistent and effective. The Task Force on Climate-Related Financial Disclosures (TCFD), which was created by the FSB, also released a 2022 status report on "TCFD-aligned disclosures”.
The final report on Supervisory and Regulatory Approaches to Climate-Related Risks, highlights:
- Supervisory and regulatory reporting and collection of climate-related data from financial institutions.
- System-wide supervisory and regulatory approaches, and the extent to which supervisory and regulatory tools and policies address climate-related risk.
- Early consideration of other potential macroprudential policies and tools.
The Progress Report on Climate-Related Disclosures, highlights:
- Progress made by the International Sustainability Standards Board (ISSB) in developing its global baseline standard.
- Actions undertaken by jurisdictions to require or promote climate-related disclosures.
- Firms’ progress in making climate-related disclosures, as reported in the 2022 TCFD Status Report.
More information on the FSB’s reports on climate-related risks and climate-related disclosures is available here.
Why this matters to your credit union: The regulation of climate-related risks in the financial sector is an emerging area that will create new regulatory challenges for credit unions including disclosures, reporting, governance and other compliance matters. These regulatory changes are occurring quickly and will alter how a credit union conducts its operations.
FSB Chair Pens Letter Concerning Financial Stability Challenges
In anticipation of its meeting with the G20, Financial Stability Board (FSB) Chair Klass Knot drafted a letter to the G20 Finance Ministers and Central Bank Governors regarding challenges to global financial stability. Since the Chair’s previous letter on financial challenges that was released in July, financial conditions have intensified with inflation increasing, issues related commodity markets or hidden leverage growing, and other vulnerabilities contributing to a weakening economic outlook.
The letter maintains that the FSB will continue to work on addressing these issues, including a November progress report on strengthening the resilience of non-bank financial intermediation. Other reports on a regulatory framework for crypto-assets, improving cross-border payments, cyber risks and climate-related financial risks will be made available for the G20 meeting in Afghanistan. The letter also mentions work on “Interoperability between the common global baseline and national and regional jurisdiction-specific requirements,” in addition to a publication of an October 13 status report on the FSB’s Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations. The ISSB relies upon the TCFD's recommendations for its accounting standards, as well as by most FSB jurisdictions as a reference point. The letter also urges action by companies to improve disclosures related to climate-related financial risks.
On October 13, the FSB further plans to release two reports on climate-related financial risks. One report will involve the FSB's recommendations on supervisory and regulatory approaches to climate-related risks subject to stakeholder comments from a public consultation, and the second report will discuss useful and consistent climate-related disclosures.
More information on the FSB’s work on financial stability challenges and the Chair’s letter is available here.
Why this matters to your credit union: Paying attention to the priorities of the Financial Stability Board provide us with insight into future regulatory changes that will occur. The breadth of issues covered in the Chair’s remarks show the wide range of issues under current policy scrutiny.
FSB Publishes Priorities for Enhancing Cross-Border Payments
The Financial Stability Board (FSB) published its Consolidated Progress Report for 2022 and Priorities for the Next Phase of Work, as a next phase for its work under the G20 Roadmap for Enhancing Cross-border Payments. The FSB wants to strengthen external engagement and partnership under the priorities and plans to deliver both reports to G20 Finance Ministers and Central Bank Governors ahead of their meeting in Washington, D.C. on October 12-13, 2022. While the work under the 2021 and 2022 Roadmaps was foundational, the current “Roadmap has now reached an inflection point and needs to move to practical initiatives to enhance payment arrangements.” The FSB will focus three priority themes: payment system interoperability and extension; legal, regulatory and supervisory frameworks; and cross-border data exchange and message standards.
With a 2027 target date, the FSB joins the Bank for International Settlements’ (BIS) the Committee on Payments and Market Infrastructures (CPMI), and other partners to set priorities for cross-border payments that will have the most impact, thereby enhancing the cost, speed, access and transparency of cross-border payments. The FSB has planned a Cross-border Payments Summit that will take place this month with leaders from both private and public sectors participating.
More information on the FSB’s priorities for enhancing cross-border payments is available here.
Why this matters to your credit union: The efforts of the international standard setting bodies to focus on faster, cheaper, more transparent cross-border payments is bringing transformative changes to the payments area. Changes in this area will greatly affect a credit union’s access to payments systems for their members.
Andrew T. Price, Esq.