We Are Just Getting Started…
Volume 12, Number 11
November 30, 2022
Advocacy News You Can Use
This month has been a busy month for advocacy at WOCCU. The G20 issued its Leaders’ Declaration, containing many items that will shape credit union regulations including financial inclusion, sustainable finance, cybersecurity, payments, AML/CFT, and others. The Financial Stability Board issued guidance supporting WOCCU advocated flexible and gradual withdrawal of COVID-19 relief measures; and the European Network of Credit Unions made headway in Brussels to help tailor frameworks and regulations designed to support the credit union cooperative model.
Many of these victories come after years of hard work not only from WOCCU, but our members and our credit unions. It would be easy to sit back and take a victory lap, but the truth is our work is just getting started. There is so much more that needs to be done to champion the importance of the credit union model and the role it can play in addressing financial inclusion, as well as serving underserved and marginalized communities, and providing affordable and responsible financial services to our communities.
While having tailored, proportional, safe and sound regulatory frameworks built into the international standards is important and essential, the real work is really shifting to the national level in addition to convincing supervisory authorities to do the difficult work of implementing these victories without allowing the bankers (or anyone else for that matter), define what a credit union can or should be. We are just getting started. Let’s take these wins and put them to work for our members.
G20 Addresses Key Credit Union Issues in Leaders’ Declaration
The G20 Bali Leaders’ Declaration issued November 15-16 in Bali, Indonesia addresses several issues critical to credit unions. Issues surrounding Financial Inclusion, Sustainable Finance and Climate Change, Payments, Cryptocurrencies, Women and Vulnerable Populations, Anti-Money Laundering/Combatting the Financing of Terrorism, Cybersecurity and others were addressed. This key document gives direction to the international standard setting bodies (i.e. Basel Committee, IASB, FATF, FSB, etc.) who will focus their workplans on issues addressed in this document.
This is significant for credit union as it ultimately will shape regulations adopted at the national level for credit unions. Of importance is the embrace of addressing financial inclusion which supports the risk-based approach and proportionate legal and regulatory frameworks. This will assist convincing national-level regulators the importance of properly tailoring rules for credit unions so that they can better serve their members.
The continued focus on payments and achieving faster, cheaper, more transparent, more inclusive cross-border payments continue to receive high emphasis from the G20. Much work is underway that will have a transformative effect on the payments space.
Finally, climate and sustainable finance and how to transform the world, businesses, society, and others to meet climate goals is a major theme throughout the Declaration. Ultimately, credit unions will play a role in addressing these changes as well as receiving their accompanying share of regulatory burden.
A summary of all of the provisions as well as their impact on credit unions can be viewed here.
Why this matters to your credit union: The G20 gives direction to the international standard setting bodies on the direction and substance of their international standards. These items will shape credit union regulations as they are developed at the international level and subsequently adopted or implemented at the national level.
Financial Stability Board Heeds WOCCU’s Call for Regulatory Flexibility
The Financial Stability Board (FSB) noted that the gradual withdrawal of relief measures granted during the COVID-19 crisis are best withdrawn gradually. This came as part of the FSB’s report to the G20 looking at financial policies in the wake of COVID-19 aimed at supporting equitable recovery and addressing the effects from scarring in the financial sector.
The report specifically notes the following:
Where jurisdictions have used the flexibility in international standards and are unwinding in a return to the pre-COVID application of international standards, they are generally not encountering any challenges. Some jurisdictions that have unwound their measures note the importance of phasing out these exceptional measures gradually and communicating the timing of such unwinding to financial markets.
FSB consulted on these measures where WOCCU noted in its comment letter that it is clear that national-level regulators should have the flexibility to have an orderly and gradual withdrawal of those COVID-19 related relief measures so as to not create unnecessary shocks to the balance sheets of credit unions. This is particularly prescient given the current global economy, increasing inflation, the effects from the conflict in Ukraine and many other localized events.
This guidance provides clear direction that national-level regulators can and should use flexibility in unwinding relief measures for credit unions.
A copy of the report can be viewed here.
Why this matters to your credit union: The FSB emphasis on noting that flexibility and transparency while withdrawing COVID-19 relief measures provides guidance to national level regulators to follow this approach. Those jurisdictions that desire to withdraw relief measures quickly should follow the approach provided by the FSB as a best practice.
Credit Unions Urge Policymakers to Support Limits on Regulatory Burdens in Effort to Speed Economic Recovery
ENCU and WOCCU representatives meet with key stakeholders in Brussels
Representatives from the European Network of Credit Unions (ENCU) and World Council of Credit Unions (WOCCU) are seeking support this week from the European Parliament, the European Commission and the Council of the European Union (EU) on limiting regulatory burdens on credit unions to help promote access to financial services for everyday Europeans.
ENCU representatives were joined by WOCCU President and CEO Elissa McCarter LaBorde and her International Advocacy team in meetings with numerous policymakers to discuss how credit unions can play an important role in the economic recovery of Europe—which is still struggling from the effects of the COVID-19 pandemic and the ongoing conflict in Ukraine.
“Credit unions are often the financial first responders during a time of crisis. However, they need regulations that are tailored to their member-owned cooperative model to help maximize their ability to serve rural or underserved markets,” said Andrew Price, WOCCU Senior Vice President of International Advocacy and General Counsel.
European policymakers appear to be listening, as numerous items under consideration contain language that allows for the proportional tailoring of regulations, including the Digital Operational Resilience Act, which gives national-level supervisors the ability to set standards for credit unions.
On other issues such as sustainable finance, credit unions are being recognized for their role in addressing climate change and the social benefits that the credit union cooperative model brings to financial services. Affordable access to payments systems, capital requirements and many other issues affecting credit unions are also under discussion.
“We must allow credit unions the ability to serve underserved and rural areas that are in need of responsible access to credit. The credit union model represents an ideal way to help ordinary citizens with their financial needs. This is imperative during this time of economic uncertainty in the EU,” said Billy Kelleher, an Irish Member of the European Parliament (MEP) who also co-chairs the European Union Parliamentary Credit Union Interest Group.
Representatives of the Irish League of Credit Unions (ILCU), the National Association of Co-operative Savings and Credit Unions (NACSCU) of Poland, the Estonian Union of Credit Cooperatives (EUCC), the Credit Union Movement of North Macedonia (FULM), the Croatian Association of Credit Unions (CACU), and the Credit Unions of Lithuania joined World Council of Credit Unions in sharing their views with various policymakers on how European Union policy can provide regulatory relief for credit unions in Europe.
Why this matters to your credit union: The efforts of the credit union community engaged in advocacy will help shape regulations favorable to the credit union model. Further, the EU is often in the lead on many emerging issues such as privacy, cybersecurity, sustainable finance and others. Shaping the regulations tailored for credit unions will help worldwide with proportional tailoring.
European Commission Advances Instant Payments in the EU and EEA Countries
On October 26, 2022, the European Commission adopted legislation it anticipates will make euro based instant payments more accessible in the EU through affordable, secure, and uninterrupted processing. The legislation, which is an amendment to the 2012 Regulation on the Single Euro Payments Regulation (SEPA), applies to all citizens and businesses in the EU and EEA countries that hold a bank account. The speed and ease of instant payments “help to significantly improve cash flow, and bring cost savings for businesses, especially for SMEs, including retailers”, with payments processing at anytime within ten seconds. According the press release from the Commission, only 11% of EU euro credit transfers were made using instant payments at the beginning of 2022, and the Commission hopes to increase that percentage through SEPA. The legislation is part of a commitment made through the Commission's 2020 Retail Payments Strategy, to improve instant payments.
SEPA is comprised of four requirements:
- “Making instant euro payments universally available, with an obligation on EU payment service providers that already offer credit transfers in euro to offer also their instant version within a defined period.
- Making instant euro payments affordable, with an obligation on payment service providers to ensure that the price charged for instant payments in euro does not exceed the price charged for traditional, non-instant credit transfers in euro.
- Increasing trust in instant payments, with an obligation on providers to verify the match between the bank account number (IBAN) and the name of the beneficiary provided by the payer in order to alert the payer of a possible mistake or fraud before the payment is made.
- Removing friction in the processing of instant euro payments while preserving the effectiveness of screening of persons that are subject to EU sanctions, through a procedure whereby payment service providers will verify at least daily their clients against EU sanctions lists, instead of screening all transactions one by one.”
WOCCU and ENCU have been engaged on advocacy on the requirement to mandate instant payments for anyone involved in payments noting the expense and compliance challenges that may prevent credit unions from engaging in the service. The effect of such a mandate may prevent smaller financial entities from entering the payments space thus denying access to marginalized or vulnerable communities. Further, the decision on which products and services to offer its members should be left to the credit union and its members.
More information on the SEPA legislation is available here.
Why this matters to your credit union: The EU often sets the way for the rest of the world on emerging issues. This approach may set the standard or drive the approach in other non-EU areas who wish to provide services in the EU. While the world is looking for solutions to the cross-border payments framework that provide faster, cheaper, more transparent, and more inclusive cross-border payments, this approach will represent a unilateral solution which may not be the best for the world. This could have a transformative effect in the payments area.
Andrew T. Price, Esq.