Regulatory changes for credit unions across the world

WOCCU has highlighted important measures enacted in Australia, the UK, Canada and Brazil

Credit unions from several countries around the world have faced regulatory changes over the past six months, according to the World Council of Credit Unions.

In its Global Regulatory Update the council highlights some of the key changes occurring in terms of credit union regulation and how these are likely to affect members.

In Australia the government has released a draft bill to allow any Australian Prudential Regulation Authority (APRA)-regulated Authorised Deposit-Taking Institution (ADIs) engaged in the business of banking to use the restricted terms ‘bank’, ‘banking’ and ‘banker’ without requiring the regulator’s approval.  The country’s Customer Owned Banking Association (COBA) has welcomed the move, which will allow all credit unions and building societies to use the term ‘bank’.

“It makes sense that all ADIs should be able to choose to use the term ‘bank’ to explain what they do – which is banking,” said COBA CEO Mark Degotardi.

“The historic restriction on use of the term bank by ADIs with more than A$50 million in capital is out of date and no longer relevant. We welcome the government’s move to level the playing field.

“There are already 18 customer-owned banks providing competition and choice in the retail banking market. These former credit unions and building societies are likely to be joined by many of the 60 other customer owned banking institutions currently trading as credit unions and building societies.”

Although some credit unions and building societies may prefer not to rebrand, Mr Degotardi welcomed the fact they will now have a choice.

“This draft legislation is the latest instalment of the Government’s agenda to promote competition in banking. COBA congratulates the Government on its commitment to this agenda and its delivery of positive reform.

“We look forward to engaging with the Government on the draft legislation.”

Canada is also debating the use of the terms ‘banks’, ‘banking’ and ‘banker’ by non-bank institutions. The Office of the Superintendent of Financial Institutions (OSFI) announced it would strictly enforce Bank Act provisions that restrict the use of the terms. The measure would have prevented provincially regulated credit unions from using those terms to describe their services.

Following lobbying from the Canadian Credit Union Association (CCUA), the decision was reversed. The Department of Finance is currently carrying out a public consultation on the issue.

In the UK the Association of British Credit Unions (ABCUL) is engaging with the Prudential Regulation Authority of the Bank of England to seek a more flexible and/or lower capital requirements for the largest credit unions. With the minimum requirement for them due to rise to 8% with an additional 2% capital buffer, some fast-growing credit unions are concerned about their ability to continue growing while reaching this capital target.

New safety and soundness requirements have been introduced for credit unions in Brazil as well. Among the changes introduced was a resolution by the Central Bank of Brazil which aims to address the issue of proportionality when it comes to banking regulation.

Under this rule, credit unions and other financial institutions will be subject to regulatory burdens that are scaled to the institution’s asset size.

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