Proportionality will remain the key focus of the World Council of Credit Unions (Woccu) when engaging with international standard setting bodies.
In its latest Global Regulatory Update, Woccu also warned that credit unions could face “a complicated, intertwined and often inconsistent set of regulations” due to an increased focus on digitisation.
In addition to the issue of proportionality, the latest edition of the Regulatory Update also looks at anti money laundering and counter-financing terrorism; sustainability finance; and privacy and open banking.
Woccu describes these topics as priorities for both international standard-setting bodies and national level regulators.
According to Woccu vice president for advocacy, Andrew Price, digitisation has led to “some of the most complex and confusing regulations credit unions face.”
He said in a press statement: “The increased use of crypto currencies and digital identity tools are greatly impacting AML/CFT regulations.
Meanwhile, data breaches, identity theft and cyber attacks are all causing regulators to look at updating privacy and open banking laws. We will continue to advocate that those regulators apply proportionality when looking at any new rules in these areas, so they are not overly burdensome or costly for smaller, community-based financial institutions.”
Woccu describes sustainable finance as an emerging area of regulation “which refers to any form of financial service that integrates environmental, social and governance criteria into business and investment decisions.”
Some regulators also take into account the UN’s Sustainable Development Goals of the work of the Network for Greening the Financial System and the role climate-related events play when it comes to financial risk.
In light of these developments, Woccu believes credit unions could face new frameworks for green mortgages, legislation on reporting, labels for retail products and related investment products; prudential standards that may affect underwriting and other operational matters; and incorporation of climate-related items into stress testing for investments and others.
“Regulators need to consider the unique needs of the credit union co-operative model when implementing policies to address societal and environmental concerns. More importantly, changes should not be imposed that undermine the safe and sound operation of financial institutions,” added Mr Price.