Credit unions have asked the G20 to reflect the importance of proportionality in its upcoming Leaders’ Declaration.
Under the Italian presidency, the 2021 G20 is made up of 19 countries and the European Union, whose economies account for around 90% of the gross world product. The G20 forum will culminate in the Leaders’ Summit, to be held in Rome on 30-31 October, where the G20 leaders will adopt a declaration.
The Credit Union National Association (CUNA) and the World Council of Credit Unions (Woccu) sent a joint letter to the US Treasury Secretary Janet Yellen Friday in advance of the release the 2021 G20 Rome Leaders’ Declaration.
The two apexes argued it was essential that national regulators work with international standard setting bodies to fully adopt proportional tailoring of regulations.
“The link between proportionality and financial inclusion has been well studied and documented as it allows the expansion of a financial institutions’ ability to serve people outside the financial system,” their letter read.
“Proportionality allows national-level regulators to tailor those rules that are often designed for large, internationally active banks in such a manner that will allow a local, community based financial institution to operate. This in turn allows institutions such as credit unions to serve those underserved markets.”
CUNA and WOCCU said they “support the G20’s commitment to financial inclusion”, arguing that their mission to support credit unions globally was “directly aligned with the G20’s objective to reduce inequalities and promote inclusive growth”.
The letter adds that while international standard-setting bodies have embraced proportionality, “more effort and discussion need to occur regarding how day-to-day supervision at the national level should be tailored to reflect the systemic importance, complexity, and risk profile of regulated entities.”
CUNA and WOCCU asked that the G20 Leaders’ Declaration include the following language: “The G20 is committed to continuing its efforts to reduce inequalities and promote inclusive growth. Financial inclusion reduces inequality, which in turn supports inclusive and sustainable growth by allowing the vulnerable to remain healthy, stay out of poverty, pay for education and accumulate human capital.
“The proportionate application of International Standards for financial regulation is a critical factor in enabling innovative financial inclusion. Financial inclusion provides for more stable markets by bringing more depositors and deposit accounts into the financial system.
“To this end we direct the Financial Stability Board (FSB) and standard setting bodies to coordinate efforts to further develop the ecosystem such that the requisite capacity to implement proportionality in practice is enhanced.
“We direct the FSB and standard setting bodies to report progress on the implementation of proportionality for financial regulation annually to the G20.”