Woccu gives global update on the key regulatory issues for credit unions in 2023

Cybersecurity, inclusion and sustainability are on the agenda as the apex urges regulators around the world to recognise the sector's resilience

It its latest annual Global Regulatory update, the World Council of Credit Unions (Woccu) says the key issues for the sector this year will include proportionality in regulation, sustainability and financial inclusion.

And the apex has repeated its call on regulators around the world to recognise the ability of credit unions to weather financial shocks and adopt a proportional approach to regulation for the sector.

Woccu believes the link between proportionality and financial inclusion will be addressed by the G20 at its September summit in Pragati Maidan, New Delhi. The 2022 G20 Leaders’ Declaration included an endorsement of two policy documents that call for enabling and proportionate legal and regulatory frameworks, a move welcomed by Woccu. In another encouraging sign, the Basel Committee on Banking Supervision issued its High-level Considerations on Proportionality, with guidance on simpler, more easily understandable frameworks for smaller, less complex financial institutions, such as credit unions.

Woccu expects financial inclusion to be a priority for the Indian G20 presidency, and for it to be expressed in the Leaders’ Declaration. “Connecting the dots between financial inclusion, proportionality and the important role credit unions and the co-operative model can play in being the catalyst for rebuilding will be a focus of Woccu International Advocacy in 2023,” the update adds.

Regulators will also be interested in sustainable finance, thinks the apex. The update argues this offers an opportunity to demonstrate the social benefits of credit unions with their community-based, member-focused model but warns that “developing a workable methodology to document that benefit will require access to quality data”. Woccu is also concerned about the fact that more data may be required by the new sustainable reporting requirements and could increase the regulatory burden on credit unions.

The update also explores the rapid evolution of payment tech, which threatens potential disruption to credit unions.

“Around the world it is impossible to consider changes to the payments landscape without observing developments in cryptocurrencies, fintech, regulatory sandboxes, digital currencies, open finance, the metaverse and many other areas,” says the update. “Piecing these parts of the puzzle together and understanding the implications on the payments landscape will be an enormous challenge.

“Positioning credit unions as trusted providers and ensuring affordable access to the emerging systems on a level-playing field with other financial service participants will be key for credit unions.”

Regulatory efforts against money laundering and the financing of terrorism are also increasing in number and complexity, a process Woccu expects to continue, placing an additional burden on credit unions. It says proportionality in international standards and work with national regulators on “properly tailored regulations” are vital if credit unions are to to increase financial inclusion and serve marginalised or underserved populations.

Cybersecurity will remain a top concern for many regulators, Woccu adds, with the sophistication of attacks continuing to rise, and the associated costs will continue to increase. The apex believes there will be additional regulations that will alter the credit union response to cybersecurity concerns.

“International standard setters are beginning to understand the critical role that credit unions play in providing responsible and affordable financial services,” said Andrew Price, Woccu’s senior VP of Aadvocacy and general counsel. “This is a key driver for inclusive and resilient growth around the world. Shaping the regulatory frameworks that help maximise this potential will allow credit unions to be the catalyst for rebuilding coming out of the pandemic and throughout an anticipated global recession.”

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