MADISON, Wis.–In the new 2020 edition of the Global Regulatory Update from the World Council of Credit Unions, the organization says an increased focus on digitization will force credit unions and other financial cooperatives to “navigate a complicated, intertwined and often inconsistent set of regulations.”
WOCCU said the new edition covers the leading regulatory issues affecting credit unions across the globe, including:
- Proportionality
- Anti-money laundering and counter-financing of terrorism (AML/CFT)
- Sustainable Finance
- Privacy and Open Banking
“And digitization plays a big part in some of the most complex and confusing regulations credit unions face,” said Andrew Price, VP-advocacy with WOCCU. “The increased use of cryptocurrencies and digital identity tools are greatly impacting AML/CFT regulations. Meanwhile, data breaches, identity theft and cyberattacks 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.”
An Emerging Area
WOCCU noted sustainable finance is an emerging area of regulation, and refers to any form of financial service that integrates environmental, social and governance criteria into business and investment decisions. Many policies or regulations adopted are designed to address the United Nations’ Sustainable Development Goals and to combat climate change, WOCCU said.
For example, WOCCU noted the Basel Committee on Banking Supervision is closely monitoring the work of the Network for Greening the Financial System and the role climate-related events play when it comes to financial risk.
According to WOCCU, what that means is credit unions are likely to see evolving international regulatory changes that impact:
- A framework for green mortgages
- Legislation on reporting
- Labels for retail products and related investment products
- Prudential standards that may affect underwriting and other operational matters
- Incorporation of climate-related items into stress testing for investments and others
What Regulators Must Consider
“Regulators need to consider the unique needs of the credit union cooperative 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,” said Price.