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Comment Letter on Digital Fraud and Banking

In response to the Basel Committee on Banking Supervision's discussion paper regarding digital fraud, World Council submitted a comment letter on behalf of the global credit union movement. The Committee's discussion paper requested comments a description of fraud and the transmission channel's into the banking system. It also requested comments on whether there are additional banking initiatives related to digital fraud that should be pursued by the Committee. 

Among suggestions for a more inclusive description of digital fraud impacting credit unions, World Council urged the Committee to explore the methods and ramifications in which the most vulnerable populations are targeted. Digital fraud is another challenge credit unions face in their mission for financial inclusion. World Council requested the Committee consider additional education initiatives related to fraud activity and resources.

Click here to read the comment letter submitted by World Council.  

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Comment Letter, Basel

World Council Submits Comment Letter on Disclosure of Cryptoasset Exposure

World Council has submitted a comment letter on the Basel Committee's public consultation Disclosure of Cryptoasset Exposure. The consultative document proposes a standardized disclosure template that would be required for financial institutions, including credit unions, with cryptoasset exposure beginning in January 2025. The Committee proposed the templates to ensure market discipline and better transparency on risks associated with exposure.  

Similar to other areas of the Basel Framework, World Council requested that proportionality or a more streamlined ability to disclose also be included in the requirements and standard templates. If credit unions decide to explore or take-on cryptoasset exposure in the future it is important that the reporting requirements for community-based financial institutions not be overly burdensome to ensure they are not excluded from new opportunities. 

Click here to read World Council's comment letter.  

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Comment Letter, Basel

World Council Urges Basel Committee to Limit Regulatory Burden on Credit Unions

World Council submitted a comment letter last week on the Basel Committee’s proposed updates to the Core Principles for Effective Banking Supervision (Core Principles). The Core Principles are global standards for prudential regulation and supervision. Supervisory authorities across the globe use the Core Principles as a benchmark for evaluating the effectiveness of their regulatory and supervisory frameworks. This is the first formal update to the Core Principles since 2012.

In the comment letter, World Council strongly urged the Basel Committee to include more direct language concerning proportionality and communication with national level supervisory authorities. We also highlighted the ongoing challenges of accessing quality correspondent banking services and the disproportionate burden recent guidance on operational resilience, climate, digitization and stress testing will have on credit unions.

World Council has long advocated for clearer language regarding proportional implementation of international standards. It is critical that laws and regulations designed to address the largest international banks posing the greatest risks to the financial markets are appropriately tailored for credit unions serving their local community. While the World Council requested several additions and adjustments to the Core Principles, we are pleased that the Basel Committee’s proposed revisions include several updates favorable to credit unions recognizing proportionality.  

A copy of the letter can be viewed here.  

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Comment Letter, Basel

World Council Responds to IFRS Foundation’s Consultation Paper on Sustainability Reporting

In September 2020, the International Accounting Standards Board requested stakeholders to respond to the IFRS Foundation’s questions on sustainability reporting found in their Consultation Paper on Sustainability Reporting. The consultation paper hoped to address concerns surrounding consistency and comparability in sustainability reporting.  According to the IFRS, “A set of comparable and consistent standards will allow businesses to build public trust through greater transparency of their sustainability initiatives, which will be helpful to investors and an even broader audience in a context in which society is demanding initiatives to combat climate change.”

World Council supported the IFRS’ goal to implement internationally recognized sustainability reporting standards as well as the development of a sustainability standards board (SSB) but requested that the IFRS consider small financial cooperatives when creating sustainability reporting standards. World Council asked that these standards avoid overburdensome reporting requirements; and include goals for financial inclusion as a requirement essential for the success of the SSB’s implementation.

World Council’s response to the IFRS’ Consultation Paper on Sustainability Reporting can be found here.

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Comment Letter, International Accounting Standards Board

World Council Comments on IASB Discussion Paper on Business Combinations

The International Accounting Standards Board requested comment on their Discussion Paper regarding Business Combinations – Disclosures, Goodwill and Impairment. World Council supported the adoption of the scheduled goodwill amortization as well as simplifications offered for the impairment test, but urged the disclosure of scheduled goodwill amortization as a separate item outside of the operating result. World Council expressed concern that this disclosure would “require the disclosure of internal confidential information that, if disclosed, could operate to the detriment of a company.”

World Council’s comments on IASB’s Discussion Paper on Business Combinations – Disclosures, Goodwill and Impairment, can be found here.

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Comment Letter, International Accounting Standards Board

WOCCU Urges Proportionality for FSB’s Evaluation of Too-Big-to-Fail Reforms

The Financial Stability Board (FSB), requested comment on their Consultation Report on the Evaluation of the effects of too-big-to-fail (TBTF) reforms for systemically important banks. The reforms under evaluation included, “ (i) standards for additional loss absorbency through capital surcharges and total loss-absorbing capacity requirements; (ii) recommendations for enhanced supervision and heightened supervisory expectations; and (iii) policies to put in place effective resolution regimes and resolution planning to improve the resolvability of banks.” Although TBTF reforms were constructed for systemically important banks, WOCCU emphasized that these reforms have indirectly affected credit unions due over regulation by national level regulators that uses TBTF reforms as a standard across all financial institutions regardless of the size, risk, and complexity of the institution. WOCCU’s response to the FSB’s Consultation Report can be found here.

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Comment Letter, Financial Stability Board

ENCU Urges EBA to Address De-risking

The European Banking Authority (EBA) called for input to understand the impact of de-risking on financial institutions and customers. The European Network of Credit Unions responded to the EBA’s directed questions and highlighted that credit unions are often the subject of de-risking by banks. Reasons for this include perceived regulatory burden and risks associated with AML/CFT requirements and the potential to eat into profits; confusion surrounding responsibility associated with AML/CFT requirements; and conflicting privacy standards in various countries creating difficulty navigating cross-border operations. ENCU noted that de-risking has reduced access to bank services causing credit unions to seek these services from second and third tier banks, which in turn has proven to be costly and burdensome, and therefore a deterrent to the provision of these services to its members.

ENCU’s comment letter to the EBA regarding the impact of de-risking on financial institutions can be found here.

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Comment Letter, European Banking Authority

ENCU Comments on Commission’s Initiative on Improving Resilience Against Cyberattacks

ENCU responded to a request for feedback to the European Commission’s public consultation regarding their initiative on improving resilience against the increasing number of cyberattacks. The European Supervisory Authorities (ESA) “advised the Commission to propose targeted improvements to the EU financial regulatory framework to develop a single regulatory and supervisory rulebook” for information communication technology (ICT) operational resilience in the financial sector. The Commission’s objective is to harmonize applicable rules to make the financial sector more secure and resilient through the reduction of compliance and administrative burdens.

In addition to the questionnaire which included questions on several topics including ICT systems and operational resilience, ENCU urged the Commission to consider risk-based and proportional requirements that are tailored to credit unions. Credit unions do not pose the same cybersecurity risks that banks do, and therefore require less stringent requirements in order to support the Commission’s goal to combat cyberattacks. ENCU also requested consideration for non-mandatory guidelines instead of hard rules to address digital operational resilience and cybersecurity issues. Flexibility to apply necessary strategies instead of overburdensome requirements will help alleviate cost and depletion on much needed resources that credit unions rely upon. Finally, ENCU asked that the Commission appoint only one prudential regulator for consistency in enforcement and regulation. A copy of the comment letter can be found here.

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Comment Letter, European Commission

ENCU Responds to European Commission’s Initiative to Combat AML/CFT

The European Network of Credit Unions (ENCU) responded to a request for feedback on the European Commission’s (Commission) action plan on money laundering & terrorism financing. According to the Commission, “Recent money laundering scandals put pressure on the EU to have a close look at the adequacy of the EU anti-money laundering framework.”[1] This initiative by the Commission aims to address areas of needed improvement in the money laundering and terrorism finance EU framework through new proposals. ENCU responded to this request for feedback and emphasized its support for this initiative while urging the Commission to consider “a risk-based approach, proportional requirements, national-level discretion to tailor regulations, and clear guidance to national level regulators on how to apply proportional regulations so that credit unions can continue its mission to improve financial inclusion and provide affordable and necessary services to the underserved European Union community.” ENCU’s comment letter to the Commission can be found here.

[1] See, Roadmap, Context, available at: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12176-Action-Plan-on-anti-money-laundering

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Comment Letter, European Commission

ENCU Comments on EBA Draft ITS on MREL and TLAC

ENCU responded to the European Bank Authority’s consultation regarding their Draft Implementing Technical Standards (ITS) on Disclosure and Reporting of MREL and TLAC. The draft ITS consisted of the EBA’s proposals for MREL/TLAC templates and tables that implement disclosure and reporting requirements. The EBA hopes to “optimise efficiency by institutions when complying with their disclosure and reporting obligations, to facilitate the use of information by authorities and market participants, and to promote market discipline.” The EBA requested feedback on the necessity, discrepancies, and clarity of specified tables and templates. ENCU emphasized its support for the EBA’s efforts to “to maximise efficiency by institutions when complying with their disclosure and reporting obligations, and to facilitate the use of information by authorities and market participants.” ENCU’s comments on this draft ITS can be found here.

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Comment Letter, ENCU, European Banking Authority

World Council Urges Basel Committee to Consider Credit Union Difference in AML/CFT Guidance

The Basel Committee on Banking Supervision (Basel Committee) released a consultation requesting feedback on their Consultative Document: Introduction of Guidelines on Interaction and Cooperation Between Prudential and AML/CFT Supervision (Consultative Document). The Basel Committee’s goal is “[t[o] enhance the effectiveness of supervision on banks’ ML/FT risk management, the Committee proposes to provide further guidelines on interaction and cooperation between prudential supervision and anti-money laundering and countering financing of terrorism (AML/CFT) supervision.” World Council supported this objective, but urged the Basel Committee to not only consider the unique structure of credit unions when determining how to assess an institution’s money laundering and financing terrorism risks, but to give clear guidance to national-level regulators on how to appropriately and proportionately assess risk for credit unions. World Council further suggested that both prudential and AML/CFT supervisors outline a coordinated proportional approach to the enforcement, management, and assessment of credit unions based on their unique organization structure, as well as consideration for privacy concerns surrounding information sharing with supervisors, and confidentiality concerns with observers that may participate in colleges or other attendees participating on an ad hoc basis. WOCCU’s response to the Consultative Document can be found here.

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Comment Letter, Basel

ENCU Responds to EBA Consultation on Draft Implementing Technical Standard for Pillar 3 Disclosures

The European Banking Authority (EBA) released two public consultations on the Implementing Technical Standard (ITS) for financial institutions’ public disclosure and on supervisory reporting for CRR2. The Draft [ITS] on public disclosures by institutions of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013 was developed to create uniform disclosure formats under the regulation, as well as update EBA’s policies on the Pillar 3 disclosures, “in order to foster the role of institutions’ disclosures in promoting market discipline through… the development of a comprehensive implementing technical standard (ITS) on disclosure.” The European Network of Credit Unions (ENCU) applauded the EBA’s priority to honor Basel 3’s proportionate approach to small and non-complex institutions by decreasing the number or required disclosures and allowing them to focus only on key metrics. ENCU, however, urged the EBA to provide more detailed guidance within their templates, tables and accompanying instructions regarding which disclosures specifically apply to small and non-complex institutions. For more information on the Draft ITS on supervisory reporting for CRR2 and backstop regulation, check out our blog post here. ENCU's response to the EBA's Draft Implementing Technical Standard for Financial Institutions' Public Disclosure can be found here

The Draft [ITS] on public disclosures by institutions of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013 can be downloaded here.

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Comment Letter, ENCU, European Banking Authority

ENCU Responds to EBA Consultation on Draft Implementing Technical Standard on Supervisory Reporting

The European Banking Authority (EBA) solicited comment on their Draft Implementing Technical Standards on supervisory reporting requirements for institutions under Regulation (EU) No 575/2013 (Draft ITS), which addresses “institutions’ compliance with prudential requirements as put forward by the CRR and related technical standards as well as additional financial information required by supervisors to perform their supervisory tasks.” Additionally, the EBA the Draft ITS revised reporting modules to adhere to two amendments to the CRR made in 2019  regarding liquidity, leverage and large exposures; and amending the’ backstop regulation’ “which sets out uniform minimum levels of coverage to ensure that institutions have sufficient loss coverage for future non-performing exposures (NPEs)” The European Network of Credit Unions (ENCU) stated its support for the EBA’s updates and revisions to its Draft ITS, and the incorporation of proportionality in the reporting requirements, however, ENCU urged EBA to encourage finalization of the Basel standards using proportionality in the reporting requirements.  This consultation ran parallel with the EBA’s consultation on ITS on public disclosures; and for more information on ENCU’s response to this consultation, please see our blog post here. ENCU's response to the EBA Consultation on Draft Implementing Technical Standards on Supervisory Reporting can be viewed here

The Draft [ITS] on supervisory reporting requirements for institutions under Regulation (EU) No 575/2013, can be downloaded here.

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Comment Letter, ENCU, European Banking Authority

ENCU Urges Proportionality in EBA's Reporting Requirements for Market Risk

The European Network of Credit Unions (ENCU) responded to the European Banking Authority's public consultation regarding specific supervisory reporting requirements for market risk. These requirements are the initial elements of the Capital Requirements Regulation's (CRR2) launch of the Fundamental Review of the Trading Book. The consultation serves to "include proposals for a thresholds template, providing insights into the size of institutions’ trading books and the volume of their business subject to market risk, and a summary template, reflecting the own funds requirements under the ‘Alternative Standardised Approach’ for market risk (MKR-ASA)." In a comment letter, ENCU responded directly to the EBA’s Draft Implementing Technical Standards on specific reporting requirements for market risk, and stated its support their Draft Standards, but urged the EBA to finalize these standards with consideration for credit unions by implementing proportional requirements that recognize the limited resources of smaller financial institutions. ENCU’s comment letter can be viewed here.

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Comment Letter, ENCU, European Banking Authority

WOCCU Urges Proportionality for Credit Unions in FATF Digital Identity Guidance

In a comment letter to the Financial Action Task Force (FATF) regarding their Draft Guidance on Digital Identity, WOCCU urged (FATF) to implement further guidance to national-level regulators to focus on an effective system that avoids imposing overly burdensome requirements and provide some flexibility for the unique structure of credit unions and cooperative financial institutions. WOCCU responded to four questions posed by FATF regarding the role of digital identity in relation to money laundering and terrorist financing, financial inclusion, due diligence and transaction monitoring, and record keeping requirements. WOCCU concurs with FATFs risk-based approach to digital identify for customer due diligence as well as their endeavors to support financial inclusion, however, WOCCU emphasized the need to implement " guidance directing supervisors to consider some high level principles such as whether an institution has cross-border operations, the asset size, the institutions interconnectedness with the financial system, the degree to which they report to multiple prudential supervisors, the mix of business activities, the average level of transactions that occur in any account and that further corresponds to the size, and the complexity and risk of a financial institution."

WOCCU's comment letter to FATF regarding their draft guidance on digital identity can be found here.  



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Comment Letter, FATF

ENCU and WOCCU Appeal to Ukraine's National Commission Regarding CRD IV Exemption

On August 26, 2019, the European Network of Credit Unions (ENCU) and the World Council of Credit Unions (WOCCU) sent letters to Ukraine's National Commission for the State Regulation of Financial Service Markets regarding the revised Regulations on Mandatory Standards and Requirements Limiting the Risk of Operations with Credit Union Financial Assets, and their relationship to the European Union Capital Requirements Directive (CRD IV). Both ENCU and WOCCU urged the Commission to adopt new regulatory norms and regulations that will help strengthen the credit union system.  If adopted the norms should pave the way for and amendment to the EU-Ukraine's Association Agreement incorporating a CRD-IV exemption for credit unions.  This exemption will bring credit unions in line with numerous other EU countries that provide a similar exemption, all of which will assist credit unions with their operations. 

Comment Letters:
ENCU Comment Letter: Regulations on Mandatory Standards and Requirements Limiting the Risk of Operations with Credit Union Financial Assets and Ukrainian Exemption from EU Basel III Capital Requirements Directive (CRD IV)

WOCCU Comment Letter: Regulations on Mandatory Standards and Requirements Limiting the Risk of Operations with Credit Union Financial Assets and Ukrainian Exemption from EU Basel III Capital Requirements Directive (CRD IV)

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Comment Letter, ENCU, European Commission

WOCCU Urges Further Proportionality Guidance for Basel Framework

WOCCU urged the Basel Committee on Banking Supervision (Basel Committee) to include clearer guidance on the factors appropriate for national-level regulators to consider when developing proportionate approaches when implementing the Basel Framework. 

WOCCU noted that national-level supervisors often view the framework as a floor and either adopt the standard outright or even exceed the standard without proportionally tailoring the regulation to the size, complexity and risk of credit unions.  As such, stronger guidance that exceeds the clear statements on proportionality already included in the Basel framework are necessary.

The comments came as part of the consultation by the Basel Committee on is Consolidated Basel Framework which is designed to clearly and comprehensively set out the policy contained in the numerous published Basel standards adopted since the financial crisis.

A copy of the letter can be viewed here.

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Comment Letter, Basel

ENCU Urges European Commission to Reduce Reg Burden on Distance Marketing Rules

ENCU urged the European Commission to avoid duplication and overlap of the implementation of the Distance Marketing of Financial Services Directive, particularly when there are product specific directives or national-level rules governing similar conduct.  ENCU noted that often inconsistencies or additional processes required by competing regulations often lead to additional costs and expenses without any corresponding benefit to consumers. 

The comments came as part of the European Commission’s Evaluation of the EU Rules on Distance Marketing of Financial Services that sets out what information a consumer should receive about a financial service and its provider before conducting a distance contract.

A copy of the comment letter can be viewed here.

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Comment Letter, ENCU, European Commission

WOCCU Urges Further Proportionality to FSB in Too Big to Fail Evaluation

WOCCU urged the Financial Stability Board (FSB) to consider issuing clearer guidance on factors that should be considered by national level regulators when developing proportionate approaches to the numerous standards adopted since the financial crisis, many of which are targeted to the "Too-Big-To-Fail" institutions.  

WOCCU noted that the complexity, usefulness, and corresponding regulatory burden and costs for smaller non-systemically important credit unions often becomes questionable, particularly those that are only involved in deposit taking and simple retail consumer lending.  While many of the Too Big to Fail Reforms were necessary, the application to credit unions and other mutuals needs to be appropriately and proportionately tailored.

The comments came as part of the FSB's Evaluation of the Too-Big-To-Fail Reforms.

A copy of the letter can be viewed here.
 

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Comment Letter, Financial Stability Board

WOCCU Calls for Further Proportionality Guidance for Credit Unions

Following a meeting by representatives of the credit union industry, the World Council of Credit Unions wrote to the Basel Committee on Banking Supervision (Basel Committee) to ask for further guidance to achieve the goal of better proportionality in regulation for credit unions.

In its letter, WOCCU urged additional guidance in the form of a set of high-level principles or weighing-factors on when less complex regulatory approaches can be warranted.  WOCCU noted that without additional guidance, many national-level policymakers continue to feel obligated to apply Basel III and other Basel Committee standards to non-complex, purely domestic deposit-taking institutions such as credit unions.  This notwithstanding that the Basel framework is intended only for internationally active banks and the expensive compliance standards are not warranted for credit unions. 

This letter followed an effort led by WOCCU making the case for proportionality to the Basel Committee last week with several representatives of the credit union industry including Canadian Credit Union Association (CCUA) President & CEO Martha Durdin, Customer Owned Banking Association (COBA) President & CEO Mike Lawrence and Credit Union National Association (CUNA) Chief Advocacy Officer Ryan Donovan.

A copy of the letter can be viewed here.

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Comment Letter, Basel

WOCCU Urges Further Proportionality to FSB to Increase SME Lending

WOCCU urged the Financial Stability Board (FSB) to continue with proportionality efforts in light of the voluminous regulatory reforms adopted since the financial crisis.  WOCCU noted that the additional complexity often filters down disproportionately to smaller, less complex institutions such as credit unions and other community based cooperative institutions.  WOCCU commented that these regulations need to be proportionately tailored and noted that the effects can have significant impact in their ability to lend to SMEs. 

These comments came as part of the FSB’s request for Feedback on the Effects of Financial Regulatory Reforms on SME Financing where they are evaluating how the regulatory reforms have affected SME lending.

A copy of the letter can be viewed here.

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Comment Letter, Financial Stability Board

WOCCU Urges Basel Committee to Provide Flexibility with Leverage Ratio Disclosures

World Council urged the Basel Committee on Banking Supervision (Committee) to make the use of daily averages in disclosures optional for non-complex depository institutions such as credit unions and other community-based mutual depository institutions that follow standardized risk-based capital rules. 

The Committee is seeking input in its consultative document Revisions to Leverage Ratio Disclosure Requirements and is seeking to address the issue of “window dressing” that occurs with internationally active, publicly traded banks reduce their balance sheets for end-quarter and end-year disclosure purposes that have macroeconimic effects and can provide misleading information to investors. 

WOCCU notes that credit union do not typically engage in this “window dressing” behavior and thus the disclosures may result in disproportionate reporting burdens on credit unions.  WOCCU did urge the ability to have the option of using daily averages for reporting purposes.

A copy of the comment letter can be viewed here.

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Comment Letter, Basel

WOCCU/CUNA Urge IRS to Reduce FATCA Regulatory Burden

WOCCU and the Credit Union National Association (CUNA) jointly urged the Internal Revenue Service (IRS) to reduce regulatory burden for Credit Unions in connection with the Foreign Account Tax Compliance Act (FATCA).  These comments came as part of the IRS’ FATCA rulemaking efforts looking for regulations that should be modified or eliminated in order to reduce unnecessary burdens. 

WOCCU and CUNA strongly supported many aspects of the rule that will reduce unnecessary regulatory burden for credit unions including the elimination of withholding on payments of gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States.

FATCA places significant compliance costs on U.S. credit unions, especially those that engage in remittances and/or have members who are not U.S. citizens. As a result, Americans living and working abroad have had their bank accounts closed, as well as loans and mortgages recalled and denied. This is in large part because many financial institutions simply cannot justify serving these members and customers due to the high costs associated with FATCA compliance. 

A copy of the comments can be viewed here.

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Comment Letter

ENCU Urges ESA to Minimize AML/CFT Regulatory Burdens

The European Network of Credit Unions urged the European Supervisory Authorities to use the increased communication and collaboration that will be gained as a result of the revised guidelines for the “AML Colleges” to reduce regulatory burden for credit unions. 

These comments came as part of the consultation process on the Draft joint guidelines on the cooperation and information exchange for the purposes of Directive (EU) 2015/849 between competent authorities supervising credit and financial institutions. The AML Colleges will be used to establish supervisory protocols when an institution crosses over multiple countries or jurisdictions for supervision regarding Anti-Money Laundering and Countering Financing of Terrorism.

ENCU noted that AML/CFT burdens are often disproportionately borne by credit unions as they do not have the economies of scale as larger institutions and are not-for-profit, member-owned cooperatives governed by a board of members who usually serve on a voluntary basis without receiving any remuneration for time and resources dedicated to the credit unions.

A copy of the comment letter can be viewed here.

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Comment Letter, ENCU, European Banking Authority

WOCCU Urges Basel Committee to Preserve Access for Credit Unions to Interest-Rate Derivatives

WOCCU urged the Basel Committee on Banking Supervision (Basel Committee) to preserve community-based financial institutions’ access to interest-rate derivatives in order to hedge interest rate by adopting revisions to the leverage ratio that utilizes the standardized approach to counterparty credit risk (SA-CCR) for a banks’ leverage ratio capital requirements with respect to client cleared derivatives. 

WOCCU notes that unless such revisions are made, smaller users of interest rate swaps and caps may no longer be able to access interest rate derivatives at fair rates, or at all.  This access is important as it helps promote safety and soundness by helping credit unions hedge interest rate risks related various items that may be in their portfolios or similar fixed-rate investments.

These comments were filed as part of the Basel Committee’s Consultative Document:  Leverage Ratio Treatment of Client Cleared Derivatives and a copy of WOCCU’s letter can be viewed here.

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Comment Letter, Basel