The Financial Action Task Force (FATF) recently issued a public consultation with proposed changes intended to better promote financial inclusion.  Comments are due to FATF by December 6, 2024. The proposed revisions span several different FAFT Recommendations and Interpretive Notes, including Recommendation 1, 10 and 15. The revisions include an increased focus on proportionality and more streamlined measures regarding the risk-based approach. The new revisions also address non-face-to-face customer-identification and transactions.

Anti-money laundering requirements have long created unintended consequences related to financial inclusion. The proposed revisions are intended to give individual countries, national regulators and financial institutions better assurance when using a simplified approach to support financial inclusion. Credit unions often face challenges when trying to serve their community while meeting compliance requirements. Changes to these areas could further support credit unions’ financial inclusion mission.

Click here to read the full consultation.

The Basel Committee on Banking Supervision issued a progress report to the G20 Finance Ministers and Central Bank Governors regarding their analysis of the 2023 banking turmoil. It addresses the liquidity-related issues including distressed banks’ outflow rates and the role of the supervisory monitoring tools.

The report notes that liquidity supervision may need to evolve over time based on challenges highlighted by the 2023 banking turmoil. The challenges were related to the speed and volume of deposit outflows and changes in the banks’ funding profile, the importance of banks operational readiness to access central bank liquidity facilities, proper liquidity stress testing, and the role of social media and the digitalization of financing in hastening the speed of a banks’ distress.

Click here to read the full report.

Liquidity is a top risk measured and monitored by individual financial institutions and prudential supervisors. The Financial Stability Institute produced a detailed report recently issued by the Bank of International Settlements on the variations and importance of strong liquidity stress tests. The report acknowledges the continued evolution of liquidity challenges given changes to the overall sector, technology and consumer behavior.  

Liquidity stress tests, which allow financial institutions to review how their liquidity position changes under adverse conditions, can take many forms. The paper reviews a range of approaches used by authorities across the globe. The paper was produced from interviews with banking authorities in Australia, England, Brazil, Singapore, and Europe and covers both bank-level liquidity stress tests and sector-wide stress tests. It includes a comparison of different approaches to stress tests in the different countries as well as specific examples.

Monitoring liquidity levels continues to be a critical challenge for individual financial institutions and relevant supervisors. The reports shares that further developments will be needed in this area to meet ongoing challenges.

Click here to read the full paper. 

Bank of International Settlements (BIS) issued an executive summary outlining Operational Continuity in Resolution (OCiR). OCiR refers to a financial institution in resolution’s ability to continue the critical shared services that are needed to maintain or facilitate the wind-down of a financial institution’s critical functions.

The summary notes that digitalization has recently been accompanied by increased reliance on third-party service providers supporting critical shared services, including areas such as data management and storage. This change creates several challenges. Data is now more frequently stored in other jurisdictions and assets may be shared across multiple third-party firms. This could create uncertainty in resolution regarding access to data or legal ownership. The increased digitalisation and reliance on third-party services also increases the chances of a final service involving support from multiple third-party providers with sub-contractors or indirect providers. These arrangements add complexity in service delivery models that may not be adequately captured in operational continuity arrangements.

The summary sets out considerations for approaching operational continuity of critical shared services that are digital. For additional information consult the Financial Stability Board’s Guidance on Arrangements to Support Operational Continuity in Resolution, which includes a recent supplementary note to clarify implementation with the increasing digitalisation of critical shared services.

Click here to read the full executive summary.

The Basel Committee on Banking Supervision met in September to discuss recent market trends and disruptions as well as key supervisory initiatives. The Committee noted several spikes in market volatility in July and August related to large, levered positions and the interconnections with non-bank financial intermediaries. The Committee noted the importance of operational resilience and managing third-party risks.

The Committee also finalized the report on lessons learned from the 2023 banking turmoil. As recommended by the G20, the report builds on earlier documentation with a new emphasis on liquidity risk that will be published in the coming months. The Committee also provided an update on its work to support regulatory supervisors including tools that can be used in their day-to-day work. The tools pertain to liquidity risk, the sustainability of business’ models, and effective supervisory judgment.

Finally, the Committee reviewed comments it received on its recent consultation regarding the proposed disclosure framework on climate-related financial risks.

Click here for more information.

New Financial Action Task Force (FATF) President Elisa de Anda Madrazo recently addressed the G20 Finance Ministers and Central Bank Governors at their meeting in Brazil. In one of her first comments as President she declared that financial inclusion will be one of her main areas of focus when delivering FTAF’s new strategic priorities. She noted securing financial integrity is not a trade-off with financial inclusion. She emphasized FATF is working diligently to prevent money laundering activity while maintaining access for clean funds to move through the regulated financial system. Excluding people from the financial system will increase inequalities and push them to unregulated options, increasing overall risks.

To meet their mandate FATF is reinforcing the need to apply a risk-based approach when designing financial integrity measures. This includes the use of simplified due diligence methods. FATF is also contributing to the G20’s roadmap on cross-border payments and updating the related standards. The President also noted the need for FATF to support low-capacity countries that have unique challenges. The support will include developing new guidance on combating illicit finance, partnering with technical assistance providers to help build effective frameworks and supporting jurisdictions as they implement regulations for virtual asset service providers.   

Ms. Elisa de Anda Madrazo of Mexico will serve as the new President of FATF from July 1, 2024 to June 30 2026, she succeeded Mr. T. Raja Kumar of Singapore.

Click here to learn more.

The International Accounting Standards Board (IASB) published a consultation document, proposing eight examples to demonstrate how companies apply IFRS Accounting Standards when reporting the effects of climate-related and other uncertainties in their financial statements.

The illustrative examples were created to provide helpful information to clarify proper reporting, they do represent new mandatory requirements. IASB is issuing this guidance following requests from stakeholders, particularly investors, who expressed concerns that the information about climate-related risks in financial statements was insufficient or inconsistent. This new proposed guidance is intended to strengthen the connection and consistency between financial statements and the company’s other reports such as sustainability disclosures.

The eight illustrative examples in the guidance focus on key areas such as disclosures on assumptions and estimations, disaggregation of information and materiality judgments. The IASB worked with the International Sustainability Standards Board (ISSB) to provide these clarifying examples and is continuing to explore ways to help improve widespread reporting of the financial impact of climate-related risks.

Comments must be submitted to the IASB by November 28, 2024. The IASB will review feedback to determine whether to finalize the proposed examples and provide them with the IFRS Accounting Standards.  

Click here to read the full proposal.

The C.D. Howe Institute, a nonpartisan not-for-profit research organization, recently issued a report highlighting the increased regulatory burden in Canada and the need to carefully consider both the benefits and costs of new requirements in the future. The report, The Good, the Bad and the Unnecessary: A Scorecard for Financial Regulations in Canada documents the trade-offs of additional regulations and recommends that regulators undergo a thorough and disciplined analysis to understand when the benefits of a new regulatory requirement out-weigh the costs.

The report importantly notes that regulating financial institutions is critical to a well-functioning, stable economy that protects consumers. It also shows there are negative consequences to unnecessary and overly burdensome regulations. It finds a more balanced approach is needed in future rulemaking. Regulations must be analyzed in terms of the impact on the overall cost of services and the ability of financial institutions to continue to serve consumers. The report also recommends that regulators account for the disproportionate impact regulations can have on smaller organizations. Proportional regulations, adjusted to the size and complexity of the institution, is needed to ensure continued competition in the financial services industry.

New regulations often require significant resources when accounting for higher compliance costs, the expense of operational changes, the lost opportunity to invest in the local economy and finance innovation. Good rule-making processes are shown to be a benchmark of an efficient financial regulatory system. The report encourages regulators to ensure they have properly identified potential problems, conducted a thorough cost-benefit analysis and clearly defined objectives before proposing a new regulation.

The report notes that unnecessary regulation is difficult to undo, therefore the process to propose and adopt new regulation must be considered carefully. It found that that a better balance is needed between regulatory objectives and costs to ensure the regulatory framework promotes financial stability as well innovation and growth, both of which benefit consumers.  

Click here to read the full report.

The Financial Stability Board (FSB) published a report on the status of financial authorities’ initiatives related to the identification and assessment of nature-related financial risks. It outlines current and future regulatory and supervisory initiatives. The report will be delivered to the G20 Finance Ministers and Central Bank Governors at their upcoming meeting in Rio De Janeiro. It discusses how nature degradation is a financial risk and how authorities across different jurisdictions are responding. The report shows that financial regulators are at different stages of evaluating nature-related financial risks. Many have concluded that there is a significant financial risk while others continue to monitor the situation.

Financial regulators that have analyzed the situation categorize climate-related financial risks into two categories: physical and transition risks. Their work shows that financing activities and investments have significant exposure to physical risk of climate-related incidents.  While there is currently no standardized approach across jurisdictions there is a general recognition that more expertise is needed. This includes an increased level of expertise across the supervisory authorities, central banks and the private sector to address these issues and improve the data, modeling and regulatory challenges.

Click here to read the full report.

The Basel Committee recently approved a disclosure framework for financial institutions' cryptoassets. The disclosure framework has an implementation date of January 1, 2026. This framework creates a standardized set of public tables and templates covering financial institutions’ cryptoasset exposures. The disclosures are intended to enhance information for oversight and provide transparency into the risk level of a financial institution’s cryptoasset exposure. The document, DIS55 Cryptoasset exposures, sets out the final revised standard.

The Basel Committee also approved a set of targeted amendments to the cryptoasset standard. They are intended to promote a consistent understanding of the standards, especially as it relates to stablecoins. The Basel Committee intends to monitor and update the framework as the financial sector's exposure to cryptoassets develops.

While credit union exposure to cryptoassets is currently limited, this is a framework that may impact the sector in the future, as exploration of the possible benefits of cryptoassets grows. Credit unions continue to explore which innovations and review technological and investment possibilities to benefit their members. It is important for credit unions to continue to advocate for a framework that enables them to invest in emerging technology, if appropriate in the future, that does not have prohibitive regulatory barriers. WOCCU along with others requested clearer guidance on several elements including the definition of “materiality.” In response to our comments, the Basel Committee is proposing a revised definition.  

Click here to access the final disclosure framework.

The Basel Committee recently published a consultation on Principles for Sound Management of Third-Party Risk in the banking sector. The proposed principles are open for comment until October 9, 2024. They provide guidance to the financial institutions and supervisors regarding effective third-party risk management to withstand operational disruptions.

This consultation recognizes that continued digitalization of the financial services has led to an increased reliance on third parties for new service offerings. The Basel Committee emphasized that the increased reliance as well as the rising concentration risks requires an updated review of how these third-party risks are managed by financial institutions. There are 12 high-level principles offering guidance. They introduce the idea of third-party life cycle while also emphasizing key concepts such as criticality.

The principles complement and expand on the Financial Stability Board’s 2023 report, Enhancing third-party risk management and oversight. While the principles are primarily directed at large international banks and their supervisors, the Basel Committee specifically noted the benefits these principles offer smaller financial institutions and their supervisory authorities. They establish a common baseline for all supervisors that oversee and evaluate the risk management of third parties.

Notably, the principles follow a technology-neutral approach. The Basel Committee believes this will allow the principles to remain relevant as new technology emerges in the future. The Basel Committee suggests these principles can be applied to third party services involved in a broad array of technology such as artificial intelligence, blockchain technology and machine learning. 

Click here to read the full consultation.

The Bank for International Settlements (BIS) released a special chapter on Artificial Intelligence (AI) in its new Annual Economic Report of 2024. The increased use of AI has significant implications for the financial system and its stability. The report highlights the impact of AI on Central Banks and the need to anticipate AI’s impact across the economy. Looking forward, Central Banks will need to determine how best to utilize AI in their own operations, especially in the area of data and data governance. The quick rise in adoption of AI within the financial sector and larger economy implies there is an urgent need for Central Banks to quickly increase their understanding both as informed observers of technology advancements as well as users of the technology itself.

The report provides an overview of developments in AI and the underlying technology. It also examines the implications of AI on the financial sector as well as emerging opportunities and challenges for Central Banks.

Click here to read the special chapter on AI.

The European Council (Council) reached an agreement on a common member states’ position on a new law intended to improve cooperation between national data protection authorities. The General Data Protection Regulation (GDPR) harmonizes data protection rights across Europe and applies to any organization that deals with personal data of EU citizens or residents, regardless of where they are based. To better facilitate GDPR enforcement this new law will require national data protection authorities to cooperate quickly when a data protection case concerns cross-border processing.

Once adopted, the regulation will provide tools for quickly handling the complaints filed by citizens or organizations. It also clarifies procedural deadlines and specific steps of an investigation, including the process for the adoption of a binding opinion by the European Data Protection Board (EDPB).

The Council will next begin negotiations with the European Parliament to agree on the final legislative text. Click here to learn more.

The European Council (Council) adopted new rules aimed at making financial institutions operating in the EU more resilient to possible economic shocks. The changes are intended to strengthen their supervision and risk management as well as sustainability in the banking sector. The new rules update the capital requirements regulation and directive that translate the Basel III standards into EU legislation.

The reforms added an “output floor” feature that limits the risk of excessive reductions in financial institutions’ capital requirements. The reforms also set a transitional regime for crypto assets and amendments to enhance the management of Environmental, Social and Governance (ESG) risks.

This is the last step of the adoption procedure. The amended capital requirements regulation and capital requirements directive will be published in the EU’s Official Journal. Member states will have 18 months to implement the directive into national legislation. The regulation changes will apply beginning January 1, 2025. Click here for more information.

On May 16, 2024 the Basel Committee published a report on the Digitalisation of Finance, outlining the risks and benefits of new technologies and its suppliers for the purposes of banking services, as well as “eight implications for banks and supervisors relating to macro-structural elements, specific digitalisation themes, and capacity building and coordination.” The report expands on the 2018 Sound Practices: implications of fintech developments for banks and bank supervisors. Technologies such as application programming interfaces, artificial intelligence and machine learning, distributed ledger technology and cloud computing, as well as new technologically enabled suppliers (eg big techs, fintechs and third-party service providers) and business models are reviewed within the report. The Committee hopes to address regulatory and supervisory implications such as:

• “monitoring evolving risks and adopting a responsible approach to innovation;
• safeguarding data and implementing robust risk management processes; and
• securing the necessary resources, staff and capabilities to assess and mitigate risks from new technologies and business models.”

More information on the report on the digitalization of finance is available here.

According to the IFRS, “Jurisdictions representing over half the global economy by gross domestic product (GDP) have announced steps to use the International Sustainability Standards Board’s (ISSB) Standards or to fully align their sustainability disclosure standards with those of the ISSB.” This includes over 20 jurisdictions representing close to 55% of the GDP, over 40% of global market capitalization, and more than half of global greenhouse emissions.

The IFRS believes the International Organization of Securities Commissions’ (IOSCO) endorsement of the ISSB’s sustainability-related financial disclosure standards back in July 2023, has created a “significant response” after encouraging its members to adopt, apply or be informed of the Standards so that it fosters consistency and comparability for companies’ climate and sustainability-related disclosures for investors. IOSCO has 130 member jurisdictions that regulate more than 95% of the world’s securities markets.

On May 28, 2024, the IFRS Foundation announced that is released a guide, the Inaugural Jurisdictional Guide for the adoption or other use of ISSB Standards, to help jurisdictions design and plan for the adoption or other use of its ISSB Standards. The Foundation has also outlined its Regulatory Implementation Programme, which is a framework to collaborate with the Growth and Emerging Markets Committee of IOSCO.

More information is available here.

On May 21, 2024, the European Council announced its approval of the Artificial Intelligence or AI Act, to set a global standard AI regulation through a risk-based approach. “The new law aims to foster the development and uptake of safe and trustworthy AI systems across the EU’s single market by both private and public actors.” The AI Act provides classification of AI systems based on risk, with lower risk systems being subject to light transparency obligations and high-risk systems subject to more requirements and obligations. AI that is capable of cognitive behavioural manipulation, social scoring, and the use of AI for predictive policing based on biometric data that categorize people based on race, religion, or sexual orientation will be banned in the EU. An AI Office in the European Commission, scientific panel, and an AI Board with member states’ representatives will be implemented as governing bodies to ensure enforcement.

More information on the AI Act is available here.

The Financial Stability Board (FSB) published a consultation report on liquidity preparedness for margin and collateral calls. The report sets out eight proposed policy recommendations to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls in centrally and non-centrally cleared derivatives and securities markets (including securities financing such as repo).

In particular the report:

• Identifies weaknesses in risk management and governance as key causes of inadequate liquidity preparedness by some non-bank market participants during recent incidents of liquidity stress in financial markets.
• Proposes eight policy recommendations focused on managing and mitigating the impact of spikes in margin and collateral calls in the non-bank financial intermediation (NBFI) sector.
• Makes proposed recommendations cover liquidity risk management and governance, stress testing and scenario design, and collateral management practices of non-bank financial institutions.

The report highlights the need for policy adjustments to deal with liquidity strains in the NBFI sector arising from spikes in margin and collateral calls during times of market stress, such as the March 2020 market turmoil, Archegos, and the commodities markets turmoil and stress in liability-driven investment funds in 2022. To achieve this, the FSB is proposing eight high-level and cross-sectoral policy recommendations that build on and complement existing rules and regulations on liquidity risk management across different sectors and jurisdictions.

The recommendations cover liquidity risk management and governance, stress testing and scenario design, and collateral management practices of non-bank market participants, focussing on liquidity risks arising from spikes in margin and collateral calls. They apply to non-bank market participants that may face margin and collateral calls, including insurance companies, pension funds, hedge funds, other investment funds and family offices. They are proposed to apply proportionately with a focus on non-bank market participants with material exposures to spikes in margin and collateral calls during times of stress. The report also highlights the need for financial intermediaries in bilateral transactions with non-financial entities, such as commodities traders, to consider assessing their liquidity preparedness for spikes in margin calls and collateral during times of stress.

A copy of the consultation can be viewed here.

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for Europe met in London to discuss global an regional macroeconomic developments and their implications for financial stability.  In particular they discussed the macro-financial environment that continues to be shaped by the adjustment of the global economy to high interest rates, while geopolitical factors are weighing on the outlook.

The group noted that despite tight financing conditions and subdued confidence, growth in the region is projected to gradually pick up, amid a recovery in real incomes. In global financial markets, certain asset valuations remain stretched and vulnerable to adjustment in the face of adverse shocks. Members discussed sectors which warranted close monitoring, specifically the outlook for – and risks associated with – commercial real estate markets, which have been undergoing a substantial adjustment recently, due to both cyclical and structural shocks.

Members received an update on the FSB’s work priorities for 2024, including its deliverables under Brazil’s G20 Presidency. The effective implementation of its global regulatory and supervisory framework for crypto-asset activities and markets is a key focus for the FSB. Members shared their experiences in addressing regulatory challenges stemming from the cross-border and cross-sectoral nature of crypto-asset activities. They also exchanged views on preparations for new crypto-asset regulations entering into force, such as the Regulation on Markets in Crypto-assets (MiCA) in the European Union and the proposed regulatory regime for crypto-assets in the United Kingdom.

The Brazilian G20 Presidency has asked the FSB to take stock of new developments in artificial intelligence (AI) and their potential implications for financial stability. The day before the meeting, the RCG held a seminar with invited guests from academia and industry on AI and its role in the financial system. The discussion focused on developments in AI, use cases in the financial sector, and implications for financial stability.

A copy of the release can be viewed here.

The World Council of Credit Unions urged the G20 to adopt language in this year’s Leaders’ Declaration to embrace proportionality that can enable credit unions as community based financial institutions to address financial inclusion around the world.  This year’s Summit under Brazil’s Group of Twenty (G20) Presidency focuses on the theme “Building a Just World and a Sustainable Planet.”  This theme highlights the world’s commitment to fair agreements that promote global economic and social development and the reduction of inequality worldwide.

To that end, World Council notes that policies conducive to increasing financial literacy and consumer protection, reducing financial exclusion, bridging the digital divide among many groups, and reducing inequalities are key to an equitable future.  Specifically, the connection between proportionality an enabling non-profit, community based financial institutions can play a critical role in accomplishing these goals.

World Council notes that a barrier to the proportional tailoring of regulations often occurs at the national level.  Thus, the requested language in the Leaders’ Declaration urges international standard setting bodes such as the Financial Stability Board to work with various agencies on the implementation of proportionality that is often already imbedded in global standards.

World Council has made this a priority of its advocacy efforts joining with many of its G20 members to urge their respective finance ministers to support this effort.  The G20 has heeded World Council’s call to address financial inclusion in past years declarations and specifically last year where they embraced proportionality included in the newly adopted sustainability disclosures issued by the International Sustainability Standards. 

This year’s Summit will occur later this year in November.  A copy of the letter can be viewed here.

Years of diligent advocacy work by the Customer Owned Banking Association (COBA) has resulted in the Treasurer of Australia establishing a regulatory roadmap to ensure the country’s major financial service regulators coordinate and provide visibility of proposed regulatory reforms going forward. COBA, World Council’s direct member organization in Australia, spent the last several years meeting with key government officials and regulators to advocate for the creation of a financial sector regulatory grid.

Based on these efforts, the new regulatory roadmap will help regulators avoid duplication, engage with financial service businesses and improve implementation practices. This change to coordinate and provide a regulatory roadmap will particularly help medium-sized and smaller financial service providers, allowing them to better anticipate regulations that might impact their business in the future and the resources needed for compliance.

The regulatory roadmap is based on a system currently used in the United Kingdom, and will be a rolling, 24-month program of regulatory initiatives impacting the financial sector. The roadmap will be updated twice a year and include proposed legislation, rules and regulations, and standard making, consultation processes and data collection processes. This advanced planning and coordination is expected to facilitate better engagement between financial service providers and regulatory agencies with coordinated priorities and greater visibility to better discuss regulatory implementation methods.  

Click here to read the Treasurer’s announcement and learn more about the key regulatory advocacy success of COBA.

The Basel Committee on Banking Supervision (the Committee) recently met to discuss key items impacting the financial service markets.

The Basel Committee announced it will be revising the Core principles for effective banking supervision (Core Principles). Following comment letters from stakeholders, including the World Council of Credit Unions, the Committee approved the first revisions to the Core Principles since 2012. The final standards will be published following the International Conference of Banking Supervisors at the end of April. 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. 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 disproportionate burden recent regulatory guidance places on credit unions in key areas, such as operational resilience, stress testing, and climate risk management. Click here to read the comment letter submitted by World Council.

During their recent meeting the Committee also discussed developing risks to the global banking system, window-dressing behavior by large banks, and the status of Basel III implementation.

The Committee discussed climate-related financial risks as one of the top ongoing and developing risks for financial institutions. It discussed scenario analysis as a tool for assessing the resilience of financial institutions business models, strategies, and overall risk profile. A discussion paper will be published in the coming months on the use of climate scenario analysis by banks and supervisors. The Committee also discussed sector risks, including segments of commercial real estate facing headwinds and banks’ interconnections with non-bank financial intermediaries.

Finally, the Committee reported on the implementation status of the outstanding Basel III standards, issued in 2017. Implementation is progressing but is uneven between countries. The Committee approved a workplan for the jurisdictional assessments of the implementation of these standards as part of the Committee’s Regulatory Consistency Assessment Programme.  

Click here for more information on the updates provided by the Basel Committee.

The Financial Stability Board (FSB) published a letter from its Chair, Klaas Knot, to G20 Finance Ministers and Central Bank Governors, ahead of the G20 meeting on 28-29 February.

Highlights of the letter are as follows:

• FSB Chair warns of challenging outlook to global financial stability including debt servicing burdens, stretched asset valuations in some key markets, and leverage and liquidity mismatch in non-bank financial intermediation (NBFI).
• Chair submits FSB’s revised policy recommendations to address vulnerabilities arising from liquidity mismatch in OEFs and calls on G20 members to implement them as quickly as feasible.
• Letter outlines key issues the FSB is working on in 2024, including lessons from the March 2023 banking turmoil, NBFI, climate change, digitalisation and enhancing the efficiency of cross-border payments.

In his letter, he warns of the challenging outlook for global financial stability, despite steady economic growth and signs of easing global financial conditions. Debt service challenges could increase, and exposures to sectors facing existing headwinds, like commercial real estate, bear close monitoring. Asset valuations are also stretched in some key markets. Abrupt shifts in market pricing could expose vulnerabilities in the financial system, including those related to leverage and liquidity mismatch in NBFI.

The letter lays out the FSB’s work during 2024 to monitor and address financial system vulnerabilities.

The FSB also noted that it is working to ensure the effective implementation of the international framework provided by the FSB Key Attributes of Effective Resolution Regimes, address the financial stability risks stemming from leverage in NBFI, and analyze the financial stability implications of tokenisation and artificial intelligence. To address growing financial stability risks from cyber incidents, the FSB is designing a format for incident reporting exchange (FIRE) for public consultation.

Finally, the FSB notes that it continues to coordinate international work through the FSB Roadmap to address financial risks from climate change, the G20 Roadmap for enhancing cross-border payments and the G20 Roadmap on crypto-assets. At the request of the Brazilian G20 Presidency, the FSB will also deliver a stocktake on regulatory and supervisory initiatives related to the identification and assessment of nature-related financial risks to the G20 July meeting.

A copy of the release can be viewed here.

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.  

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.