MADISON, Wis.–While the perception (and often reality) is international policymaking bodies are little interested in the issues of concern to small organizations such as credit unions, there is actually some good news on that front, according to one person.
Andrew Price, SVP-international advocacy with the World Council of Credit Unions, pointed to some hopeful signs when it comes to one large international body and what it could mean for credit unions during a WOCCU webinar titled, “Credit Unions & The G20: The Push for Financial Inclusion.”
The webinar was designed to address some of the challenges in expanding services to underserved markets due to regulatory burden.
Officially, the G20 is an intergovernmental forum comprising 19 countries and the European Union that works to address major issues related to the global economy. As this CUToday.info series explores, unofficially the G20’s decisions and policies can often lead to undesirable outcomes for smaller organizations, including credit unions, when “proportionality” isn’t taken into account.
While Price was optimistic, he said it’s also necessary to be realistic about current realities.
The first four installments in the CUToday.info series can be found here, here, hereand here.
‘Crux of the Problem’
“The crux of the problem that we see is that interaction between the international standard-setters and the national-level regulators shows there needs to be a lot more communication so that national-level regulators can really understand the importance of tailoring regulations so credit unions can do what they do,” said Price.
That importance is being recognized, according to Price, who said at the international level various organizations such as the G20 and the Basel Committee have begun doing a better job of embracing “proportionality” in rulemaking.
“They’ve really done a good job in including risk-based approaches in regulations,” he said. “They put in language that says that no regulations should ever be so burdensome” as to restrict access to financial services.
“It's really what national-level regulators need to look at,” he contnued. “(The G20) has a document on financial inclusion, which is fantastic, because it gives examples of how tailoring can occur, particularly with items such as member diligence.”
That includes simpler processes for member account opening and taking into account the actual risk presented, Price explained.
But other challenges remain, he added, noting Basel III standards are really designed for the largest of international institutions, yet national regulators remain “hesitant to tailor their regulations.”
Andrew Price speaking to WOCCU webinar.
“They don't want to be perceived by their peers or their neighboring countries as being weak, or they don't want to be perceived as providing an exemption or watering down a standard to make it easier for somebody in their country,” Price said. “A lot of times they just really don't know how to go about it and that's really where we see the problem. We think there needs to be more education in that regard about how they can proportionately tailor the regulations.”
The Path Forward
Noting other speakers to the WOCCU webinar who have been featured in this series had stated regulators in their own counties “don’t want to be bothered” with proportionality, Price believes the path forward is for everyone involved to see “both sides of the coin.”
As an example, he pointed to anti-money laundering rules. Using one European country as an example, he said credit unions average approximately $11 million in assets, yet there requirements that three people within every institution be responsible for complying with AML rules, which “doesn’t make a lot of sense.”
But some have found a workaround, he said.
“What the credit unions do is they will appoint the three to meet the requirement, but then each of them only does that function one hour a week,” said Price. “This is kind of a simple example, but it just alludes to some of the absurdity, some of the hoops you have to jump though.”
Not Asking for Special Favors
In meeting with policymakers, Price said credit unions must be clear they are not asking for an exemption, but rather to be regulated in a more proportional, appropriate way.
“We understand that's part of a proper, safe and sound, functioning regulatory system, but we want those regulations to be tailored so that they work,” he said. “Anti-money laundering is a great example of that standard. And that brings it back to the G20, because the G20, I'm happy to believe, is really focused on financial inclusion and they're very receptive to this issue. In fact, many of the leaders’ declarations for the past several years have been focused on that and the link between proportionality and financial inclusion is well documented.”
‘Excited About Our Work’
Credit unions, he said, must continue to communicate that as not-for-profit cooperatives they are best suited for bringing financial inclusion to underserved and rural markets.
“If we're successful in this, the international standard-setters will give more direction to national-level regulators, helping them understand how they can tailor regulations,” said Price. “I think there's going to be a good focus on that and that is going to let you as a credit union really serve your members and hit those areas. I'm very excited about the work.”