During my first job working for a prudential bank and credit union regulator, one of my early training classes posed the question of whether a credit union would prefer to be in a rising interest rate environment or a declining interest rate environment. We went around the room with various people offering their arguments as to which situation was better for a credit union. Strong views were offered on both sides of the issue. At the end, the teacher said that they were going to give us the answer but warned us that it was a trick question. To this day, I remember the answer clearly.
“Neither—a credit union should be prepared for either situation,” said the instructor.
It is a lesson that stuck with me because it really helps to focus on the fact that a credit union leader should focus on the skills and the actions necessary to properly manage the credit union based on the situation before them. Worrying or hoping for economic factors that are beyond the control of the credit union really does not help manage the institution in the most prudent manner. This lesson is really important now more than ever, with regulators focused on inflation, stagnation and a weaker outlook for growth. This, and the many new regulations coming our way on climate resilience, sustainable finance, payments, cryptocurrencies, etc., means we must be prepared for all situations.
WOCCU Advocated Proportionality Included in Climate-Related Financial Risks Standard
The Basel Committee on Banking Supervision published its Principles for the Effective Management and Supervision of Climate-related Financial Risks. The document forms part of the Committee’s holistic approach to addressing climate-related financial risks to the global banking system and seeks to improve banks’ risk management and supervisors’ practices in this area.
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