Proportionality is alive and well. This is great news for credit unions because it means regulators are seeing the importance of tailoring regulations to allow credit unions to properly serve their members. We saw this most recently with the Financial Action Task Force (FATF) issuing its High-Level Synopsis of the Stocktake of the Unintended Consequences of the FATF Standards. The key passage in this report states that the failure to use the proportionality that is central to the risk-based approach can lead to or compound financial exclusion.
This is an important position from an international standard setting body. First, it acknowledges that more work needs to be done with national-level regulators to undertake that hard work of tailoring regulations. Perhaps more importantly, it highlights the important role that credit unions can play in serving excluded or marginalized populations if regulatory frameworks are properly permissive. This is precisely the focus of much of WOCCU’s International Advocacy efforts.
We hope this serves as a template for other international standard setters to follow. While almost all include proportionality in their frameworks, taking the next steps to focus on how the failure to implement proportionality leads to financial exclusion is just as important. Ryan Donovan, EVP and Chief Advocacy Officer at CUNA often says that advocacy is a process and not an event. Perhaps these are baby steps in the process, but it seems like a giant leap.
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