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Appropriately applied proportionality can significantly advance the G20’s goals of promoting financial inclusion, CUNA wrote to the House Financial Services Committee Wednesday. Treasury Secretary Janet Yellen testified before the committee on the state of the international financial system.
Proportionality allows national regulators to tailor rules often designed for large, internationally active banks to allow local, community-based financial institutions to operate.
“Credit unions are committed to financial inclusion and we applaud the recent G20 Rome Leaders’ Declaration that affirmed the G20 support for national-level regulators to strengthen their focus on proportionality and financial inclusion,” the letter reads. “This year, we urge the G20 to include language in the Leaders’ Declaration that will direct the international standard setting bodies to work closely with national-level regulators to fully adopt proportional tailoring of regulations for the purposes of advancing financial inclusion.
“Proper implementation of proportionality in regulations for smaller cooperative depository institutions such as credit unions can greatly reduce inequalities and promote inclusive growth,” it adds. “More importantly, proportionality, applied appropriately, can significantly advance the G20’s goals of promoting financial inclusion by fostering responsible finance through increased access to responsible and affordable financial services.”
Wednesdays letter, and CUNA’s previous letter to Yellen requests the following language be included in the G20 Leaders’ Declaration:
The G20 is committed to continuing its efforts to reduce inequalities and promote inclusive growth. Financial inclusion reduces inequality, which in turn supports inclusive and sustainable growth by allowing the vulnerable to remain healthy, stay out of poverty, pay for education and accumulate human capital. The proportionate application of International Standards for financial regulation is a critical factor in enabling innovative financial inclusion. Financial inclusion provides for more stable markets by bringing more depositors and deposit accounts into the financial system. To this end we direct the Financial Stability Board (FSB) and standard setting bodies to coordinate efforts to further develop the ecosystem such that the requisite capacity to implement proportionality in practice is enhanced. We direct the FSB and standard setting bodies to report progress on the implementation of proportionality for financial regulation annually to the G20.