WOCCU, ENCU Call for COVID-19 Regulatory Relief

World Council of Credit Unions (World Council), the European Network of Credit Unions (ENCU), and the European Union Credit Union Parliamentary Interest Group (EUCUPIG) in two separate letters called for regulatory relief to allow credit unions in the European Union to play a critical role in the response to the COVID-19 pandemic. Credit Unions have a history of providing critical services through disasters, emergencies and other disruptions by providing direct assistance to their members. 

With proper regulatory relief, credit unions have the ability to advance financial inclusion during the pandemic.   These community-based cooperatives provide services to households, SMEs and vulnerable groups that face a number of obstacles in accessing credit, particularly during this crisis.

This call for regulatory relief came in a series of letters with the ENCU letter signed by five Members of the European Parliament (MEPs) also members of the EUCUPIG::

  • MEP Billy Kelleher (Co-Chair of EPCUIG - Ireland)
  • MEP Paul Tang (Vice-Chair of EPCUIG – The Netherlands)
  • MEP Frances Fitzgerald (Ireland)
  • MEP Barry Andrews (Ireland)
  • MEP Caroline Nagtegaal (The Netherlands)
A copy of the WOCCU letter can be viewed here and a sample ENCU letter here.

WOCCU Urges IASB to Implement Reg Relief in IRB Reform

The World Council of Credit Unions (WOCCU) urged the International Accounting Standards Board (IASB) to adopt measures that would reduce regulatory burden on credit unions in its comment letter on the IASB's Exposure Draft on Interest Rate Benchmark Reform. 

The Exposure Draft is part of the IASB's Interest Rate Benchmark Reform, which was issued in September 2019, and is the next phase of the project that considers the effects of interest rate benchmark reform on an entity’s financial statements that arise when interest rate benchmarks are replaced with alternative, nearly risk-free interest rates that are based, to a greater extent, on transaction data (alternative benchmark rates). 

WOCCU urged the use of the practical expedient in numerous instances to reduce the regulatory burden on the preparation of financial statements.  

A copy of the comment letter can be viewed here.

International Accounting Standards Board

Credit Union COVID-19 Advocacy Guide Released

In order to assist credit unions worldwide with advocacy with their national level regulators, WOCCU is pleased to make available its Advocacy Insights: Advancing the Credit Union Cause During a Global Pandemic. This guide is designed to give some practical steps to help credit unions demonstrate why policymakers should allow credit unions to be a part of the solution in addressing worldwide problems arising as a result of the COVID-19 pandemic. The credit union cooperative model has demonstrated over and over again their ability to help its members traverse numerous disasters over the years.

A copy of the guide is available here.
Additionally, the guide is available in Spanish here.

FSI focuses on Financial Crimes for COVID-19

The Financial Stability Institute of the Bank for International Settlements issued FSI Brief No. 7 that focuses on Financial Crimes in times of COVID-19 and the corresponding issues of AML and cyber resilience measures.  The key findings of the brief are as follows:  
  • Criminals are exploiting vulnerabilities opened up by the Covid-19 lockdown, increasing the risks of cyber attacks, money laundering (ML) and terrorist financing (TF).
  • Authorities worldwide have responded by drawing financial institutions' attention to these threats and by providing guidance on ways to improve cyber security and mitigate ML and TF risks.
  • Financial authorities are warning financial institutions to be particularly watchful in relation to their IT networks and non-public data; third-party risk; and cyber security incident response plans; and to focus additional effort on staff training and awareness.
  •  Financial authorities also emphasise the need for financial institutions to be vigilant of new ML and TF risks and to continue meeting anti-money laundering (AML) and combating the financing of terrorism (CFT) requirements, while using the flexibility built into the AML/CFT risk-based framework, digital customer on-boarding and simplified due diligence processes.
  • In both areas, the official guidance underscores the trade-offs between expecting financial institutions to enhance or adjust their cyber resilience and AML frameworks and, on the other hand, avoiding imposing an excessive burden that could hinder financial institutions in delivering key financial services.
A copy of the brief can be viewed here.
Bank of International Settlements

FATF Issues Guidance on COVID-19 AML/CFT Risks

The Financial Action Task Force (FATF) issued a paper identifying challenges, best practices, and policy responses to the unprecedented global challenges emerging as a result of the COVID-19 pandemic.  Increased COVID-19 related crimes, including fraud, cybercrime, misdirection or exploitation of government funds or international financial assistance are all creating new avenues of illicit crimes. 

Emerging risks and vulnerabilities are identified in the paper that could result in criminals finding ways to:  

  • Bypass customer due diligence measures;
  • Increase misuse of online financial services and virtual assets to move and conceal illicit funds;
  • Exploit economic stimulus measures and insolvency schemes as a means for natural and legal persons to conceal and launder illicit proceeds;
  • Increase use of the unregulated financial sector, creating additional opportunities for criminals to launder illicit funds;
  • Misuse and misappropriation of domestic and international financial aid and emergency funding;
  • Exploit COVID-19 and the associated economic downturn to move into new cash-intensive and high-liquidity lines of business in developing countries.
FATF also conducted its first webinar on this topic that can be viewed here. A copy of the paper can be viewed here.

European Commission Releases Money Laundering & Terrorist Financing Action Plan

On May 7, 2020, a “ Communication From the Commission on an Action Plan for a comprehensive Union policy on preventing money laundering and terrorist financing” was published in conjunction with the launch of their public consultation requesting feedback on the actions proposed by the Commission to achieve a comprehensive Union policy on preventing money laundering and terrorist financing, and the best way to implement these actions. The Commission’s Action Plan stresses their commitment to combatting both EU and global money laundering and terrorist financing (ML/TF) issues, and the increased instances of criminal activity stemming for the Covid-19 pandemic. The Commission hopes to create a stronger AML/CFT framework and an integrated EU AML/CFT system; and  “intends to implement a comprehensive AML/CFT policy, adapted to the specific threats, risks and vulnerabilities currently facing the EU14 and designed in a manner that can evolve efficiently while taking into account innovation.”

The Action Plan outlines how the Commission plans to carry out their objectives by building on the following six pillars:

  • Ensuring the effective implementation of the existing EU AML/CFT framework;
  • Establishing an EU single rule book on AML/CFT;
  • Bringing about EU level AML/CFT supervision;
  • Establishing a support and cooperation mechanism for FIUs;
  • Enforcing Union-level criminal law provisions and information exchange;
  • Strengthening the international dimension of the EU AML/CFT framework.

WOCCU looks forward to responding to the Commission’s consultation and supporting the consideration of credit unions in the formulation and implementation of their action items addressing ML/TF prevention.

European Commission

Basel Committee Releases Survey Regarding Climate Related Financial Risk Initiatives

The Basel Committee published their, “Climate-related financial risks: a survey on current initiatives”, summarizing members’ existing regulatory and supervisory initiatives on climate-related financial risk. The Basel Committee created the Task Force on Climate-related Financial Risks (TFCR) to improve global financial stability by performing “a stocktake of members’ existing regulatory and supervisory initiatives on climate-related financial risks;” initiating “a set of analytical reports on climate-related financial risks, including a literature review, and reports on the transmission channels of such risks to the banking system as well as on measurement methodologies”; and developing “effective supervisory practices in order to mitigate climate-related financial risks”.

The survey suggests that:

  • The majority of Basel Committee members consider it appropriate to address climate-related financial risks within their existing regulatory and supervisory frameworks;
  • an overwhelmingly large share of members have conducted research related to the measurement of climate-related financial risks, while a number of members identified operational challenges in assessing climate-related financial risks such as data availability, methodological challenges, and difficulties in mapping of transmission channels. A majority of the members have raised risk awareness with banks through different channels, and many banks are disclosing information related to climate-related financial risks to some extent; and
  • approximately two-fifths of members have issued, or are in process of issuing, more principles based guidance regarding climate-related financial risks. However, the majority of members have not factored, or have not yet considered factoring, the mitigation of such risks into the prudential capital framework.

5th FSI COVID-19 Brief Issued on Government Guarantee Programs

The Financial Stability Institute of the Bank for International Settlements issued its 5th Brief on Public guarantees for bank lending in response to the Covid-19 pandemic.  Highlights of the brief are as follows:
  • In response to the Covid-19 pandemic, governments have launched guarantee programmes to support bank lending to companies, especially small and medium-sized enterprises. This is essential to avoid a sharp contraction in bank credit that would exacerbate the pandemic's adverse impact. 
  • The design of such programmes needs to strike a difficult balance between responding promptly to the pandemic and maintaining a sufficient level of prudence. Key features of a sample of programmes (eg target beneficiaries, coverage of the guarantee, loan terms, length of the programme) reflect this tension.
  • Incentives were created for the banks to join these programmes by exploiting flexibility in existing prudential requirements, while central banks have often provided liquidity support. Programmes are, however, subject to operational challenges and, ultimately, fiscal capacity limits.
A copy of the brief can be viewed here.
Bank of International Settlements

BIS Publishes Working Papers on Post-Crisis International Financial Regulatory Reforms

The Bank for International Settlements published working papers entitled, “Post-crisis international financial regulatory reforms: a primer”, which reviews post-crisis regulatory reforms, specifically reviewing the bank and Central Counterparties (CCP) international regulatory reforms and how CCP international standards fit within a “unified analytical framework”. The CCP reforms were implemented in response to the Great Financial Crisis (GFC) with the purpose of improving financial stability through the implementation of improved and new standards. The BIS working paper is primarily based on a review of the unified analytical framework and premised on the belief that the key concept of the framework is “shock-absorbing capacity, which is higher when (i) there is less exposure to the losses that a shock generates and (ii) there are more resources to absorb such losses.” The working paper argues that a “conservative regulatory approach” is necessary to address issues of political pressures on the economy and technical obstacles to reform, and “[a] higher cost of balance sheet space is a healthy side effect of the backstops underpinning such an approach". BIS’ summary of this working paper can be found here.

Bank of International Settlements

BIS Publishes Bulletin on Role of Prudential Policy in Covid-19 Losses

The Bank for International Settlements (BIS) published a bulletin entitled “Buffering Covid-19 Losses – the Role of Prudential Policy”, suggesting conditions to address the shock coronavirus pandemic has had on the economy through release of prudential buffers. The bulletin is divided into three parts: 1. Assessment of how banks are and will be affected by Covid-19 confinement measures and policy responses to the pandemic; 2. design and usability of prudential buffers; and 3. relaxing buffers to support banks.

According to BIS the following are key takeaways from the bulletin:

  • “By allowing banks to run down some of their buffers, policymakers are sending a strong signal about their resolve to lessen the economic fallout from the pandemic. Such prudential measures complement the main policy levers: monetary and fiscal instruments. 
  • To avoid a reduction in credit to the real economy, authorities need to ensure that banks have the capacity and willingness to make use of the flexibility afforded by the buffer release. Payout restrictions on banks and risk-sharing between banks and the public sector will be key.
  • For banks to continue playing a positive role in the supply of funding during the recovery, they should maintain usable buffers for a long period, as losses from a severe recession will take time to materialise.”
Bank of International Settlements

4th FSI COVID-19 Brief issued with Focus on Insurance

The Financial Stability Institute of the Bank for International Settlements issued its 4th Brief on Insurance Regulatory Measures in Response to COVID-19.  The highlights of the brief are as follows: 
  • Currently, insurers are more likely to experience losses from financial market volatility than from higher insurance claims arising from Covid-19. Few insurance supervisors have seen a need to strengthen or adjust prudential requirements to insulate insurers from current financial market uncertainties.
  • So far, authorities have responded mainly by taking measures to provide operational relief to insurers from regulatory and supervisory requirements so that they can continue providing insurance services. These measures will also help insurers to enhance risk monitoring of their Covid-19 financial exposures.
  • Some authorities have set out expectations for insurers to conserve capital through prudent exercise of dividend and variable remuneration policies. The aim is to enhance their resilience against huge uncertainties from potential Covid-19 fallout. Other capital-related measures should relieve supervisory pressures and reduce the tendency of insurers to manage their investments in a procyclical manner. These measures include: extending the supervisory intervention ladder, triggering the countercyclical lever and recalibrating capital requirements.
  • The far-reaching impact of Covid-19 calls for sustained vigilance by both supervisors and insurers. In the post-pandemic phase, the extraordinary measures currently warranted will need to be unwound through a carefully crafted exit strategy that preserves sound risk management practices and protects policyholders' interests.
A copy of the brief can be viewed here.
Bank of International Settlements

European Council Adopts Taxonomy Regulation for Sustainable Finance

The European Council (Council) adopted a regulation establishing a EU-wide common classification system “to encourage private investment in sustainable growth and contribute to a climate neutral economy”; and the Council hopes to establish this taxonomy by the end of 2021. The taxonomy aims to give investors and businesses a way to identify environmentally sustainable economic activities through common language. The EU has a 2050 target to become climate neutral and a 2030 goal to reach Paris agreement targets, and the taxonomy is expected to help achieve these goals by empowering investors to adjust their investments to “more sustainable technologies and businesses”.

Eventually, a framework will be implemented based on six environmental objectives set up for the European Union, as follows:

1) climate change mitigation;
2) climate change adaptation;
3) sustainable use and protection of water and marine resources;
4) transition to a circular economy;
5) pollution prevention and control;
6) protection and restauration of biodiversity and ecosystems.

The press release on the sustainable finance taxonomy can be viewed here.

Council of the European Union

WOCCU Releases Credit Union COVID-19 Regulatory Guide

WOCCU released it’s COVID-19 Guide for Credit Unions focused on bringing together responses by the international standard setting bodies, prudential authorities, and other operational recommendations focused solely on the credit union industry.  Pertinent topics include capital standards, accounting issues, IT concerns, designation as Essential, and other regulatory challenges faced by credit unions navigating the pandemic. The Credit Union COVID-19 Guide to Regulator and Operational Responses can be viewed here

FSB Publishes Consultation Report on Cyber Incident Response and Recovery

The Financial Stability Board (FSB) provided their consultation report,  Effective Practices for Cyber Incident Response and Recovery, to the G20 Finance Ministers and Central Bank Governors for their April 15th virtual meeting. The report is a toolkit of 46 effective practices to address “cyber incident response and recovery activities”.

According to the FSB report, the effective practices consist of seven of the following components:

  1. Governance - frames how cyber incident and recovery is organised and managed.
  2. Preparation – to establish and maintain capabilities to respond to cyber incidents, and to restore critical functions, processes, activities, systems and data affected by cyber incidents to normal operations.
  3. Analysis – to ensure effective response and recovery activities, including forensic analysis, and to determine the severity, impact and root cause of the cyber incident to drive appropriate response and recovery activities.
  4. Mitigation – to prevent the aggravation of the situation and eradicates cyber threats in a timely manner to alleviate their impact on business operations and services.
  5. Restoration – to repair and restore systems or assets affected by a cyber incident to safely resume business-as-usual delivery of impacted services.
  6. Improvement – to establish processes to improve response and recovery capabilities through lessons learnt from past cyber incidents and from proactive tools, such as tabletop exercises, tests and drills.
  7. Coordination and communication – to coordinate with stakeholders to maintain good cyber situational awareness and enhances the cyber resilience of the ecosystem.

For more information on the FSB press release, visit their website here.

Financial Stability Board

Third FSI Brief Issued with Covid-19 Expected Loss Guidance

The Financial Stability Institute of the Bank for International Settlements Issued it's Third Briefing on expected loss provisioning during a pandemic.  The guidance can be summarized as follows:
  • In the wake of the Covid-19 pandemic, several prudential authorities and the Basel Committee on Banking Supervision (BCBS), introduced a series of measures to clarify how banks should consider various public and private debt relief programmes in their ECL estimates and in their calculation of regulatory capital. These measures are intended to incentivise banks to continue supporting the real economy, while reducing pressure on banks' ECL provisions, earnings and regulatory capital.
  • Supervisory initiatives that provide capital relief should be augmented by severe constraints on the payment of dividends, bonuses and share buybacks. These joint actions will simultaneously expand banks' lending capacity and enhance their ability to absorb losses.
  • Prudential authorities face difficult trade-offs as they confront the most severe economic crisis in modern times. Encouraging the use of flexibility in applicable accounting standards, while preserving market trust and transparency in the reported financial statements of banks, will be key in fostering both economic and financial stability.
A copy of the guidance can be viewed here.
Bank of International Settlements

FSI Issues Second Brief on Covid-19 Operational Challenges

The Financial Stability Institute of the Bank for International Settlements Issued its second brief on Covid-19 addressing operational challenges of financial institutions.  The guidance suggests that regulators consider the following items when considering operational resilience during the crisis: 
  • Critical/essential employees: identifying the critical functions and employees that support important business services, as well as ensuring employees' safety and that they can safely resume their duties (remotely, if necessary).
  • IT infrastructure: ensuring that IT infrastructure can support a sharp increase in usage over an extended period and taking steps to safeguard information security.
  • Third-party service providers: ensuring that external service providers and/or critical suppliers are taking adequate measures and are sufficiently prepared for a scenario in which there will be heavy reliance on their services.
  • Cyber resilience: remaining vigilant in order to identify and protect vulnerable systems, and detect, respond and recover from cyber attacks.
A complete copy of the brief can be viewed here.
Bank of International Settlements

FSB Delivers Covid-19 Regulatory Principles to G20

The Financial Stability Board delivered a report setting out the financial stability implications of COVID-19 and policy measures taken to address them to the G20 Finance Ministeres and Central Bank Governors. 

The report sets out five principles that underpin the official community’s rapid and coordinated response to support the real economy, maintain financial stability and minimize the risk of market fragmentation. Using these principles, authorities will:

  • Monitor and share information on a timely basis to assess and address financial stability risks from COVID-19;
  • Recognize and use the flexibility built into existing financial standards to support our response; seek opportunities to temporarily reduce operational burdens on firms and authorities;
  • Act consistently with international standards, and not roll back reforms or compromise the underlying objectives of existing international standards; and
  • Coordinate on the future timely unwinding of the temporary measures taken.
A copy of the report can be viewed here
Financial Stability Board

FSI Reflects on Reg Responses to Covid-19 Pandemic

The Financial Stability Institute (FSI) of the Bank of International Settlements issued its "Reflections on Regulatory Responses to the Covid-19 Pandemic.  Highlights of its findings include the following:
  • Regulatory policy responses should seek to support economic activity while preserving the financial system's soundness and ensuring transparency.
  • The recommendation for banks to make full use of capital and liquidity buffers should go hand in hand with restrictions on dividends and bonuses and clarity concerning the process for rebuilding them.
  • Flexibility in loan classification criteria for prudential and accounting purposes should be complemented with sufficient disclosure on the criteria banks use to assess creditworthiness.
  • The publication of detailed guidance on the application of expected loss provisioning rules, combined with sensible transitional arrangements, may constitute a balanced approach to mitigating the unintended effects of the new accounting standards.
A copy of the report can be viewed here.
Bank of International Settlements

IADI Observes Trends in DSPs, Deposit Insurance, and Financial Inclusion

The International Association of Deposit Insurance (IADI) published a draft research paper entitled, Deposit Insurance and Financial Inclusion: Current Trends in Insuring Digital Stored-Value Products, to “document the challenges emerging for jurisdictions which have decided on a deposit insurance treatment of DSPs”, as well as review the approach taken by deposit insurers to provide coverage for DSPs. Digital stored-value products (DSPs), which are financial products that allow consumers to store value in a digital format (i.e. digital instrument that carries a credit balance such as digital gift cards), are becoming increasingly available and have served as a means of financial inclusion. According to the paper, however, “Survey data show that deposit insurers are not actively involved in national arrangements to promote financial inclusion, and the decision to participate in these arrangements does not rely on them.”

The survey further reveals that deposit insurers are aware that member institutions are offering DSPs as products, but they are not considered deposits in more than three-quarters of 51 jurisdictions. A summary of DSP product observations include the following: Little over half of surveyed jurisdictions have at least one approach to DSPs (“In 2016, the Consultative Group to Assist the Poor (CGAP) published the document Deposit Insurance and Financial Inclusion, which identifies three approaches for covering DSPs that have emerged regarding digital financial inclusion and deposit insurance.”); 10 jurisdictions have opted out of DSP coverage; 12 jurisdictions cover DSPs; DSP institutions do not have a liquidation process in place in most jurisdictions; although not required, the none of the jurisdictions have created a separate fund to cover DSPs; and only six of the jurisdictions surveyed had specific requirements regarding “public awareness activities” related to insured or non-insured DSPs.

The paper concluded that as observed in 2013, the majority of jurisdictions do not have a formal acknowledgement of the role that deposit insurance plays in promoting financial inclusion, and while deposit insurers put in place rules that protect small depositors, they “do not incorporate specific obligations in terms of fostering financial inclusion”.


WOCCU Supported Measures Included in IADI Guidance Paper on Deposit Insurance Systems

The International Association of Deposit Insurers (IADI) released a Guidance Paper entitled, "Public Policy Objectives for Deposit Insurance Systems". The Guidance Paper gives an update on deposit insurance system public policy objectives in various jurisdictions as well as guidance for effective implementation of Principle 1 found in the IADI’s Core Principles for Effective Deposit Insurance Systems, which lays out essential public policy directives aimed to “protect depositors and contribute to financial stability”. The paper includes “results of a survey conducted by IADI of members’ experiences in selecting, implementing and evaluating their PPOs”.

In October, WOCCU responded to the IADIs consultation on public policy objectives for deposit insurance systems and emphasized its support for IADI’s PPOs to protect depositors and support financial stability; however, we encouraged IADI to include proportionality guidance so that national level regulators have the clearance to properly tailor regulations for cooperative institutions that are often less complex and less risky than their for-profit bank counterparts. With success, IADI addressed the importance of proportionality and stated, “By setting only the minimum requirement, these guidance points are supportive of the principle of proportionality. In any case, their application is voluntary and deposit insurers are free to put in place their own PPO development process and review framework based on jurisdiction, circumstance and legal framework.”

Additionally, WOCCU urged IADI to create effective regulation that provides supervision and monitoring of depository institutions for credit unions, as well as the provision of technical and financial assistance programs that will contribute to the protection of deposits for cooperative depositories and smaller, less capitalized institutions. WOCCU noted an absence of data for deposit insurance systems designed for credit unions. In the survey, IADI listed the countries that had PPOs in place as of March 31, 2016, and of those countries, Poland was the only country found to ensure financial assistance for credit unions, however, many countries address small, less sophisticated depositors.


Basel Committee Issues WOCCU urged Covid-19 Regulatory Relief

The Basel Committee on Banking Supervision released technical guidance setting out additional measures to alleviate the impact of Covid-19 on the global banking system.


  1. Expected credit loss accounting:  The Basel Committee notes that regarding the SICR assessment, relief measures to respond to the adverse economic impact of Covid-19 such as public guarantees or payment moratoriums, granted either by public authorities, or by banks on a voluntary basis, should not automatically result in exposures moving from a 12-month ECL to a lifetime ECL measurement. 
  2. Expected credit loss accounting transitional arrangements:  The Basel committee is allowing for the implementation of several transitional arrangements including applying exiting transitional arrangements even if those were not implemented initially.  Additionally, a 2 year period comprising the years 2020 and 2021, jurisdictions may allow banks to add-back up to 100% of the transitional adjustment amount to CET1. The “add-back” amount must then be phased-out on a straight line basis over the subsequent 3 years. 
  3. Capital treatment of non-performing loans, loans subject to moratorium, or past due:  The Basel Committee also provided treatment for a loan that might otherwise be considered troubled or in default  noting that jurisdictions can apply relief criterion for payment moratorium periods (public or granted by banks on a voluntary basis) relating to the Covid-19 outbreak such that they can be excluded by banks from the counting of days past due. Another criterion used is whether a bank considers that the borrower is unlikely to pay its credit obligations. The Committee has agreed that this assessment should be based on whether the borrower is unlikely be able to repay the rescheduled payments. 
  4. Non-centrally cleared derivatives: The Committee and the International Organization of Securities Commissions have agreed to defer the final two implementation phases of the framework for margin requirements for non-centrally cleared derivatives by one year.
WOCCU has urged this regulatory flexibility during the Covid-19 crisis.  A copy of the guidance can be viewed here.

BIS Addresses Public Concern Regarding Viral Transmission Through Cash

The Bank for International Settlements released a bulletin entitled, Covid-19, cash, and the future of payments, which addresses growing public concerns and questions about the possibility of transmitting viruses through cash. The Covid-19 pandemic has understandably catalyzed apprehension surrounding issues of hygiene, safety and transmission of the virus; and it logically follows that the public will have concerns about the physical use of cash. BIS’ bulletin establishes from the onset that its key takeaways are the following:

  • “The Covid-19 pandemic has fanned public concerns that the coronavirus could be transmitted by cash.
  • Scientific evidence suggests that the probability of transmission via banknotes is low when compared with other frequently-touched objects, such as credit card terminals or PIN pads.
  • To bolster trust in cash, central banks are actively communicating, urging continued acceptance of cash and, in some instances, sterilising or quarantining banknotes. Some encourage contactless payments.
  • Looking ahead, developments could speed up the shift toward digital payments. This could open a divide in access to payments instruments, which could negatively impact unbanked and older consumers. The pandemic may amplify calls to defend the role of cash – but also calls for central bank digital currencies.”

The BIS bulletin further reports the increase of media inquiries and internet searches regarding the safety of handling cash, with countries such as Australia, France, Singapore, Switzerland, Ireland, the United Kingdom, Canada, the United States, Jamaica and Kenya leading with the highest number of searches on this topic as of the publication of this bulletin on April 3, 2020. The bulletin concludes by placing emphasis on the value of central bank digital currencies (CBDCs), but with the caveat that they must be accessible to the underbanked with contact-free technical surfaces appropriate for the entire population. “The pandemic may hence put calls for CBDCs into sharper focus, highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats.”

WOCCU will continue to follow finance and financial regulatory issues surrounding the Covid-19 pandemic as they develop.

Bank of International Settlements

Basel Committee Delays Basel III Implementation to assist with COVID-19

The Basel Committee's oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), provided relief to help financial institutions respond to the impact of Covid-19 on the global banking system by delaying deadlines for the implementation of the Basel III framework.

The following changes were adopted by the GHOS to the implementation timeline of the outstanding Basel III standards:

  • The implementation date of the Basel III standards finalised in December 2017 has been deferred by one year to 1 January 2023. The accompanying transitional arrangements for the output floor has also been extended by one year to 1 January 2028.
  • The implementation date of the revised market risk framework finalised in January 2019 has been deferred by one year to 1 January 2023.
  • The implementation date of the revised Pillar 3 disclosure requirements finalised in December 2018 has been deferred by one year to 1 January 2023.
A copy of the press release can be viewed here.

Application of IFRS 9 Financial Instruments During Covid-19 Pandemic

The IFRS Foundation published a document entitled “IFRS 9 and Covid-19, Accounting for expected credit losses applying IFRS 9 Financial Instruments in the light of current uncertainty resulting from the covid-19 pandemic”, which was created to address IFRS 9 application questions during this pandemic. The document outlines applicable accounting standards related to expected credit losses (ECL) that may arise during the Covid-19 pandemic.

Of note, the document outlines that extensions of payment holidays to all borrowers in particular classes of financial instruments should not automatically result in all those instruments being considered to have suffered an SICR.  It also notes that it is likely difficult at this time to incorporate the specific effects of covid-19 and government support measures on a reasonable and supportable basis into expected loss calculations but urges post-model overlays or adjustments to be considered at appropriate times. 

The document suggests the use of “all reasonable and supportable information available” when determining ECL and lifetime losses. It further characterizes IFRS 9 as flexible, suggesting that during these times it may be necessary to adjust “approaches to forecasting and determining when lifetime losses should be recognized to reflect the current environment.” The Foundation also recommends deferring to guidance provided by prudential and securities regulators, including guidance issued by the European Banking Authority, the European Central Bank, the European Securities and Market Authority, the Prudential Regulation Authority and the Malaysian Accounting Standards Board.


EU Ministers of Finance Enabling Flexibility on COVID-19 Response

The European Union (EU) Ministers of Finance of the Member States of the EU jointly with the EU Commission have taken decisive action to allow appropriate reaction to the effects on the financial sector due to the COVID-19 crisis. 

The action issued today will ensure the needed flexibility to take all necessary measures for supporting the health and civil protection systems and to protect our economies, including through further discretionary stimulus and coordinated action, designed, as appropriate, to be timely, temporary and targeted, by Member States.

Ministers remain fully committed to the respect of the Stability and Growth Pact but the action today will allow the Commission and the Council to undertake the necessary policy coordination measures within the framework of the Stability and Growth Pact, while departing from the budgetary requirements that would normally apply, in order to tackle the economic consequences of the pandemic.  This is in anticipation of a severe economic downturn expected as a result of the crisis.

WOCCU continues to urge this flexibility in allowing our credit unions to appropriately respond to the crisis.  

The press release of today's action can be viewed here.

European Commission