WOCCU urged the Financial Stability Board to provide maximum flexibility to national level regulators in the withdrawal of relief measures implemented during the COVID-19 pandemic. The comments cam as part of the Financial Stability Board’s (FSB) consultative report on the Exit strategies to support equitable recovery and address effects from COVID-19 scarring in the financial sector.
WOCCU noted their concern the impact and potential increase in institutional stress that a rapid withdrawal of relief will cause. Due to the consequences of the pandemic, characterized by high levels of unemployment, the deterioration of specific sectors of the economy and the loss of individual purchasing power, and the impact the war in Ukraine, inflation, rising gas prices, and other increasing costs, many financial entities may experience solvency, liquidity, and other problems in the short and medium term. Depending on the reality of each country and individual credit unions, a generalized deterioration in the quality of financial assets could generate a systemic contagion effect in the financial system of a country, or within the credit union sector.
WOCCU has long urged national-level regulators to work closely with credit unions on providing reasonable and attainable plans to restore norms that existed prior to the pandemic. WOCCU will continue to work with international standard setters and national level regulators as the withdrawal of COVID-19 related relief measures are withdrawn.
A copy of the letter can be viewed here.