Financial Stability Board Heeds WOCCU’s Call for Regulatory Flexibility

The Financial Stability Board (FSB) noted that the gradual withdrawal of relief measures granted during the COVID-19 crisis are best withdrawn gradually. This came as part of the FSB’s report to the G20 looking at financial policies in the wake of COVID-19 aimed at supporting equitable recovery and addressing the effects from scarring in the financial sector.

The report specifically notes the following:

Where jurisdictions have used the flexibility in international standards and are unwinding in a return to the pre-COVID application of international standards, they are generally not encountering any challenges. Some jurisdictions that have unwound their measures note the importance of phasing out these exceptional measures gradually and communicating the timing of such unwinding to financial markets.

FSB consulted on these measures where WOCCU noted in its comment letter that it is clear that national-level regulators should have the flexibility to have an orderly and gradual withdrawal of those COVID-19 related relief measures so as to not create unnecessary shocks to the balance sheets of credit unions. This is particularly prescient given the current global economy, increasing inflation, the effects from the conflict in Ukraine and many other localized events.

This guidance provides clear direction that national-level regulators can and should use flexibility in unwinding relief measures for credit unions.