The World Council of Credit Unions took issue with some portions of the Financial Stability Board’s recent consultative document on best practices for bail-in execution.
The Financial Stability Board is an international body that monitors the global financial system and makes recommendations about how the system’s players should operate. The board can’t pass any laws to govern financial institutions, but its best-practices and frameworks are often picked up by jurisdictions and national authorities looking to implement financial laws and regulations, according to the FSB’s website.
FSB wrote its consultative document titled “Principles on Bail-in Execution” on Nov. 30, 2017, to help guide financial institutions in best practices for bail-ins. Bail-ins are essentially the opposite of bail-outs, according to Investopedia. They occur when creditors and depositors take a loss on their holdings to rescue a financial institution on the brink of failure. Bail-ins are less common then bail-outs — and neither are desirable positions for any financial institution to be in.
Overall, WOCCU does support the FSB’s views on the proposal as a way to improve the stability of banks that are considered too big to fail, according to an analysis by the Credit Union National Association. But the international credit union agency asked the FSB to limit its proposed bail-in requirements only to systematically important banks — not to credit unions who could be hurt by the regulations.
To read WOCCU’s full letter, click here.