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Looking up from the corner of Bay and Adelaide streets in Toronto’s financial district.Gloria Nieto/The Globe and Mail

Credit unions appear to have won relief from regulations that would have banned them from using terms such as "banking" to describe their business.

The federal budget released on Tuesday proposed rewriting the Bank Act to give provincially regulated financial institutions like credit unions "flexibility to use generic bank terms," overriding new rules proposed by Canada's banking regulator.

In late June last year, the Office of the Superintendent of Financial Institutions (OSFI) promised to get tough on firms that aren't federally regulated as banks, such as credit unions and financial technology startups, for using terms such as "bank," "banker" or "banking." The use of such terms is restricted under the Bank Act, and OSFI said it wanted "to provide clarity" as the financial sector evolves.

Yet those terms have been treated as commonplace language for years by non-bank financial institutions, which take deposits, make loans and transfer money, but seek to set themselves apart from big banks. Credit unions cried foul at the new rules, and the Canadian Credit Union Association (CCUA) warned it would cost members up to $80-million over two years to scrub the terms from signage, websites and documents. At the time, CCUA chief executive Martha Durdin called OSFI's crackdown "a clash of regulation versus common sense."

In July, Finance Minister Bill Morneau agreed to revisit the issue, and the federal government now seems poised to roll back OSFI's effort at tighter enforcement.

"We are obviously pleased with Minister Morneau's announcement," Ms. Durdin said in a statement.

Details of proposed changes are not yet clear, but "once the Bank Act is revised OSFI will communicate its compliance expectations," an OSFI spokesperson said.

The proposed flexibility to use banking terminology extends only to "prudentially regulated deposit-taking institutions," which could mean unregulated financial technology, or "fintech," firms will still be restricted from using the words to describe their activities.

Beata Caranci, chief economist at TD Bank says the 2017 federal budget did not have large initiatives and is a very safe budget in terms of spending