PRA Reviews Capital Regime for Credit Unions in UK
PRA published the policy statement PS6/20, which contains the final policy on amendments to the Credit Union Part of the PRA Rulebook (Appendix 1) and the updated supervisory statement SS2/16 on the prudential regulation of credit unions (Appendix 2). PS6/20 also provides feedback to the responses received to consultation paper CP28/19 on the review of the capital regime for credit unions. PS6/20 is relevant to all credit unions and the changes in PS6/20 take effect from March 16, 2020.
The updated supervisory statement SS2/16 sets out the PRA expectations of credit unions with regards to the Credit Union rules. It applies to all UK credit unions as defined in the Credit Union Rulebook Part. Areas covered include capital, liquidity, additional activities, maximum deposit levels, fixed-rate shares and deposits, lending, investments, and governance and organization. This statement is intended to be read together with the rules contained in the Credit Union Rulebook Part. The statement seeks to advance the statutory objective of PRA to promote the safety and soundness of the firms it regulates by setting out the expectations on how credit unions should comply with core elements of the regulatory framework contained in the Credit Union Rulebook Part. As per the regime, a credit union will be expected to maintain the relevant minimum requirement specified by Credit Union 8.5 at all times.
SS2/16 was amended following the publication of PS6/20 on the review of capital regime for credit unions to update the capital requirements for credit unions. The changes include deletion of paragraphs 2.3-2.5, addition of new paragraph 2.6, amendment to paragraph 4.1, addition of the new paragraph 4.2A, amendments to paragraphs 4.3 and 4.4, and amendments to Tables 1 and 2. SS2/16 was also updated to simplify the formatting and language, where helpful, to aid readability and to update links in footnotes.
The policy set out in PS6/20 has been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time the UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with the EU take effect. PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018 (EUWA) at the end of the transition period.
Related Links
Effective Date: March 16, 2020
Keywords: Europe, UK, Banking, PRA Rulebook, Credit Union, SS 12/16, Regulatory Capital, Proportionality, CP 28/19, PS 6/20, PRA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Trevor Howes
IFRS 17 technical advisor; AXIS actuarial modeling system expert; extensive experience in life insurance and life reinsurance, with focus on modeling, valuation, and financial reporting
Previous Article
OSFI Lowers Domestic Stability Buffer for Banks to 1%Related Articles
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
EBA Updates Lists of Entities for Use in Capital Calculations under SA
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS Amends Notice on Related Party Transactions of Banks
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA Consults on Standards Related to FRTB-SA
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA Proposes Rules Related to IRB Approach for Credit Risk
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).