Featured Product

    PRA Proposes Changes to Regulatory Regime for Credit Unions

    September 21, 2022

    The Prudential Regulation Authority (PRA) proposed amendments to the Credit Union Part of the PRA Rulebook and a new supervisory statement on "Supervising credit unions," which will supersede the existing supervisory statement (SS2/16) on "The prudential regulation of credit unions." The consultation ends on December 21, 2022 and is relevant for all credit unions in the UK.

    The proposed amendments relate to amending and strengthening the regulatory regime to address risks posed by larger, more complex credit unions. PRA considers that setting higher expectations for credit unions that pose greater risk (due to their size or activities undertaken) to the primary safety and soundness objective of PRA would help ensure higher standards, while retaining a simple PRA Rulebook in recognition of the diversity of the sector.

    PRA proposed changes to the Credit Union Part of the PRA Rulebook to

    • include lending to corporate members and the provision of consumer credit within the definition of "additional activities," within the scope of existing additional systems and control requirements.
    • extend the range of products available to credit unions to invest in and to include a wider range of products, where a credit union meets certain requirements, including funds held with other credit unions.
    • amend the PRA rules on lending limits, including confirmation that the current limits on credit union unsecured lending will also apply to the provision of hire purchase agreements and conditional sale agreements, which will be permitted products for Great Britain credit unions under the FS Bill’s proposed amendments to the Credit Unions Act 1979.

    The proposal on the supervisory statement is intended to

    • set additional expectations for credit unions with more than GBP 10 million in assets with respect to liquidity risk management and contingency funding.
    • provide more clarity on PRA expectations regarding the amount and quality of capital held by a credit union.
    • set out additional detail on PRA expectations of credit unions that offer mortgages, including consideration of relevant sections of SS20/15 ‘Supervising building societies’ treasury and lending activities’.
    • set an expectation that the largest credit unions (with more than GBP 100 million in assets) consider the steps and resources needed to wind down their business in an orderly manner and are able to evidence that they have evaluated the risks and how best to mitigate them.
    • set expectations for credit unions that provide credit cards.
    • set expectations for credit unions that provide loans to corporate members, including minimum expectations for credit unions undertaking secured lending to corporate members.
    • set expectations around risk management, including operational risk management for credit unions with more than GBP 10 million in assets, with good practice guidance for all credit unions.
    • clarify existing expectations for all credit unions on governance, business plans, and forecasts.
    • set expectations regarding a credit union’s internal audit function, including indicators that it may not be fulfilling its role.

    With the introduction of the aforementioned changes, PRA highlights that credit unions should carefully consider the risk-return trade-off and ensure that investment decisions reflect the risk appetite of the credit union. There may be an incremental cost to credit unions in developing expertise in investments and updating policies and procedures to reflect the new requirements and expectations. With regard to implementation, PRA clarifies that the proposed amendments are based on the version of the Financial Services Bill introduced into Parliament on July 20, 2022. Going forward, PRA will provide an update if there are any material changes to the Financial Services Bill that affect the proposals in this consultation paper. The proposed changes would take effect on publication of the final policy.


    Related Links


    Keywords: Europe, UK, Banking, Credit Unions, Reporting, PRA Rulebook, Supervisory Statement, Lending, Credit Risk, Corporate Lending, Regulatory Framework, CP7 22, PRA

    Featured Experts
    Related Articles

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8596