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Major changes agreed to new regulation


01 Feb 16

ABCUL has welcomed the significant changes that have been agreed to proposed new credit union regulation.

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have taken on board the Association's representations on the proposed reforms to the CREDS credit union sourcebook, and have agreed significant changes to measures member credit unions were concerned could be detrimental to the movement's growth and sustainability.

Among the major improvements ABCUL has secured are:

  • Agreement that credit unions will still be allowed to accept deposits greater than the Financial Services Compensation Scheme limit, provided the PRA are notified in advance.
  • Redefining the new 10% capital to assets ratio for larger credit unions and those engaged in “additional activities” as a minimum 8% plus a 2% buffer which can be used in periods of stress.
  • Raising the membership threshold which triggers the new 10% capital to assets ratio from 10,000 to 15,000 members.
  • Allowing credit unions to set their own ratio targets and monitor performance against these, rather than requiring compliance with target levels.
  • Removing the proposed cap of £500,000 on credit union loans and allowing credit unions with the capacity to do so to make large loans in accordance with existing rules.

The full list of changes from the original proposals ensures that credit union regulation will remain proportionate and appropriate to the sector.

In fact, the positive elements of the original proposals combined with these new improvements mean the British credit union movement will now enjoy a regulatory regime that is even more favourable to the sector's sustainable growth and development than the previous one.

ABCUL Policy Manager Matt Bland said: "With support and input from members of all sizes, the Association made detailed, evidenced, constructive representations to the PRA urging them to reconsider some of the initial proposals which could have seriously limited the movement's potential for sustainable growth.

"We are delighted that the regulators have engaged with the movement in such a positive manner and have taken on board our suggestions. These revised proposals will much better achieve the objective of a regulatory framework appropriate to the modern credit union sector."

ABCUL Chief Executive Mark Lyonette said: "Our ability to secure improvements from the original proposed reforms demonstrates the importance of credit unions working together in a strong trade association to present a credible voice to regulators.

"ABCUL is its member credit unions; a co-operative of co-operatives pooling their resources to create the professional trade body that can speak with authority and influence national policy. Our achievement in securing these changes is a great tribute to the power of co-operation."

The new regulatory regime comes into force from 3 February 2016, and a full briefing on the changes and their implications for credit unions is available to ABCUL members here (member login and password required).

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