Regulators to reappraise rules for credit unions

Regulators to reappraise rules for credit unions

The Prudential Regulation Authority and the FCA have proposed changes to their rules regarding credit unions.

A 73-page consultation published by the two regulators, Reform of the Legacy Credit Unions Sourcebook, outlined a variety of proposed changes, made separately by each regulator, to the rules.

Under one PRA proposal forming part of the consultation, which closes on 30 September, credit unions would only be able to enter into mortgages subject to a regulated mortgage contract, as defined in the current PRA glossary.

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Credit unions would only be allowed to invest in capital-protected products, with the intention of holding these to maturity, under another PRA proposal.

The PRA deals with matters affecting the financial safety and soundness of credit unions, while the FCA focuses on how credit unions conduct business.

According to the Association of British Credit Unions, as of 31 December 2014 there were approximately 362 credit unions across England, Scotland and Wales, employing more than 1,500 staff.

According to the figures, the sector was used by 1,197,293 people and had total assets of £1.26bn.

In 2013 the Archbishop of Canterbury Justin Welby put credit unions in the spotlight by claiming he would back them as a competitor to payday lenders such as Wonga.

Since then, the Church of England has been involved in measures to promote credit unions.

The archbishop’s task group on responsible credit and savings, set up in January 2015 and chaired by former FSA chief executive Sir Hector Sants, has developed initiatives that are already being piloted, such as LifeSavers, a national savings club programme for primary schools and the training of ‘church credit champions’ to increase the awareness and membership of credit unions.

Credit union sector as of 31 December 2014
Approximately 362 credit unions across England, Scotland and Wales
Total assets of £1.26bn
Total loans of £718m
Total deposits of £1.07bn
22 credit unions across the UK offering current accounts

Source: Association of British Credit Unions

Industry view

A spokesman for the Association of British Credit Unions Ltd, said: “It’s important the regulatory regime remains fair and proportionate for credit unions of all sizes and, in particular, that the reforms don’t curtail credit unions’ capacity to compete or prove barriers to their growth.”

Adviser view

Simon Mansell, director of Worcester-based Temple Bar, said: “Credit unions usually lack resources, so financial stability is an area where regulators need to be careful in their attempts to encourage them while not giving them the regulatory kiss of death.”