On 26 July 2023, the Prudential Regulation Authority (PRA) published Policy Statement PS11/23 – Credit Unions: Changes to the regulatory regime (PS11/23).
PS11/23 provides feedback on responses to the PRA’s Consultation Paper on the same topic (CP7/22) and also contains its final policy.
In CP7/22, the PRA proposed to:
- Provide more flexibility for credit unions when investing their surplus funds so long as they meet specified requirements and consider applicable guidance.
- Set higher requirements and expectations for credit unions that pose greater risk to the PRA’s safety and soundness objective (either due to their size, or activities undertaken).
- Clarify the PRA’s existing expectations of credit unions in certain areas.
Respondents generally welcomed the PRA’s proposals, while some respondents raised concerns and/or requested clarification on a number of areas.
Changes to draft policy
The PRA does not consider the rule changes from the draft CP to be significant. The most material changes to the draft policy as set out in CP7/22 include:
In the Credit Unions Part of the PRA Rulebook:
- Changes to the categories of permissible credit union investments, including clarification of the application of the counterparty concentration limits.
In Supervisory Statement SS2/23:
- Changes in presentation that make the SS easier to read.
- Changes to the investment counterparty concentration limits to provide that they would not apply to certain investments.
- Changes to the PRA’s expectations regarding the quality of credit unions’ capital base.
- Clarifications of the PRA’s expectations with respect to credit unions that provide mortgages.
- Changes to the PRA’s expectations for large credit unions to carry out exit strategy planning.
The new rules and SS will take effect on Tuesday 29 August 2023.