The Prudential Regulation Authority (PRA) is responsible for the prudential regulation and supervision of credit unions. It has a general objective to promote the safety and soundness of the firms it regulates and a secondary objective to facilitate effective competition.
The PRA is an independent non-governmental body and, although the Treasury sets the legal framework for all regulation, it has strictly limited powers in relation to the regulators. However, last year the Government asked the PRA to use the evidence gathered from the Government’s Call for Evidence on Credit Unions to inform their 2015 review of the Credit Union Sourcebook (CREDS).
The PRA have confirmed that they have taken into account the feedback received by HM Treasury in response to the Call for Evidence when formulating suggested reforms to CREDS.
The PRA’s reforms seek to establish a more risk-based and flexible framework for credit union regulation, which imposes higher expectations for more sophisticated activity. The PRA recognises the unique structure and important role credit unions play in their local communities and is proposing to reform the rules to better reflect their evolving but distinctive business model.
The PRA are looking to adjust the regulation so that rules around investments, capital levels and reporting requirements will be determined by looking at the risk profile and business model of the credit union. Existing rigid restrictions will be removed, giving credit union boards more freedom to decide how their businesses are to be run.