News release
Credit unions could benefit from several ideas put forward today by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) aimed at helping the sector grow, innovate and meet the changing needs of their members.
Credit unions, which are member-owned and typically focus on savings and personal loans in a specific occupation, community or area, have over two million members in the UK.
Building on the joint PRA and FCA 2025 Mutuals Landscape report, this discussion paper examines whether the regulatory framework remains proportionate as the sector evolves, and explores how credit unions can expand access to financial services and improve outcomes for the members they serve.
Options the regulators are seeking views on include:
- Removing some requirements on internal audit and regulatory documents for smaller credit unions, cutting red tape without compromising stability;
- Creating a risk-based framework for larger, more complex credit unions, giving them more flexible capital requirements;
- Applying relevant rules for smaller deposit takers, such as the standardised approach for risk weighted assets, to replace the current simple leverage ratio they report on;
- Applying a simplified version of the Basel framework, streamlining capital add-ons for large credit unions with specific exposures, and applying a simple capital buffer for absorbing shocks in stress periods;
- What barriers there are to credit unions offering new products and services, including how shared-service organisations and third-party organisations can best support investment, technology and operational capability;
- Giving credit unions additional guidance on FCA expectations around working with third-parties to provide important services;
- Whether changes to FCA fees could reduce regulatory costs and support sustainable growth;
- Providing credit unions a path to convert into building societies, bringing the benefits of a framework more tailored to specific lending and a wider range of funding tools;
- Reviewing the current framework for solvent exit, providing further flexibility to transfer business or restructure in an orderly manner.
Shoib Khan, Director of UK Deposit Takers at the Prudential Regulation Authority, said:
“Credit unions are a vital part of our financial services sector, and we have scope to make their regime even more proportionate and growth-friendly. We want to have an open, transparent dialogue with firms, and I look forward to seeing their honest feedback.”
Sheree Howard, Executive Director of Authorisations at the Financial Conduct Authority, said:
“Credit unions provide valuable support to millions of members, including many who may otherwise struggle to access affordable financial services. As the sector evolves, it is important that the regulatory framework keeps pace, enabling credit unions to innovate, grow and meet the changing needs of their members while continuing to deliver good outcomes for consumers. We want to hear directly from the sector about what is working well, where barriers remain, and how the regulatory framework may need to adapt to support a strong, sustainable future for credit unions.”
The regulators are encouraging firms to offer their feedback on the options presented and whether there are other options which have not been included. The possibilities at this stage give more options to firms with very different business models, growth trajectories and risk profiles.
Notes to editors
- Read the full Discussion Paper.
- Today’s announcement builds on a joint report released by the regulators on the wider mutuals sector, which outlined measures to support the sector’s growth and resilience.
- Read the full Small Domestic Deposit Takers rules.