CP7/22 – Credit Unions: Changes to the Regulatory Regime

Consultation Paper 7/22
Published on 21 September 2022


This Consultation Paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposed amendments to the regulatory regime that applies to credit unions. 

The proposals would result in:

  • amendments to the Credit Union Part of the PRA Rulebook (Appendix 1); a new Supervisory Statement (SS) ‘Supervising credit unions’ which the PRA proposes would supersede SS2/16 ‘The prudential regulation of credit unions’ (Appendix 2), which will be deleted.

The CP is relevant to all UK credit unions.

The purpose of the proposals is 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 of credit unions that pose greater risk to the PRA’s safety and soundness objective (either due to their size, or activities undertaken); and
  • clarify the PRA’s existing expectations in key areas.

The PRA has considered the interaction between its primary and secondary objectives and the have regards principles, including in relation to proportionality, recognising the differences in the nature of and objectives of, businesses carried on by different persons, the principle of transparency, and the use of the PRA’s resources in the most efficient and economical way.

The proposals in this CP broadly relate to amending and strengthening the regulatory regime in order to address risks posed by larger, more complex credit unions. The PRA considers that setting higher expectations of credit unions that pose greater risk (due to their size or activities undertaken) to the PRA’s primary safety and soundness objective would help ensure higher standards among those credit unions, while at the same time retaining a simple PRA Rulebook in recognition of the diversity of the sector.

The PRA considers that its proposed changes may result in affected credit unions incurring incremental costs, but these costs are considered by the PRA to be proportionate, given the additional risks to safety and soundness posed by these credit unions. The PRA’s proposal to extend the range of permitted investments provides benefits in terms of opportunities for diversification of investment portfolios and possibly increased returns. However, the PRA considers that credit unions should carefully consider the risk return trade-off, and ensure investment decisions reflect the risk appetite of the credit union. There may be an incremental cost to credit unions in developing expertise in investments and updating policies and procedures to reflect the new requirements and expectations. This cost could be avoided by credit unions not availing themselves of the opportunity to invest in the wider range of permitted investments. For the majority of credit unions, the proposed changes are limited to further details of the PRA’s expectations on the existing regulatory framework, which should provide additional clarity of the PRA’s expectations and reduce uncertainty. These credit unions are therefore not expected to incur material additional costs as a result of the proposals.


The FS Bill was introduced into Parliament on Wednesday 20 July 2022. The proposals set out in this CP are based on the version of the FS Bill that was introduced into Parliament. The PRA will provide an update if there are any material changes to the FS Bill that affect the proposals in this CP.

The proposed changes would take effect upon publication of the final policy.

Responses and next steps

This consultation closes on Wednesday 21 December 2022. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP7_22@bankofengland.co.uk. Please indicate in your response if you believe any of the proposals in this consultation paper are likely to impact persons who share protected characteristics under the Equality Act 2010, and if so, please explain which groups and what the impact on such groups might be.  

Consultation Paper 7/22


Consultation end date: Wednesday 21 December 2022