Credit union review weighs simpler rules and tougher capital

DP2/26 explores reduced documentation, audit and reporting burdens for simple credit unions below £10 million in assets, while retaining core safeguards.

One package pairs this relief with a common 5 percent leverage ratio, replacing 3 percent for firms below £5 million.

Current requirements rise to 8 percent on assets above £10 million and 10 percent above £50 million.

For the largest firms, an option raises capital from 10 to 15 percent on assets above £300 million.

Alternatives include tailored risk-based capital, parts of the Small Domestic Deposit Taker regime or conversion to building society status requiring legislative change.

Possible deposit-taker safeguards include a buffer of at least 3.5 percent of risk-weighted assets and a 50 percent retail deposit ratio.

Around 340 UK credit unions serve more than two million members and hold £4.9 billion in assets.

The review covers shared-service organisations, unused product permissions, social housing investments and potential FCA fee reductions.

It examines aggregator-driven growth, outsourcing and mortgage risks, including possible permission to hedge with derivatives.

Solvent-exit planning expectations currently apply above £100 million in assets.

Transfers are restricted to credit unions with matching or overlapping common bonds; broader loan sales may require legislation.