New PRA rules permit credit union investments in ancillary service entities

The Prudential Regulation Authority (PRA) has amended its Rulebook to allow credit unions greater flexibility in their investment strategies.

Specifically, a new clause 6.3(6) has been introduced into the Credit Unions Part, permitting investments in entities that provide ancillary services.

These services must be exclusively for the benefit of credit unions and their members, as well as other mutual societies with a Part 4A permission and their members.

Crucially, such investments must directly benefit the investing credit union and its members, and the ancillary services provided must not constitute part of the credit union's regulated activities.

This expansion moves beyond previous restrictions, which primarily limited investments to fixed-interest sterling-denominated securities guaranteed by the UK government with a maturity of up to 12 months.

The change aims to foster a more integrated and supportive ecosystem for the mutual sector by enabling shared service provision.

This instrument, titled 'PRA Rulebook: Non-CRR Firms: Credit Unions Instrument 2026', was made by the PRA under its powers in the Financial Services and Markets Act 2000. It represents a formal update to the regulatory framework governing non-CRR firms, specifically credit unions.

The new rules come into force on 20 February 2026. This regulatory adjustment provides a clear legal basis for credit unions to engage in investments that support their operational efficiency and member services through collaborative structures.

The instrument clarifies the scope of permissible investments, ensuring such activities remain within prudential boundaries while facilitating beneficial ancillary services for the mutual sector.