Credit union options pair lighter rules with risk-based capital
UK credit unions serving over two million members face potential changes to capital rules, fees and business models. The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) are seeking views on options to support growth and innovation.
Capital rules follow business complexity
The discussion paper explores removing some internal audit and regulatory document requirements for smaller credit unions without compromising stability.
Larger, more complex firms would gain a risk-based framework with more flexible capital requirements.
Options include replacing the current simple leverage ratio with relevant smaller deposit-taker rules, including the standardised approach to risk-weighted assets.
A simplified Basel framework would streamline capital add-ons for large credit unions with specific exposures and introduce a simple buffer to absorb stress-period shocks.
Building on the joint 2025 Mutuals Landscape report, the paper asks whether regulation remains proportionate as the sector evolves.
New products and conversion routes
Other options cover barriers to new products, shared-service and third-party support for investment, technology and operations, plus guidance on FCA expectations for important outsourced services.
Regulators also seek views on lower FCA fees, conversion into building societies with lending-specific rules and broader funding tools, and more flexible solvent exits through transfers or restructuring.
Credit unions are member-owned savings and personal-loan providers serving occupations, communities or areas; firms may propose additional options.
Options rather than settled rules
These are discussion options, not adopted requirements.
PRA Director Shoib Khan seeks feedback on a more proportionate, growth-friendly regime.
FCA Executive Director Sheree Howard stresses innovation and member outcomes, while the options accommodate differing business models and risk profiles.
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