The PRA have written to Category 4 and 5 Credit Unions with the findings of their assessment of the sector. There were three different letters for Category 5 Credit Unions depending on the Credit Union’s peer group (less than £15m assets, less than £15m assets and high growth and those over £15, assets).
Category 5 Credit Unions with assets<£15m
The letter to Cateogry 5 Credit Unions with assets less than £15 million focuses on three main points:
- Governance– The PRA have reminded Credit unions of their requirements to:
- monitor and mitigate risks in line with section 10 of the PRA Credit Union rulebook.
- measure and monitor compliance with key ratios
- have a financial risk management policy if they carry out additional services,
- Succession Planning– The PRA have emphasised the importance of having succession planning in place. Succession plans should also have a specific focus on the Board.
- Single Customer View– The PRA noted improvements with Category 5 Credit Unions compliance with the Single Customer View (SCV) requirements. They have, however, expressed some areas of concern. Their main issue is if Credit Union computer systems are not kept up to date. With the SCV Â rules changing in 2016 there is a risk if programmes are not kept up to date then reports from the system will not meet the new requirements.
High Growth Category 5 Credit Unions
For those which are high growth and less than £15 million assets they also focused on the need for Credit Unions to have robust risk appetite statements in place as well as directors and internal audit function with the necessary skills.
Large Category 5 Credit Unions
The letter to Credit Unions with assets between £15m-£40m  covered the points above as well as:
- Importance of having clear terms of reference between internal audit and supervisory committee.
- that Credit Unions  should have detailed policies and procedures, specific to the Credit Union, in place.
Category 4 Credit Unions
The PRA have also written to Category 4 Credit Unions. Category 4 Credit Unions will now be subject  in a three year period to a:
- Governance  review ((also known as a ‘Board Effectiveness Review’, or BER),
- Credit risk review, and an
- Operational risk and resilience review (new review being introduced).
The letter to Category 4 Credit Unions provides details of their findings from governance and credit risk reviews in the last year and highlights what they will cover in their operational risk and resilience review.
All three letters to Category 5 Credit Unions and the letter to Category 4 Credit Unions can be found on the PRA website by clicking here.