PRA 2018 Letter to Credit Unions

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The PRA has sent its annual letter to version 5 Credit Unions. There are three versions of the letter. The version you receive depends on your size and rate of growth.

It is important that all Credit Unions review the letter as it sets out the regulator’s expectations. Some of the key points highlighted in the letter were:

  • Single Customer View– The PRA expects Credit Unions to undertake regular reviews and checks of SCV data. These reviews should focus on joint accounts, corporate accounts, inactive members and correct extraction of member details.
  • Notifying the Regulator– The PRA emphasied the requirement for Credit Unions to notify them 5 days before issuing any shares over the FSCS limit. The PRA also expect any Credit Unions in financial difficulty to let them know.
  • Operational Risk and Cyber Security– There has been a growing focus by the PRA on Credit Unions’ business resilience. A number of PRA visits in the last 12 months have focused on this topic. In this letter the PRA are stating that Credit Unions should be considering the robustness of their systems to cope with disruptions. In addition, Credit Unions should have systems to deal with cyber attacks. They also highlighted the dangers of internal fraud.
  • Governance– Following on from the recent FCA focus on governance, the PRA have also emphasised the importance of the Board in good governance. In their letter to larger and growing Credit Unions they also stated that Credit Unions must have robust risk management frameworks. Frameworks should be underpinned by risk appetite statements. If you require any help in setting up risk appetite statements then please contact us.
  • Capital Requirements– From the 30 September 2018 the capital requirement for large Credit Unions and those carrying out additional services increases . The requirement changes from 8% to 8% plus 2% capital buffer for certain Credit Unions. If these Credit Unions fall below this requirement then the PRA expect to be notified as soon as possible. They also expect in these circumstances for the Credit Union to provide them with a detailed capital improvement plan.
  • Strategic Planning- For growing Credit Unions the PRA have also stated the importance of stress testing of the business strategy. Stress testing and scenario analysis are useful tools for all Credit Unions.

For further details please see the PRA letter which is available from the PRA website.