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The PRA has written to all ‘category 5’ Credit Unions following their 2014 Annual Assessment of these Credit Unions. There were two different versions of the letter. The version Credit Unions received depended on whether the PRA viewed the Credit Union as likely to fail the 3% capital to asset target when it comes into force.

For Credit Unions meeting the requirements, the regulator’s letter highlighted the fact a Credit Union’s financial positions can change quickly. They therefore highlighted the importance of governance, strategic planning and business plans. The PRA also focused on the risk that current accounts or transactional accounting services pose.

The second version of the letter was sent to Credit Unions that the regulator believed are at risk of failing the new capital to asset requirements. Their letter asks these Credit Unions to prepare themselves for a winding up by having a working Single Customer View (SCV). They were also asked to consider the services they offer such as transactional accounting services which may cause issues in a merger or winding up. The PRA have also stated that they will not approve any merger/transfer of engagements where they believe this will have an adverse effect on another Credit Union.