PRA Annual Review of the Sector 2019

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The PRA have sent their annual review of the sector letters out to Credit Unions. This year there are only two versions of the letter- one for large category 5 Credit Unions and one for smaller Credit Unions. Some of the key topics covered include:

Operational Resilience– The current hot topic with both regulators is again a key topic in the letter.  In line with their joint discussion paper they continue to stress the importance of a service based approach. They also remind Credit Unions of their continued responsibilities for services which are outsourced (see section 14 of PRA Credit Union rulebook for more details). The importance of succession planning was also highlighted. For more details on operational resilience see our operational resilience webpage.

Single Customer View– The regulator sets out 9 questions for Credit Unions to consider with regards to SCV. This was only in the letter to smaller Credit Unions but all Credit Unions should consider these points.

Fraud– The PRA noted that there has been an increase in the level of Credit Union frauds in the last year. The importance of segregation of duties and strong internal audit were stressed.

Provisioning– Issues in provisioning was also covered in the letter. This includes areas such as where share to loan payments continue to be taken after the member has stopped paying into the Credit Union. Many systems continue to show the loan as not in arrears despite the member having ceased to pay in and the exposure to the Credit Union not reducing. Other problems they noted were provisions being removed from rescheduled loans where the member had not kept to the new repayments for at least 6 months and loans rescheduled over the terms permitted in CUP.

Liquidity– The importance of monitoring liquidity was stressed with some Credit Unions have breached the liquidity ratio in the past year.

Both versions of the letter can be found on the PRA website.