Regulation of CUSOs
The PRA announced at ABCUL’s Annual Conference, on 15 March 2025, that they would be looking to clarify the regulatory treatment on Credit Union Service Organisations (CUSOs). A small number of Credit Unions already make use of CUSOs, but their use is growing. In other countries, such as America and Canada, they play a much greater role carrying out activities Credit Unions cannot provide and offering economies of scale. They do pose risks and from the PRA point of view they are currently unregulated.
The PRA therefore plan to:
- Send out a sector letter setting out PRA views and their high-level expectations.
- Carry out consultation on rule changes and expectations
- Write to those Credit Unions currently using CUSOs individually
We plan to issue further blogs when more information is available.
Other Points
During the conference, Helen Ainsworth of the PRA also raised a number of other important points:
- They have seen a large decrease in Credit Union capital in recent months. This doesn’t appear to be linked to arrears which has remained fairly consistent in the sector. They believe this is probably due to rising costs.
- Helen Ainsworth emphasised the role SS2/23 plays in the PRA’s approach to regulation. She also stressed that risk management is separate from compliance.
- She also warned Credit Unions about growing beyond their capabilities. They have seen a number of examples where the quality of governance, risk management and controls have not kept pace with the Credit Union’s growth.
- Last year the PRA sent a letter to Credit Unions on governance. There will be further feedback provided to the sector on the results of that letter.