The Prudential Regulation Authority (PRA) has finalised the amendments to its framework for credit unions wishing to invest in credit union service organisations (cusos).
Cusos are entities jointly owned by more than one credit union to provide shared functions such as IT and loan processing, allowing for economies of scale and eliminating duplication of costs.
Following a consultation last June, the regulator largely finalised its policy, including amending the PRA Rulebook to clarify that credit unions may invest in cusos that serve other UK-regulated mutuals.
It has also updated its Supervisory Statement (SS)2/23, with a new chapter setting out expectations for credit unions that invest in or use cusos.
The PRA has also made targeted changes in response to feedback including clarifying that a credit union may partner with non-credit unions to own a cuso.
And it has brought in safeguards to ensure the risks associated with the expansion of cuso scope in this way are managed.
It is also Increasing the maximum investment that a credit union can make in a cuso from 5% to 7.5% of its capital, together with clarifications on the practical application of the limit.
The rule changes took effect on 20 February, with the new supervisory expectations in the new chapter of SS2/23 applying from 20 August, allowing credit unions six months to implement them.
In its policy statement, the PRA said: “Expanding the scope of credit union investments in cusos is expected to support credit union growth and innovation, while improving access to high-quality shared services and delivering cost efficiencies.
“By reducing barriers to establishing cusos and allowing partnerships with other mutuals or non-credit unions, these changes create opportunities for new revenue streams and greater collaboration.
“Raising the investment cap from 5% to 7.5% further enables credit unions to scale their involvement, fostering economies of scale and better service provision. Safeguards set out in SS2/23, such as legal and operational separation requirements, are designed to manage prudential risks effectively.”
