UK regulators' joint discussion paper exploring credit union reforms to support sustainable growth

The UK Prudential Regulation Authority (PRA) and the UK Financial Conduct Authority (FCA) have published a joint discussion paper (DP2/26) considering whether the existing regulatory and legislative framework for credit unions remains fit for purpose as the sector evolves. The review in the paper considers whether the current framework supports six broad outcomes: proportionate regulation; consumer confidence and protection; competition and innovation; long-term sustainability; operational resilience and risk management; and orderly market exit.

In particular, matters the regulators seek views on include:

• removing some requirements on internal audit and regulatory documents for smaller credit unions
• the appropriate capital requirements framework
• barriers to credit unions offering new products and services
• whether changes to FCA fees could reduce regulatory costs and support sustainable growth
• providing credit unions with a path to convert into building societies
• reviewing the current framework for solvent exit, providing further flexibility to transfer business or restructure in an orderly manner.

The responses are intended to inform the regulators' future review of the credit union framework. The deadline for comments is 5 March 2027. Separately, the PRA published a consultation paper (CP15/26) proposing amendments to its rules and supervisory expectations to accommodate planned legislative reforms to modernise the framework for Northern Ireland credit unions (NICUs).

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