LONDON (6/25/14)--The Bank of England’s Prudential Regulation Authority (PRA) has published regulatory reform proposals that would ease outdated restrictions against credit unions and help promote them as a viable alternative to payday lenders and a banking sector beset by scandal and crisis (Reuters June 24).
PRA is the central bank’s supervisor of lenders and insurers. It proposed removing rigid restrictions to give boards of credit unions more freedom in operating them. The new rules would reflect the broader range of financial services offered today by credit unions and give consumers more confidence about the safety of their funds deposited. It would cap deposits at 85,000 pounds (US$133,397) and single loans at 500,000 pounds (more than US$784,688).
“These changes will introduce a more risk-based and flexible regime for credit unions, with prudential standards that reflect the diverse business models they now operate,” said Deputy Governor Andrew Bailey. “The new rules will raise standards where required.”
Mark Lyonette, chief executive of the Association of British Credit Unions, told Reuters it was important that credit unions’ rules remain relevant and appropriate. The association will survey Britain’s credit unions to inform its response. He said new regulations should remain fair and proportionate for credit unions of all sizes.
Reform regulation of credit unions has been promoted by policymakers and the Church of England. The Archbishop of Canterbury Justin Welby and other church leaders in the United Kingdom opened the Churches Mutual Credit Union in February, saying they were trying to “build a new financial sector in this country” to promote access to financial services for all (News Now Feb. 12). The credit union includes the Scottish Episcopal Church and the Church of Wales within its field of membership.
Members of royalty, including Camilla, the Duchess of Cornwall and the wife of Prince Charles, also have promoted credit unions as a viable alternative to payday lenders.