PRA and FCA float lighter rules for UK credit unions and a path to become building societies
Victoria Shinder1 min readThe Prudential Regulation Authority and the Financial Conduct Authority published a joint discussion paper on 3 November with ideas to help UK credit unions grow and innovate. Credit unions are member-owned, typically offer savings and personal loans to people sharing an occupation, community or area, and have more than two million members in the UK. The paper builds on the regulators' 2025 Mutuals Landscape report.
The options on which they seek views include removing some internal audit and documentation requirements for smaller credit unions; a risk-based framework with more flexible capital requirements for larger, more complex ones; applying rules used for smaller deposit takers, such as the standardised approach to risk-weighted assets, in place of the current simple leverage ratio; and a simplified version of the Basel framework with streamlined capital add-ons and a simple buffer for stress periods.
The paper also asks what stops credit unions offering new products, how shared-service and third-party organisations can support investment and technology, whether FCA fees could be changed to cut costs, whether credit unions should have a path to convert into building societies, and how the framework for a solvent exit could allow more flexible transfers or restructuring.
"We have scope to make their regime even more proportionate and growth-friendly," said Shoib Khan, the PRA's director of UK deposit takers.
What it means
The building-society route is the notable option: it would give the larger credit unions a regime built for lending and more ways to raise funds. At this stage nothing is proposed as a rule; the regulators are asking the sector which of these options it wants.