CRED 1
Introduction
CRED 1.1
The Credit Unions Sourcebook
- 01/12/2004
CRED 1.1.1
See Notes
- (1) Welcome to the Credit Unions sourcebook, known as CRED for short. CRED is credit unions' guide to the main FSA Handbook, which contains all of the rules and guidance for all regulated firms, including credit unions. It puts into effect the FSA's commitment to provide credit unions with their own specialist sourcebook. The Handbook is a vast document and many parts of it are not relevant to credit unions. So we have tried to distil into CRED those parts of the Handbook which are most relevant. We believe that CRED contains enough information on what the FSA requires of credit unions to meet most of their day-to-day operational needs.
- (2) Northern Ireland credit unions are not covered by the Handbook or by CRED. They are exempt from the general prohibition on carrying on a regulated activity, and do not need to be authorised persons. Their exemption is reflected in the definition of credit union in the Handbook and CRED: "a body corporate registered under the Industrial and Provident Societies Act 1965 as a credit union in accordance with the Credit Unions Act 1979, which is an authorised person" (see CRED 2.7.1G for an explanation of defined terms). Northern Ireland credit unions are registered under their own separate legislation, not under the Industrial and Provident Societies Act 1965 and the Credit Unions Act 1979. The Credit Unions Act 1979 permits the Treasury to make reciprocal arrangements with the appropriate authority in Northern Ireland for the law applicable to credit unions registered in Great Britain to be applied to credit unions registered in Northern Ireland, when the latter operate in Great Britain (and for the law applicable to credit unions registered in Northern Ireland to be applied to credit unions registered in Great Britain, when the latter operate in Northern Ireland). No such arrangements have yet been made.
- 01/12/2004
CRED 1.1.2
See Notes
CRED 1.1.3
See Notes
CRED 1.1.4
See Notes
The approach we have taken in assembling the various chapters of CRED is as follows:
- (1) Where there are requirements that are specific to credit unions we have spelt these out in full. The chapters containing these requirements are Chapters 7 - 10 and Chapter 17.
- (2) Where there are requirements in the Handbook relating to the day-to-day operations of a wider range of firms than credit unions, we have provided substantive guidance on the way in which those requirements should apply to credit unions. The relevant chapters are 3 - 6, 11, 12 and 14. It should be noted that in these chapters, the guidance refers to rules which exist elsewhere in the Handbook and which must be observed by credit unions.
- (3) Where there are requirements in the Handbook covering to a wider range of firms than credit unions, but which do not relate to the day-to-day operations of credit unions, we have provided a brief summary of those requirements. In circumstances in which one of these chapters became relevant to a credit union, we would expect credit unions to access the full text in the Handbook. The relevant chapters are 13, 15 and 16.
- (4) Where there are requirements in the Handbook that do not relate to credit unions, the relevant chapter of the Handbook has not been covered in CRED. The various other specialist sourcebooks and the Training and Competence manual (TC) are examples of this.
- (5) The procedures for compensation (COMP) and for complaints against the FSA (COAF) have not been included.
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CRED 1.1.5
See Notes
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CRED 1.1.6
See Notes
- 01/12/2004
CRED 1.1.7
See Notes
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CRED 2
CRED 2
CRED 2.1
What is this guide?
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CRED 2.1.1
See Notes
- 01/12/2004
CRED 2.2
Structure
- 01/12/2004
CRED 2.2.1
See Notes
- 01/12/2004
CRED 2.2.2
See Notes
- 01/12/2004
CRED 2.2.3
See Notes
- 01/12/2004
CRED 2.2.4
See Notes
CRED 2.3
Contents of CRED
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CRED 2.3.1
See Notes
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CRED 2.3.2
See Notes
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CRED 2.3.3
See Notes
- 01/12/2004
CRED 2.4
Status of provisions
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CRED 2.4.1
See Notes
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Rules: R
CRED 2.4.2
See Notes
Evidential provisions: E
CRED 2.4.4
See Notes
CRED 2.4.5
See Notes
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Guidance: G
CRED 2.4.6
See Notes
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CRED 2.4.7
See Notes
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CRED 2.4.8
See Notes
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CRED 2.4.9
See Notes
- 01/12/2004
CRED 2.4.10
See Notes
Direction: D
CRED 2.4.11
See Notes
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CRED 2.4.12
See Notes
- 01/12/2004
CRED 2.5
Numbering: Pages
- 01/12/2004
CRED 2.5.1
See Notes
Page numbers are not important in CRED. In the paper version, page numbering starts again at the beginning of each chapter. But each page of a chapter shows:
- (1) the reference code for the sourcebook or manual;
- (2) the number and title of the chapter; and
- (3) the number and title of the section of the chapter.
For example, the first page of Chapter 3 of the Supervision manual shows at the top, on the left 'SUP 3: Auditors' and on the right 'Section 1: Application'. In addition, each page of a chapter shows, at the foot of the page, the number of the last paragraph on the page.
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CRED 2.5.2
See Notes
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CRED 2.5.3
See Notes
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CRED 2.5.4
See Notes
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CRED 2.5.5
See Notes
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CRED 2.6
Numbering: Contents
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CRED 2.6.1
See Notes
The main text of CRED is numbered as follows:
- (1) chapter 1 (2, 3 etc)
- (2) section 1.1 (1.2, 1.3 etc)
- (3) paragraph 1 (1.1.2, 1.1.3 etc)
- (4) sub-paragraph 1.1.1(1) (1.1.1(2), 1.1.1(3) etc)
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CRED 2.6.2
See Notes
CRED 2.7
Defined terms
- 01/12/2004
CRED 2.7.1
See Notes
- 01/01/2005
- Past version of CRED 2.7.1 before 01/01/2005
CRED 2.8
Schedules
- 01/12/2004
CRED 2.8.1
See Notes
- 01/12/2004
Transitional provisions
CRED 2.8.2
See Notes
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Schedule 1: Record keeping requirements
CRED 2.8.3
See Notes
- 01/12/2004
Schedule 2: Notification requirements
CRED 2.8.4
See Notes
- 01/12/2004
Schedule 3: Fees and other required payments
CRED 2.8.5
See Notes
- 01/12/2004
Schedule 4: Powers exercised in making the Handbook.
CRED 2.8.6
See Notes
- 01/12/2004
Schedule 5: Rights of action for damages
CRED 2.8.7
See Notes
Schedule 5:
- (1) gives guidance (where relevant) on the availability of rights of action to private persons under section 150 of the Act; and
- (2) lists the rules in CRED:
- (a) to which rights of action under section 150(1) of the Act; and
- (b) to which rights of action apply at the suit, not only of a private person, but of a person who is not a private person, in accordance with section 150(3), with a statement to whom the rights have been extended.
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Schedule 6: Rules that can be waived
CRED 2.8.8
See Notes
- 01/12/2004
Schedule 7: Schedule of releases
CRED 2.8.9
See Notes
- (1) The purpose of schedule 7 is to help credit unions keep track of amendments made to CRED since it was first published. It lists by serial number each release issued, its date of publication and its contents. The full text of each release is on the FSA's website at www.fsa.gov.uk.
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CRED 2.9
Glossary of definitions
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CRED 2.9.1
See Notes
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CRED 3
The FSA's Principles for Businesses
CRED 3.1
Application and purpose
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CRED 3.1.1
See Notes
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CRED 3.1.2
See Notes
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CRED 3.1.3
See Notes
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CRED 3.1.4
See Notes
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CRED 3.2
The Principles
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CRED 3.2.1
See Notes
The table in PRIN 2.1.1 R sets out the full text of the Principles. These are repeated below for ease of reference.
- (1) Integrity. A firm must conduct its business with integrity.
- (2) Skill, care and diligence. A firm must conduct its business with due skill, care and diligence.
- (3) Management and control. A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
- (4) Financial prudence. A firm must maintain adequate financial resources.
- (5) Market conduct. A firm must observe proper standards of market conduct.
- (6) Customers' interests. A firm must pay due regard to the interests of its customers and treat them fairly.
- (7) Communications with clients. A firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading.
- (8) Conflicts of interest. A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
- (9) Customers: relationships of trust. A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.
- (10) Clients' assets. A firm must arrange adequate protection for clients' assets when it is responsible for them.
- (11) Relations with regulators. A firm must deal with its regulators in an open and cooperative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.
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CRED 3.3
Consequences of breaching the Principles
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CRED 3.3.1
See Notes
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CRED 3.3.2
See Notes
CRED 4
Senior
management arrangements, Systems and Controls
CRED 4.1
Application and purpose
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CRED 4.1.1
See Notes
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CRED 4.1.2
See Notes
- 01/12/2004
CRED 4.1.3
See Notes
CRED 4.1.4
See Notes
The purposes of SYSC are:
- (1) to encourage directors and senior managers to take appropriate practical responsibility for the credit union's arrangements on matters likely to be of interest to the FSA because they impinge on the FSA's function under the Act;
- (2) to reinforce Principle 3, under which all firms including credit unions must take reasonable care to organise and control their affairs responsibly and effectively with adequate risk management systems;
- (3) to encourage all firms, including credit unions, to vest responsibility for effective and responsible organisation in specific directors and senior managers.
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CRED 4.1.5
See Notes
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CRED 4.1.6
See Notes
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CRED 4.1.7
See Notes
CRED 4.1.8
See Notes
CRED 4.2
Apportionment of responsibilities
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CRED 4.2.1
See Notes
CRED 4.2.2
See Notes
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CRED 4.2.3
See Notes
Among the significant responsibilities to be apportioned will be responsibility for:
- (1) finance;
- (2) lending;
- (3) arrears control;
- (4) money laundering reporting;
- (5) complaints handling.
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CRED 4.2.4
See Notes
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CRED 4.2.5
See Notes
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CRED 4.2.6
See Notes
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CRED 4.2.7
See Notes
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CRED 4.2.8
See Notes
- 01/12/2004
CRED 4.2.9
See Notes
- 01/12/2004
CRED 4.2.10
See Notes
- 01/12/2004
CRED 4.2.11
See Notes
- 01/12/2004
CRED 4.2.12
See Notes
- 01/12/2004
CRED 4.3
Systems and Controls
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General
CRED 4.3.1
See Notes
CRED 4.3.2
See Notes
CRED 4.3.3
See Notes
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CRED 4.3.4
See Notes
Rules and evidential provisions
CRED 4.3.5
See Notes
- 01/12/2004
CRED 4.3.6
See Notes
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CRED 4.3.7
See Notes
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CRED 4.3.8
See Notes
- 01/12/2004
CRED 4.3.9
See Notes
- 01/12/2004
CRED 4.3.10
See Notes
- 01/12/2004
CRED 4.3.11
See Notes
- (1) A credit union should have an internal audit function (this may be either in house or outsourced to a third party).
- (2) Contravention of CRED 4.3.11 E (1)) may be relied on as tending to establish contravention of SYSC 3.1.1 R (see CRED 4.3.1 G).
CRED 4.3.12
See Notes
CRED 4.3.13
See Notes
- (1) A credit union should ensure appropriate segregation of duties in order to minimise the risk of financial crime or contravention of requirements and standards under the regulatory system.
- (2) Contravention of CRED 4.3.13 E (1) may be relied on as tending to establish contravention of SYSC 3.1.3 G.
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CRED 4.3.14
See Notes
Committee of management
CRED 4.3.15
See Notes
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CRED 4.3.16
See Notes
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CRED 4.3.17
See Notes
As the credit union's governing body, the committee of management has responsibility for ensuring that the credit union complies with the requirements of SYSC 3.1.1 R (see CRED 4.3.1 G CRED 4.3.2 G). Accordingly, the committee of management has overall responsibility for the following matters:
- (1) to establish objectives and formulate a business plan;
- (2) to monitor the financial position of the credit union;
- (3) to determine and document policies and procedures;
- (4) to direct and coordinate the work of all employees and volunteers, and ensure that they are capable and properly trained;
- (5) to maintain adequate reserves;
- (6) to make provision for bad and doubtful debts;
- (7) to recommend a dividend on shares to members subject to the credit union's financial position;
- (8) to ensure that the credit union complies with all statutory and regulatory requirements;
- (9) to ensure that the credit union complies with the requirements of its registered rules.
Where a committee of management has responsibility for these matters on a day to day basis (that is, they are not delegated to a chief executive or manager) it seems highly likely that each member of the committee would be performing the apportionment and oversight function, and would therefore require individual approval.
CRED 4.3.18
See Notes
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Organisation
CRED 4.3.19
See Notes
CRED 4.3.20
See Notes
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CRED 4.3.21
See Notes
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CRED 4.3.22
See Notes
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CRED 4.3.23
See Notes
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CRED 4.3.24
See Notes
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CRED 4.3.25
See Notes
CRED 4.3.26
See Notes
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CRED 4.3.27
See Notes
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Documentation of systems of control
CRED 4.3.28
See Notes
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CRED 4.3.29
See Notes
The committee of management should determine the form of documentation to be adopted. Considerations should include the following:
- (1) It should be comprehensive. It should cover all material aspects of the operations of the credit union.
- (2) It should be integrated. Separate elements of the system should be cross referred so that the system can be viewed as a whole.
- (3) It should identify risks, and the controls established to manage those risks. The controls should be identified and their purpose defined so that their effectiveness can be evaluated.
- (4) There should be named persons or posts for each control function, and alternatives in case of absence.
- (5) It should state how the operation of the control is evidenced. Evidence might include signatures, records and registers, retention of control documents.
- (6) It should be unambiguous. Instructions should be clear and precise, avoiding expressions such as "normally" and "if possible".
- (7) It should be practical. The separate elements should have a practical role in the review and improvement of systems.
- (8) It should be up to date. There should be an accurate description of the function that the control is to address. When changes are made to the function, the appropriate systems of control need to be updated and documented at the same time.
- (9) The committee of management should, from time to time, seek confirmation that the systems of control are being complied with.
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CRED 4.3.30
See Notes
Documentation should not be restricted to "lower level" controls applied in processing transactions, but should also cover "high level" controls including:
- (1) powers to be exercised only by the committee of management, and powers delegated to others;
- (2) the purpose, composition and reporting lines of sub-committees, and senior managers to whom responsibilities are delegated;
- (3) the specific roles and responsibilities of individual officers;
- (4) the timing, form and purpose of meetings of the committee of management and sub-committees, and the way in which policies and decisions are recorded and their implementation monitored.
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CRED 4.3.31
See Notes
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Accounting records and systems
CRED 4.3.32
See Notes
CRED 4.3.33
See Notes
- 01/12/2004
CRED 4.3.34
See Notes
The main reasons why a credit union should maintain adequate accounting and other records are:
- (1) to provide the committee of management with adequate financial and other information to enable them to conduct its business in a prudent manner on a day-to-day basis;
- (2) to safeguard the assets of the credit union and the interests of members and persons too young to be members (see CRED 7.3.2 G);
- (3) to assist officers of the credit union to fulfil their regulatory and statutory duties in relation to the preparation of annual accounts;
- (4) to provide the committee of management with sufficient timely and accurate information to assist them to submit the information required or requested by the FSA.
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CRED 4.3.35
See Notes
When forming their opinion of whether the accounting and other records are adequate, the committee of management should satisfy themselves that they capture and record on a timely basis, and in an orderly fashion, every transaction. They should provide sufficient information in respect of each transaction to explain:
- (1) its nature and purpose;
- (2) the asset or liability, actual and contingent, which arises (or may arise) from it;
- (3) the income or expenditure, current and deferred, which arises from it.
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CRED 4.3.36
See Notes
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Compliance
CRED 4.3.37
See Notes
CRED 4.3.38
See Notes
CRED 4.3.39
See Notes
- 01/12/2004
CRED 4.3.40
See Notes
Some important compliance issues include:
- (1) insurance against fraud and dishonesty;
- (2) arrangements for the prevention, detection and reporting of money laundering;
- (3) establishing and maintaining a satisfactory system of control;
- (4) keeping proper books of account;
- (5) computation and application of profits;
- (6) investment of surplus funds;
- (7) capital requirements;
- (8) liquidity requirements;
- (9) limits on shares and loans;
- (10) maintenance of membership records;
- (11) submission of financial reports to the regulator;
- (12) approved persons regime;
- (13) payment of regulatory fees.
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Management information
CRED 4.3.41
See Notes
CRED 4.3.42
See Notes
- 01/12/2004
CRED 4.3.43
See Notes
The committee of management should be satisfied that:
- (1) the information available is sufficient for the proper assessment of the potential risks for the credit union, and in order to determine its need for capital and liquidity;
- (2) the information available is sufficiently comprehensive to provide a clear statement of the performance and financial position of the credit union;
- (3) management information reports are prepared with sufficient frequency;
- (4) sufficient attention is focused on key factors affecting income and expenditure and that appropriate performance indicators are employed;
- (5) actual performance is compared with planned and prior performance.
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CRED 4.3.44
See Notes
In forming a view on whether the management information system is sufficiently comprehensive, the committee of management should consider whether, where relevant, the substance of reports provides a clear statement of:
- (1) the capital position;
- (2) the liquidity position;
- (3) profits and losses, assets and liabilities, and flow of funds;
- (4) loans, arrears, and provisions.
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CRED 4.3.45
See Notes
- 01/12/2004
Information for the FSA
CRED 4.3.46
See Notes
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Personnel
CRED 4.3.47
See Notes
CRED 4.3.48
See Notes
- 01/12/2004
CRED 4.3.49
See Notes
- 01/12/2004
Internal Audit
CRED 4.3.50
See Notes
CRED 4.3.51
See Notes
CRED 4.3.52
See Notes
- 01/12/2004
CRED 4.3.53
See Notes
The purposes of an internal audit are:
- (1) to ensure that the policies and procedures of the credit union are followed;
- (2) to provide the committee of management with a continuous appraisal of the overall effectiveness of the control systems, including proposed changes;
- (3) to recommend improvements where desirable or necessary;
- (4) to determine whether the internal controls established by the committee of management are being maintained properly and operated as laid down in the policy, and comply with relevant Acts, secondary legislation, rules, policies and procedures;
- (5) to ensure that accounting records are prepared promptly and accurately, and that they are in order;
- (6) to assess whether financial and operating information supplied to the committee of management is accurate, pertinent, timely, and complete.
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CRED 4.3.54
See Notes
CRED 4.3.55
See Notes
The internal audit work programme should include items such as:
- (1) verification of cash (counting and reconciliation) without prior notification;
- (2) bank reconciliation (checking records against bank statements);
- (3) verification of passbooks or account statements;
- (4) checking for compliance with policies and procedures;
- (5) checking for compliance with relevant Acts, secondary legislation and rules;
- (6) checking minutes and reports of the committee of management and other sub-committees for compliance, and assessing regularity and completeness;
- (7) checking loan applications;
- (8) verification of the credit union's assets and investments.
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CRED 4.3.56
See Notes
The key elements of a satisfactory system of internal audit include the following:
- (1) Terms of reference. These should be specified with precision and include, amongst other things, scope and objectives of the audit committee and the internal audit function, access to records, powers to obtain information and explanations for officers, and reporting requirements. These should be approved by the committee of management.
- (2) Risk analysis. Key risks in each area of the credit union's business should be identified. The adequacy of the specific controls put in place to address those risks should be assessed.
- (3) Internal audit plan. This should be developed on the basis of the risk analysis.
- (4) Detailed programmes. These should be based on the internal audit plan, together with the controls and their objectives specified in the control documentation. Each programme should be comprehensive, specifying the frequency with which the various parts of the programme are to be carried out and how the work is to be performed.
- (5) Working papers. These should be maintained to evidence who performed the work, how it was controlled and supervised, and to record the conclusions reached. They should be cross referenced to reports made and action taken.
- (6) System of reporting. Formal reports should be submitted at the completion of each aspect of programmed work, stating the areas covered together with any recommendations and conclusions reached.
CRED 4.3.57
See Notes
CRED 4.3.58
See Notes
- 01/12/2004
CRED 4.3.59
See Notes
CRED 4.3.60
See Notes
The committee of management should be satisfied that the internal audit function is being properly carried out. In order to review the overall effectiveness of the internal audit function it should consider the following:
- (1) the adequacy and scope of planning;
- (2) the adequacy and scope of work performed in relation to the plans and programmes;
- (3) the regularity and level of reporting on matters arising from the inspections;
- (4) the disposal of points and recommendations raised, and reasons for the rejection of any major points;
- (5) a review of the overall effectiveness of the internal audit function.
Business planning
CRED 4.3.61
See Notes
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CRED 4.3.62
See Notes
- 01/12/2004
CRED 4.3.63
See Notes
CRED 4.3.64
See Notes
- 01/12/2004
CRED 4.3.65
See Notes
CRED 4.3.66
See Notes
- 01/12/2004
CRED 4.3.67
See Notes
- 01/12/2004
CRED 4.3.68
See Notes
- 01/12/2004
Documentation of policies and procedures
CRED 4.3.69
See Notes
- 01/12/2004
CRED 4.3.70
See Notes
- 01/12/2004
CRED 4.3.71
See Notes
The policy and procedures manual should cover all aspects of the credit union's operations, including matters such as:
- (1) cash handling and disbursements;
- (2) collection procedures;
- (3) lending - including large exposures (see CRED 10.1 - CRED 10.5);
- (4) arrears management (see CRED 10.2.8 G - CRED 10.2.9 G);
- (5) provisioning (see CRED 10.5);
- (6) liquidity management (see CRED 9);
- (7) financial risk management (see CRED 7);
- (8) money laundering prevention (see CRED 12 );
- (9) internal audit (see CRED 4.3.50 G - CRED 4.3.60 G);
- (10) information technology (see CRED 4.3.31 G);
- (11) business continuity - otherwise known as disaster recovery (see CRED 4.3.72 G - CRED 4.3.74 G);
- (12) marketing;
- (13) training;
- (14) connected persons and managing conflicts of interest (see CRED 4.3.27 G);
- (15) complaints handling (see CRED 17).
Business continuity
CRED 4.3.72
See Notes
CRED 4.3.73
See Notes
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CRED 4.3.74
See Notes
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CRED 5
Threshold conditions
CRED 5.1
Application and purpose
- 01/12/2004
CRED 5.1.1
See Notes
- 01/12/2004
CRED 5.1.2
See Notes
- 01/12/2004
CRED 5.1.3
See Notes
- 01/12/2004
CRED 5.1.4
See Notes
- 01/12/2004
CRED 5.1.5
See Notes
CRED 5.2
The Conditions
- 01/12/2004
CRED 5.2.1
See Notes
Schedule 6 to the Act and COND set out the threshold conditions in full. They are:
- (1) Threshold condition 1: Legal status. This sets out a number of conditions for legal form. A credit union by definition will comply.
- (2) Threshold condition 2: Location of offices. A regulated UK credit union must have its head office and registered office in the United Kingdom. This general requirement in the Act is aimed at ensuring that firms are organised in a way that can be effectively supervised. The Credit Unions Act 1979 applies a specific requirement: the registered office of a credit union has to be in Great Britain; Northern Ireland credit unions are covered by separate legislation. (See CRED 1.1.1 G(2) for the definition of the italicised term credit union).
- (3) Threshold condition 3: Close links. This condition requires the FSA to be satisfied that it can effectively supervise a firm, taking into account the structure of the group to which it belongs or the other firms to which it has close links. This will have little relevance to credit unions because of the way they are constituted.
- (4) Threshold condition 4: Adequate resources. The adequate resources condition has a wide meaning. The FSA will interpret the term 'adequate' as meaning sufficient in terms of quantity, quality and availability, and 'resources' as including all financial resources, non-financial resources and means of managing its resources; for example, capital, provisions against liabilities, liquidity and human resources. Detailed financial resources and systems requirements for credit unions can be found in CRED 4, CRED 8, and CRED 9. The FSA will consider whether a credit union is ready, willing and organised to comply with these requirements when assessing if it has adequate resources for the purposes of this threshold condition.
- (5) Threshold condition 5: Suitability. Essentially, this condition requires the FSA to be satisfied that a credit union is 'fit and proper' to be authorised and permitted to carry on the relevant activities. It will therefore have regard to all relevant matters. These will include whether there are any indications that the credit union will not be able to meet its debts as they fall due, and whether the credit union has taken reasonable steps to identify and measure any risks of regulatory concern. It will also include the credit union's connection with any person.
- 01/12/2004
CRED 5.2.2
See Notes
- 01/12/2004
CRED 5.2.3
See Notes
CRED 5.2.4
See Notes
CRED 6
The Approved persons regime
CRED 6.1
Application and purpose
- 01/12/2004
CRED 6.1.1
See Notes
- 01/12/2004
CRED 6.1.2
See Notes
- 01/12/2004
CRED 6.1.3
See Notes
CRED 6.1.4
See Notes
Guidance on all the provisions of the manuals concerning approved persons is provided below, but the following points summarise the key parts of the proposals:
- (1) FSA has specified various functions which are seen as key to the operation of a credit union and which are referred to as controlled functions.
- (2) A controlled function may be performed only by a person who is a fit and proper person to perform the function to which the approval relates.
- (3) The purpose of these provisions is to complement the regulation of credit unions themselves.
- (4) The manuals provide full details concerning all aspects of the application process, the criteria for assessment, the range of controlled functions and disciplinary action.
- 01/12/2004
CRED 6.2
The Statements of Principle of Code of Practice for Approved Persons (APER)
- 01/12/2004
CRED 6.2.1
See Notes
- 01/12/2004
Introduction
CRED 6.2.2
See Notes
- 01/12/2004
CRED 6.2.3
See Notes
- 01/12/2004
The Statements of Principle
CRED 6.2.4
See Notes
- 01/12/2004
CRED 6.2.5
See Notes
The table in APER 2.1.2 P sets out the full text of the Statements of Principle. These are repeated below for ease of reference.
- (1) An approved person must act with integrity in carrying out his controlled function.
- (2) An approved person must act with due skill, care and diligence in carrying out his controlled function.
- (3) An approved person must observe proper standards of market conduct in carrying out his controlled function.
- (4) An approved person must deal with the FSA and with other regulators in an open and cooperative way and must disclose appropriately any information of which the FSA would reasonably expect notice.
- (5) An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function is organised so that it can be controlled effectively.
- (6) An approved person performing a significant influence function must exercise due skill, care and diligence in managing the business of the firm for which he is responsible in his controlled function.
- (7) An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function complies with the regulatory requirements imposed on that business.
- 01/12/2004
Code of Practice for Approved persons
CRED 6.2.6
See Notes
APER 3.1 provides an introduction to the Code of Practice for Approved Persons and provides guidance on its operation. The key points for those involved with credit unions are as follows:
- (1) An approved person will be in breach of a Statement of Principle only where his conduct was deliberate or where his standard of conduct was below that which would be reasonable in the circumstances.
- (2) All the Statements of Principle may apply to approved persons performing a controlled function for a credit union.
- 01/12/2004
Factors relevant to Statements of Principle
CRED 6.2.7
See Notes
- 01/12/2004
CRED 6.2.8
See Notes
- 01/12/2004
Enforcement procedures
CRED 6.2.9
See Notes
CRED 6.3
Approved persons
- 01/12/2004
CRED 6.3.1
See Notes
- 01/12/2004
Introduction
CRED 6.3.2
See Notes
- 01/12/2004
Purpose of the regime
CRED 6.3.3
See Notes
- 01/12/2004
Controlled functions
CRED 6.3.4
See Notes
- 01/12/2004
Specification of functions
CRED 6.3.5
See Notes
- 01/12/2004
CRED 6.3.6
See Notes
- 01/12/2004
CRED 6.3.7
See Notes
SUP 10.6: the governing functions:
- (1) SUP 10.6.4 R: the Director function This is the function of acting in the capacity of a director of a credit union.
- (2) SUP 10.6.8 R: the non-executive director function It is unusual for a credit union to appoint non-executive directors as such. But this function would include membership of a credit union's supervisory committee and any other committee which scrutinises the approach of executive management, the credit union's performance, and its standards of conduct.
- (3) SUP 10.6.11 R: the chief executive function Acting in the capacity of chief executive, whether or not using that title. This role includes anyone having the responsibility, alone or jointly with one or more others, under the immediate authority of the committee of management, for the conduct of the whole of the business.
- 01/12/2004
CRED 6.3.8
See Notes
SUP 10.7: the required functions:
- (1) SUP 10.7.1 R: the apportionment and oversight function. The apportionment of responsibilities (see CRED 4.2 and SYSC 2.1.1 R). The function of dealing with apportionment of responsibilities under SYSC 2.1.1 R, and of overseeing the establishment and maintenance of systems and controls under SYSC 3.1.1 R.
- (2) SUP 10.7.13 R: the money laundering reporting function. The function of acting in the capacity of the money laundering reporting officer of a credit union.
- 01/12/2004
CRED 6.3.9
See Notes
SUP 10.8: the systems and controls functions:
- (1) SUP 10.8.1 R the finance function The function of acting in the capacity of a senior manager with responsibility for reporting to the committee of management in relation to its financial affairs.
- (2) SUP 10.8.3 R: the risk assessment function The function of acting in the capacity of a senior manager with responsibility for reporting to the committee of management on the setting and controlling of its risk exposure.
- (3) SUP 10.8.6 R: the internal audit function The function of acting in the capacity of a senior manager with responsibility for reporting to the committee of management in relation to its adherence to internal systems and controls, procedures and policies.
CRED 6.3.10
See Notes
CRED 6.3.11
See Notes
- 01/12/2004
CRED 6.3.12
See Notes
Form A | SUP 10 Annex 4 | Application to perform controlled functions under the approved person regime. |
Form B | SUP 10 Annex 5 | Notice to withdraw an application to perform controlled functions under the approved persons regime. |
Form C | SUP 10 Annex 6 | Notice of ceasing to perform controlled functions. |
Form D | SUP 10 Annex 7 | Notification of changes in personal information or application details. |
Copies of these forms may be obtained from the FSA website or from the Individual Vetting and Approval Department. |
- 01/12/2004
CRED 6.3.13
See Notes
- 01/12/2004
CRED 6.3.14
See Notes
- 01/12/2004
CRED 6.3.15
See Notes
- 01/12/2004
CRED 6.4
Assessing fitness and propriety
- 01/12/2004
Purpose
CRED 6.4.1
See Notes
- 01/12/2004
Background
CRED 6.4.2
See Notes
- (1) FIT 1.2 explains that the FSA may grant an application for approval for a person to perform a controlled function only if it is satisfied that the candidate is fit and proper to perform the controlled function to which the application relates.
- (2) It also indicates that the FSA may withdraw its approval if it considers that an individual is no longer fit and proper to perform the controlled function to which the approval relates.
- 01/12/2004
Assessing fitness and propriety
CRED 6.4.3
See Notes
FIT 1.3 explains that the FSA will have regard to a range of factors when assessing the fitness and propriety of a person to perform a particular controlled function, but that the most important criteria will be the person's:
- (1) honesty, integrity and reputation;
- (2) competence and capability; and
- (3) financial soundness.
- 01/12/2004
CRED 6.4.4
See Notes
- 01/12/2004
Export chapter as
CRED 7
Investment and borrowing
CRED 7.1
Application, purpose and interpretation
- 01/12/2004
CRED 7.1.1
See Notes
- 01/12/2004
CRED 7.1.2
See Notes
- (1) The rules and guidance contained in this chapter are designed to address risks that can arise from the structure of a credit union's balance sheet.
- (2) These risks include the risk that a credit union's income is not sufficiently large to cover its funding, operational and other costs, and the risk that a credit union may not be able to renew or replace wholesale funding at an affordable rate.
- 01/12/2004
CRED 7.1.3
See Notes
For the purposes of this chapter:
- (1) the maturity of a security or loan is the last or only date on which it shall be repayable by or under its terms; and
- (2) surplus funds means funds not immediately required for a credit union's accepting deposits, lending and ancillary purposes.
- 01/12/2004
CRED 7.2
Investment
- 01/12/2004
Types of investment
CRED 7.2.1
See Notes
Subject to the general limitations on its powers contained in the Credit Unions Act 1979 and to the limitations contained in CRED 7.2.2 R CRED 7.2.3 R below, a credit union may invest its surplus funds and funds serving liquidity purposes only in the following types of investment:
- (1) deposits or loans to a UK domestic firm with Part IV permission to accept deposits;
- (2) deposits or loans to an institution which is authorised in any other EEA State to accept deposits;
- (3) sterling-denominated securities issued by the government of any EEA State;
- (4) fixed-interest sterling-denominated securities guaranteed by the government of any EEA State, provided that any guarantee is unconditional in respect of the payment of both principal and interest on those securities.
- 01/12/2004
Maturity of investments
CRED 7.2.2
See Notes
- 01/12/2004
CRED 7.2.3
See Notes
- 01/12/2004
Cash in custody of officers
CRED 7.2.4
See Notes
- 01/12/2004
Investment conditions no longer satisfied
CRED 7.2.5
See Notes
- 01/12/2004
Transactions between credit unions
CRED 7.2.6
See Notes
- (1) A credit union may accept a loan from another credit union (section 10(1) of the Credit Unions Act 1979). However, although a credit union is a UK domestic firm with Part IV permission to accept deposits (CRED 7.2.1 R (1)), it cannot issue shares to another credit union (section 5(1) and (2) of the Credit Unions Act 1979) or otherwise accept deposits from another credit union (Section 8(1) of the Credit Unions Act 1979). UK banks and building societies may accept deposits from a credit union.
- (2) CRED 7.2.2 R - CRED 7.2.3 R apply to loans between credit unions, except for subordinated loans qualifying as capital under CRED 8.2.1 R (4)(a). (See CRED 7.2.1 R and CRED 8.2.5 R (2)).
- (3) CRED 8.2.1 R - CRED 8.2.6 G apply to subordinated loans between credit unions qualifying as capital under CRED 8.2.1 R (4)(a).
- (4) CRED 10 (Lending) (which covers loans to members) does not apply to loans between credit unions (see CRED 10.1.1 R). However, in relation to such loans, credit unions should have regard to the principles outlined in CRED 10.4.6 G and CRED 10.5 (Provisioning).
- (5) CRED 9.3.7 R(2) applies to loans between credit unions in relation to liquidity.
- 01/12/2004
CRED 7.2.7
See Notes
Loans between credit unions should only be arranged after careful consideration by both parties. For example:
- (1) the borrower should consider the financial implications of relying on such borrowing in order to lend to members, or to finance share withdrawals; and
- (2) the lender should assess the risk of late and non-repayment arising from the borrower's own liquidity and credit risks, and keep the aggregate of its loans to other credit unions to a very modest level.
- 01/12/2004
Land holding
CRED 7.2.8
See Notes
CRED 7.3
Borrowing and Financial risk management
- 01/12/2004
Borrowing
CRED 7.3.1A
See Notes
- 01/12/2004
CRED 7.3.2A
See Notes
CRED 7.3.3
See Notes
- 01/12/2004
CRED 7.3.4
See Notes
- (1) The borrowing of a version 1 credit union should not exceed an amount equal to 20% of the total shareholding in the credit union at the end of more than two consecutive quarters.
- (2) Contravention of CRED 7.3.4 E (1) may be relied on as tending to indicate contravention of CRED 7.3.3 R.
- 01/12/2004
CRED 7.3.5
See Notes
- 01/12/2004
CRED 7.3.6
See Notes
- 01/12/2004
Financial risk management policy statement
CRED 7.3.7
See Notes
- 01/12/2004
CRED 7.3.8
See Notes
- 01/12/2004
CRED 7.3.9
See Notes
- 01/12/2004
CRED 7.3.10
See Notes
- 01/12/2004
Export chapter as
CRED 7A
Shareholding
CRED 7A.1
Application and purpose
- 01/12/2004
CRED 7A.1.1
See Notes
- 01/12/2004
CRED 7A.1.2
See Notes
- 01/12/2004
CRED 7A.2
Members' shares
- 01/12/2004
- Future version of CRED 7A.2 after 01/01/2006
Maximum shareholdings
CRED 7A.2.1
See Notes
CRED 7A.2.2
See Notes
- 01/12/2004
CRED 7A.2.3
See Notes
- 01/12/2004
CRED 7A.2.4
See Notes
Joint accounts
CRED 7A.2.5
See Notes
- 01/12/2004
CRED 7A.2.6
See Notes
- 01/12/2004
Dividends on shares
CRED 7A.2.7
See Notes
A version 1 credit union must not:
- (1) pay different dividends on different accounts; and
- (2) pay dividends out of interim profits more than once a year.
CRED 7A.2.8
See Notes
A version 2 credit union is permitted to:
- (1) pay different dividends on different accounts; and
- (2) pay dividends out of interim profits more than once a year.
- 01/12/2004
CRED 7A.3
Deposits
- 01/12/2004
CRED 7A.3.1
See Notes
- (1) A credit union must not accept deposits except:
- (a) as shares from its members who are natural persons qualifying in accordance with CRED 13 Annex 2 G Table 1G 1; or
- (b) from natural persons too young to be members under CRED 7A.3.1 R(2); or
- (c) as loans from persons under CRED 7.3.1A R - CRED 7.3.2A R.
- (2) A credit union must not accept deposits exceeding the greater of £5,000 and 1.5 per cent of the total shareholdings in the credit union from a person who is under the age at which, under section 20 of the Industrial and Provident Societies Act 1965, he may become a member of the credit union unless the deposits are held in a CTF, in which case the credit union may accept a larger deposit.
CRED 7A.3.1A
See Notes
- 01/12/2004
CRED 7A.3.2
See Notes
- (1) The effect of the general prohibition in section 19 of the Act is that no person may carry on the regulated activity of accepting deposits, unless authorised or exempt.
- (2) CRED 7.3.1A R and CRED 7A.3.1 R are intended to ensure that the liberalisation of credit union borrowing (CRED 7.3.2A R) does not have the unintended effect of undermining the common bond concept (CRED 13 Annex 1 G) by allowing credit unions to operate deposit accounts for natural persons who do not qualify for membership.
- (3) Section 20 of the Industrial and Provident Societies Act 1965 provides that a person above the age of 16 may be member of a credit union, unless its rules provide to the contrary (see CRED 13 Annex 2 G Table1G3).
- (4) CRED 13 Annex 2 G Table 1G 3 gives guidance on the eligibility of natural persons too young to be members.
- (5)
- (a) A credit union is no longer required to:
- (i) hold such juvenile deposits in a fund apart from the general funds of the credit union; and
- (ii) distribute all the interest earned on the fund (after deduction of expenses) to juvenile depositors.
- (b) A credit union may make a commercial judgement on the appropriate amount of interest to pay juvenile depositors.
- (c) These changes were made by amendment of section 9 of the Credit Unions Act 1979 by Order under section 428 of the Act. (The Financial Services and Markets Act 2000 (Consequential Amendments and Transitional Provisions) (Credit Unions) Order 2002 - SI 2002 No. 1501)
- 01/12/2004
CRED 7A.4
Insurance against fraud or other dishonesty
- 01/12/2004
CRED 7A.4.1
See Notes
- 01/12/2004
CRED 7A.4.2
See Notes
In order to comply with CRED 7A.4.1 R, a policy of insurance subject to the exception in CRED 7A.4.3 R:
- (1) must insure the credit union in respect of every description of loss suffered or liability incurred by reason of the fraud or other dishonesty of any of its officers or employees;
- (2) must so insure the credit union up to the limits set out in CRED 7A Annex 1 R in respect of any one claim, except that the liability of the insurer may be restricted to the amounts set out in CRED 7A Annex 1 R in respect of the total of the claims made in any one year; and
- (3) must not provide in relation to any claim for any amount greater than one per cent of the limits on any one claim set out in CRED 7A Annex 1 R to be met by the credit union.
- 01/12/2004
CRED 7A.4.3
See Notes
- 01/12/2004
CRED 7A Annex 1
Insurance against fraud or other dishonesty
- 01/12/2004
See Notes
Column (1) Aggregate value of share subscriptions and other deposits received and not repaid (the "aggregate value") |
Column (2) Cover required in respect of any one claim |
Column (3) Cover required in respect of total claims made in any one year |
|
Row (A) | Less than £10,000 | The higher of £500 or 50 per cent of the aggregate value | The higher of £1,000 or 100 per cent of the aggregate value |
Row (B) | £10,000 to £100,000 | The higher of £5,000 or 20 per cent of the aggregate value | 100 per cent of the aggregate value |
Row (C) | More than £100,000 | The higher of £20,000 or 15 per cent of the aggregate value | The higher of £100,000 or 75 per cent of the aggregate value |
Row (D) | More than £1,000,000 | £150,000 plus 5 per cent of the aggregate value over £1,000,000, subject to a maximum of £2,000,000 | £750,000 plus 5 per cent of the aggregate value over £1,000,000, subject to a maximum of £4,000,000 |
In relation to a credit union which, at the relevant date, has accepted and not repaid share subscriptions and other deposits of the aggregate value stipulated in column (1) of the table in this Annex, the limit in respect of any one claim is the amount appearing in the corresponding part of column (2); and the amount in respect of the total of claims made in any one year is the amount appearing in the corresponding part of column (3). |
For the purposes of this Annex, "the relevant date" is either the date of inception or renewal of the policy of insurance, or such other date as the credit union determines, provided that the relevant date in each year subsequent to the first must be not more than one year after the relevant date in the preceding year. |
- 01/12/2004
CRED 8
Capital requirements
CRED 8.1
Application and purpose
- 01/12/2004
CRED 8.1.1
See Notes
- 01/12/2004
CRED 8.1.2
See Notes
- 01/12/2004
CRED 8.1.3
See Notes
- 01/12/2004
CRED 8.1.4
See Notes
- 01/12/2004
CRED 8.1.5
See Notes
- 01/12/2004
CRED 8.2
Components of capital
- 01/12/2004
CRED 8.2.1
See Notes
- (1) The following are included in the meaning of 'capital' for the purposes of this chapter:
- (a) audited reserves;
- (b) interim net profits;
- (c) subordinated debt meeting the requirements set out at CRED 8.2.1 R (4);
- (d) initial capital.
- (2) Audited reserves are audited accumulated profits or losses, or both, retained by a credit union after payment of tax and dividends. Reserves also include other realised gains and gifts of capital - for example from a sponsoring organisation.
- (3) Interim net profits are interim profits net of tax and anticipated dividends.
- (4) To be included in the calculation of capital, subordinated debt must meet the following conditions:
- (a) the maturity of the loan must be more than five years from the date on which the loan is made;
- (b) the subordination provisions provide that the claims of the subordinated creditors rank behind those of all unsubordinated creditors including the credit union's shareholders;
- (c) to the fullest extent possible creditors waive their rights to set off amounts they owe the credit union against subordinated amounts owed to them by the credit union;
- (d) the only events of default are non-payment of any interest or principal under the debt agreement or the winding-up of the credit union;
- (e) the remedies available to the subordinated creditor in the event of default in respect of the subordinated debt are limited to petitioning for the winding up of the credit union or proving for and claiming in the liquidation of the credit union;
- (f) the subordinated debt must not become due and payable before its stated final maturity date except on an event of default complying with (d);
- (g) the terms of the subordinated debt must be set out in a written agreement or instrument that contains terms that provide for the above conditions;
- (h) the debt must be unsecured and fully paid up.
- (5) Initial capital is a credit union's capital at the time it is given Part IV permission to accept deposits, but this does not apply in cases where the credit union is treated as having such a permission on credit unions day. Initial capital consists of a credit union's assets less its liabilities other than the liabilities set out in CRED 8.2.1 R(a)-(c).
CRED 8.2.1A
See Notes
- 01/12/2004
CRED 8.2.2
See Notes
- 01/12/2004
CRED 8.2.3
See Notes
- 01/12/2004
CRED 8.2.4
See Notes
Years to maturity | Amount of loan counting towards capital |
More than 4 | 100% |
Less than and including 4 but more than 3 | 80% |
Less than and including 3 but more than 2 | 60% |
Less than and including 2 but more than 1 | 40% |
Less than and including 1 | 20% |
- 01/12/2004
CRED 8.2.5
See Notes
- (1) When a credit union makes a subordinated loan to another credit union qualifying as capital under CRED 8.2.1 R(4)(a), the full amount of the loan (not the amount counting towards the borrower's capital under CRED 8.2.4 R) must be deducted from the lender's capital.
- (2) A subordinated loan within CRED 8.2.1 R(4)(a) is not an investment under CRED 7.2.1 R.
- 01/12/2004
CRED 8.2.6
See Notes
- 01/12/2004
CRED 8.3
Version 1 credit unions
- 01/12/2004
Requirement to maintain positive net worth
CRED 8.3.1
See Notes
- 01/12/2004
CRED 8.3.2
See Notes
- 01/12/2004
CRED 8.3.3
See Notes
- 01/12/2004
CRED 8.3.4
See Notes
- 01/12/2004
Building reserves
CRED 8.3.5
See Notes
- 01/12/2004
CRED 8.3.6
See Notes
- 01/12/2004
CRED 8.3.7
See Notes
- 01/12/2004
CRED 8.3.8
See Notes
- 01/12/2004
Minimum initial capital
CRED 8.3.9
See Notes
- 01/12/2004
CRED 8.3.10
See Notes
- 01/12/2004
CRED 8.3.11
See Notes
- 01/12/2004
Capital requirement for version 1 credit unions wishing to lend amounts of more than £7,500 in excess of the borrowing member's shareholding.
CRED 8.3.12
See Notes
- (1) A version 1 credit union must not make a loan of an amount greater than £5,000 in excess of the borrowing member's shareholding unless it has a capital to total assets ratio of at least 5%.
- (2) A credit union which is owed by a member a total amount greater than £5,000 in excess of that member's shareholding must maintain at all times, while such an amount is outstanding, a capital to total assets ratio of at least 5%.
CRED 8.3.13
See Notes
- 01/12/2004
Capital requirements for large version 1 credit unions
CRED 8.3.14
See Notes
- 01/12/2004
CRED 8.3.15
See Notes
- 01/12/2004
CRED 8.3.16
See Notes
- (1) A version 1 credit union with total assets of more than £10 million or a total number of members of more than 10,000, or both, must maintain at all times a risk-adjusted capital to total assets ratio of at least 8%.
- (2) 'Risk-adjusted capital' has the same meaning as in CRED 8.4.1 RCRED 8.4.2 R (Risk-adjusted capital requirements for version 2 credit unions).
- 01/12/2004
CRED 8.4
Version 2 credit unions
- 01/12/2004
CRED 8.4.1
See Notes
- (1) A version 2 credit union must maintain at all times a risk-adjusted capital to total assets ratio of at least 8% unless CRED 8.4.3 R applies.
- (2) Risk-adjusted capital is calculated as follows:Capital + (provisions - balance of the net liability of borrowers where their loans are 12 months or more in arrears - 35% of the net liability of borrowers where their loans are 3-12 months in arrears).
- 01/12/2004
CRED 8.4.2
See Notes
In calculating risk-adjusted capital:
- (1) the maximum net figure for provisions (after deduction of the stipulated amounts for loans in arrears) that can be included is 1% of total assets;
- (2) 'provisions' includes specific provisions and general provisions; and
- (3) mortgage loans and provisions in respect of mortgage loans must not be included in calculating the loan balances to be deducted from, and the provisions to be added to, the amount of capital.
- 01/12/2004
Minimum initial capital
CRED 8.4.3
See Notes
- 01/12/2004
CRED 8.4.4
See Notes
- 01/12/2004
CRED 8.4.5
See Notes
- 01/12/2004
CRED 9
Liquidity
CRED 9.1
Application, purpose and interpretation
- 01/12/2004
CRED 9.1.1
See Notes
- 01/12/2004
CRED 9.1.2
See Notes
- 01/12/2004
CRED 9.1.3
See Notes
- 01/12/2004
CRED 9.1.4
See Notes
- 01/12/2004
CRED 9.1.5
See Notes
CRED 9.1.6
See Notes
- (1) Under section 7 of the Credit Unions Act 1979, if a withdrawal of shares would reduce the member's savings with the credit union to less than his total liability (including contingent liability) to the credit union whether as borrower, guarantor or otherwise then:
- (a) if there is a loan to the member which is treated as under section 11A of the Credit Unions Act 1979, the withdrawal is not permitted; and
- (b) in any other case, the withdrawal is permitted only at the discretion of the committee of management of the credit union.
- (2) 'Unattached shareholding' is intended to refer to that portion of a member's savings the withdrawal of which is not restricted by section 7.
CRED 9.1.7
See Notes
'Total relevant liabilities' means the sum of:
- (1) unattached shareholdings in the credit union, and deposits by persons too young to be members of the credit union; and
- (2) liabilities (other than liabilities for shares) with an original or remaining maturity of less than three months (including overdrafts and instalments of loans).
- 01/12/2004
CRED 9.2
General requirements
- 01/12/2004
CRED 9.2.1
See Notes
- 01/12/2004
CRED 9.2.2
See Notes
- 01/12/2004
CRED 9.2.3
See Notes
- 01/12/2004
CRED 9.2.4
See Notes
- 01/12/2004
CRED 9.2.5
See Notes
- 01/12/2004
CRED 9.2.6
See Notes
- 01/12/2004
CRED 9.2.7
See Notes
- 01/12/2004
CRED 9.2.8
See Notes
- 01/12/2004
CRED 9.2.9
See Notes
- 01/12/2004
CRED 9.3
Minimum liquidity requirements
- 01/12/2004
CRED 9.3.1
See Notes
- 01/12/2004
CRED 9.3.2
See Notes
- 01/12/2004
CRED 9.3.3
See Notes
- 01/12/2004
CRED 9.3.7
See Notes
- (1) For the purposes of CRED 9.3.2 R - CRED 9.3.5 R, only those assets shall count as liquid which can be realised for cash at short notice, and within at most eight days.
- (2) Amounts loaned by one credit union to another must not be counted as liquid by the lender.
- 01/12/2004
CRED 9.3.8
See Notes
- 01/12/2004
CRED 9.3.9
See Notes
- (1) For the purposes of calculating the ratio of a credit union's liquid assets to its total relevant liabilities (in CRED 9.3.2 R CRED 9.3.5 R), the securities referred to in CRED 7.2.1 R CRED 7.2.3 R should be valued on the basis that they could be realised at market value minus the following discounts (whether or not this is the case in fact):
- (a) maturity less than 1 year - zero;
- (b) maturity 1 to 5 years - 5%.
- (2) Compliance with CRED 9.3.9 E (1) may be relied on as tending to indicate compliance with CRED 9.3.8 R (the 8-day realisation-value rule).
- (2) Compliance with CRED 9.3.9 E (1) may be relied on as tending to indicate compliance with CRED 9.3.8 R (the 8-day realisation-value rule).
- 01/12/2004
CRED 9.3.10
See Notes
- 01/12/2004
CRED 9.3.11
See Notes
- 01/12/2004
CRED 10
Lending to members
CRED 10.1
Application and purpose
- 01/12/2004
CRED 10.1.1
See Notes
- 01/12/2004
CRED 10.1.2
See Notes
- (1) This chapter seeks to protect the interests of credit unions' members in respect of loans to members. Principle 4 requires credit unions to maintain adequate financial resources and Chapter 8 sets out the FSA's detailed capital adequacy requirements in respect of credit unions.
- (2) This chapter is not relevant to loans between credit unions, except as indicated in CRED 7.2.6 G(4).
- 01/12/2004
CRED 10.2
General requirements concerning lending policy
- 01/12/2004
CRED 10.2.1
See Notes
- 01/12/2004
CRED 10.2.2
See Notes
- 01/12/2004
CRED 10.2.3
See Notes
- 01/12/2004
CRED 10.2.4
See Notes
- 01/12/2004
CRED 10.2.5
See Notes
- 01/12/2004
CRED 10.2.6
See Notes
- 01/12/2004
CRED 10.2.6A
See Notes
- (1) A credit union must not make a loan to:
- (a) an officer, or other approved person; and
- (b) a relative of, or any person otherwise connected with, anyone included in (1) above, on terms more favourable than those available to other members of the credit union.
- (2) "Relative" has the same meaning as in section 31 of the Credit Unions Act 1979.
CRED 10.2.7
See Notes
- (1) To prevent conflicts of interest, a credit union should have clear arrangements for dealing with loans to the persons specified in CRED 10.2.6A R.
- (2) In relation to staff, the prohibition in CRED 10.2.6A R applies only to those who are officers or approved persons.
- (3) "Connected" in CRED 10.2.6A R includes any close business or personal relationship.
- 01/12/2004
CRED 10.2.8
See Notes
- 01/12/2004
CRED 10.2.9
See Notes
- 01/12/2004
CRED 10.2.10
See Notes
- 01/12/2004
CRED 10.2.11
See Notes
- (1) A credit union may only make loans to:
- (a) its members who are natural persons qualifying in accordance with section 1(2) of the Credit Unions Act 1979 (see CRED 13 Annex 2 G Table 1G 1);
- (b) other credit unions.
- (2) A credit union may make a loan to a member for a business purpose. However, this does not mean that a credit union may make a loan to a member who merely intends to transmit that loan to another body that will actually carry out the purpose. A credit union should not make loans to members who are acting together to achieve an aggregate loan that exceeds the limits in CRED 10.3.
- 01/12/2004
CRED 10.3
Lending limits
- 01/12/2004
CRED 10.3.1
See Notes
CRED 10.3.2
See Notes
CRED 10.3.3
See Notes
CRED 10.3.4
See Notes
CRED 10.3.5
See Notes
- 01/12/2004
CRED 10.3.6
See Notes
- 01/12/2004
CRED 10.4
Large exposures
- 01/12/2004
CRED 10.4.1
See Notes
For the purposes of this section, a large exposure is defined as an individual net liability to the credit union which meets both of the following criteria:
- (1) it is at least £5000;
- (2) it is at least 10% of the value of the credit union's total capital.
CRED 10.4.2
See Notes
- 01/12/2004
CRED 10.4.3
See Notes
- 01/12/2004
CRED 10.4.4
See Notes
- 01/12/2004
CRED 10.4.5
See Notes
- 01/12/2004
CRED 10.4.6
See Notes
- 01/12/2004
CRED 10.5
Provisioning
- 01/12/2004
CRED 10.5.1
See Notes
- 01/12/2004
CRED 10.5.2
See Notes
- (1) A credit union must make specific provision in its accounts for bad and doubtful debts of at least the amounts set out below:
- (a) 35% of the net liability to the credit union of borrowers where the amount is more than three months in arrears; and
- (b) 100% of the net liability to the credit union of borrowers where the amount is more than 12 months in arrears.
- (2) The net liability of a borrower is the amount of his loan and interest outstanding, less his shareholding.
- 01/12/2004
CRED 10.5.3
See Notes
- (1) A credit union should maintain a general provision for bad and doubtful debts of at least 2% of the net liability to the credit union of borrowers not covered by the specific provisions in CRED 10.5.2 R.
- (2) Contravention of CRED 10.5.3 E (1) may be relied on as tending to establish contravention of CRED 10.5.1 R.
- 01/12/2004
CRED 10.5.4
See Notes
- 01/12/2004
CRED 10.5.5
See Notes
- 01/12/2004
CRED 10.5.6
See Notes
- (1) CRED 10.5.2 R requires a credit union to maintain minimum levels of specific provision. However, a credit union that only maintains the minimum levels does not necessarily comply with CRED 10.5.1 R. This will depend on the assessment and judgement referred to in CRED 10.5.5 G.
- (2)
- (a) Failure to maintain a general provision of the level indicated in CRED 10.5.3 E creates a presumption that the credit union is not complying with CRED 10.5.1 R, though that presumption can be rebutted by the credit union: for example, it may be able to demonstrate that the occurrence of impaired loans that are either below the threshold for specific provision (that is, they are less than three months in arrears) or are unidentified at the time, is very low.
- (b) If, on the other hand, a credit union does maintain the indicative level in CRED 10.5.3 E, that does not necessarily mean that it complies with CRED 10.5.1 R.
- 01/12/2004
CRED 10.5.7
See Notes
- 01/12/2004
CRED 11
Conduct of business
CRED 11.1
Introduction
- 01/12/2004
Conduct of business
CRED 11.1.1
See Notes
CRED 11.1.2
See Notes
- (1) The rules and guidance set out in COB mainly apply to designated investment businesses and, as stated in COB 1.3.2 G (2), have limited application to deposits.
- (2) The only parts of COB that set out rules and guidance on deposits, other than for a cash deposit ISA, are those relating to financial promotion in COB 3 and those relating to distance contracts for accepting deposits in COB 2.6 (General provisions related to distance contracts), COB 6.7 (Cancellation and withdrawal), COB 6.4.25 R (Entering into a distance contract for accepting deposits). Guidance on the way in which those requirements apply to credit unions is set out in CRED 11.4 (Entering into a distance contract for accepting deposits).
CRED 11.1.3
See Notes
- 01/12/2004
CRED 11.1.4
See Notes
- 01/12/2004
Electronic commerce activities
CRED 11.1.5
See Notes
The E-Commerce Directive sourcebook (ECO) contains rules and guidance applicable to a credit union which carries on an electronic commerce activity; that is, a credit union which accepts deposits, or carries on certain other activities, by way of an information society service. An information society service is, generally speaking and subject to certain exclusions, a service that:
- (1) is normally provided for remuneration;
- (2) is provided at a distance;
- (3) is so provided by means of electronic equipment for the processing (including digital compression) and storage of data; and
- (4) is so provided at the individual request of a recipient of the service.
CRED 11.1.6
See Notes
- 01/12/2004
CTF providers
CRED 11.1.7
See Notes
CRED 11.2
Financial promotion
- 01/12/2004
CRED 11.2.1
See Notes
- 01/12/2004
CRED 11.2.2
See Notes
- 01/12/2004
CRED 11.2.3
See Notes
CRED 11.2.4
See Notes
In addition to the limited application of COB 3, a number of exemptions from the rules and guidance on financial promotions are listed in COB 3.2.5 R. Some exemptions are particularly relevant to credit unions namely exemptions (2), (4) and (5):
- (1) Exemption (2): A financial promotion which can lawfully be communicated by an unauthorised communicator without approval.
- (2) Exemption (4): A "one off" non-real time financial promotion or a "one off" solicited real time financial promotion. If the conditions set out in (a) to (c) are satisfied, a financial promotion is to be regarded as "one off"; if not, the fact that any one or more of these conditions is met is to be taken into account in determining if a financial promotion is "one off", but a financial promotion may be regarded as "one off" even if none of the conditions are met; the conditions are that:
- (a) the financial promotion is communicated only to one recipient or only to one group of recipients in the expectation that they would engage in any investment activity jointly;
- (b) the identity of the product or service to which the financial promotion relates has been determined having regard to the particular circumstances of the recipient;
- (c) the financial promotion is not part of an organised marketing campaign.
- (3) Exemption (5): A financial promotion which contains only one or more of the following:
- (a) the name of the firm;
- (b) the name of an investment;
- (c) a contact point (address including an e-mail address, telephone or facsimile number);
- (d) a logo;
- (e) a brief, factual description of the firm's activities;
- (f) a brief, factual description of the firm's fees;
- (g) a brief, factual description of the firm's investment products;
- (h) the price of yield of investments and the charges.
CRED 11.2.5
See Notes
CRED 11.2.6
See Notes
The requirement on a firm under COB 3.8.4 R (1) is that it should be able to show that it has taken reasonable steps to ensure that a non-real time financial promotion is clear, fair and not misleading. This is supported by further detailed rules including an evidential provision COB 3.8.5 E):
- (1) A firm should take reasonable steps to ensure that, for a non-real time financial promotion:
- (a) its promotional purpose is not in any way disguised or misrepresented;
- (b) any statement of fact, promise or prediction is clear, fair and not misleading and discloses any relevant assumptions;
- (c) any statement of opinion is honestly held and, unless consent is impracticable, given with the consent of the person concerned;
- (d) the facts on which any comparison of contrast is made are verified, or, alternatively, that relevant assumptions are disclosed and that the comparison or contrast is presented in a fair and balanced way, which is not misleading and includes all factors which are relevant to the comparison or contrast;
- (e) it does not contain any false indications, in particular as to:
- (i) the firm's independence; or
- (ii) the firm's resources and scale of activities; or
- (iii) the scarcity of any investment of service;
- (f) the design, content or format does not disguise, obscure or diminish the significance of any statement, warning or other matter which the financial promotion is required by this chapter to contain;
- (g) it does not include any reference to approval by the FSA or any government body, unless such approval has been obtained in writing from the FSA or that body (see also GEN 1.2 (Referring to approval by the FSA));
- (h) it does not omit any matters the omission of which causes the financial promotion not to be clear, fair and not misleading; and
- (i) the accuracy of all material statements of fact in it can be substantiated.
- (2)
- (a) Compliance with COB 3.8.5 E(1) may be relied on as tending to show compliance with COB 3.8.4 R(1).
- (b) Contravention of COB 3.8.5 E(1) may be relied on as tending to show contravention of COB 3.8.4 R(1).
CRED 11.3
Statutory status disclosure
- 01/12/2004
CRED 11.3.1
See Notes
- 01/12/2004
CRED 11.3.2
See Notes
- 01/12/2004
CRED 11.4
Entering into a distance contract for accepting deposits
- 01/12/2004
CRED 11.4.1
See Notes
CRED 11.4.2
See Notes
Pre-contract disclosure requirements
CRED 11.4.3
See Notes
CRED 11.4.4
See Notes
Exemptions
CRED 11.4.5
See Notes
The exemptions referred to in CRED 11.4.3 G are set out in COB 6.4.27 R to COB 6.4.31 R. They are relevant:
- (1) where the contract is concluded by telephone and the retail customer gives explicit consent to receiving a more limited range of information. COB 6.4.27 R (1) sets out the information to be provided in such cases. Full information has to be provided, in a durable medium, immediately after conclusion of the distance contract (COB 6.4.27 R (2));
- (2) where a means of communication (other than telephone) is used which does not enable provision of required information in a durable medium before conclusion of the contract; in this case full information must also be provided in a durable medium immediately after conclusion of the distance contract (COB 6.4.29 R);
- (3) where there is an initial service agreement and the contract is in relation to a successive or separate operation of the same nature under that agreement, or there is no initial service agreement and the contract is in relation to a successive or separate operation of the same nature and is being performed no more than one year from the date of performance of the last operation ( COB 6.4.30 R to COB 6.4.31 R; and see COB 1.10.2 G).
CRED 11.4.6
See Notes
- 01/12/2004
Cancellation
CRED 11.4.7
See Notes
CRED 11.4.8
See Notes
The only exemptions from the right to cancel are when:
- (1) the price of the service depends on fluctuations in the financial market outside the credit union's control which may occur during the cancellation period; or
- (2) the contract has already been fully performed with the retail customer's consent before he exercises his right to cancel; or
- (3) the credit union has an initial service agreement with the retail customer and the contract is in relation to a successive operation or separate operation of the same nature under that agreement (see COB 1.9.2 G (3))
CRED 11.4.9
See Notes
CRED 11.4.10
See Notes
CRED 11.4.11
See Notes
CRED 12
Money laundering
CRED 12.1
Introduction
- 01/12/2004
What is Money laundering?
CRED 12.1.1
See Notes
- 01/12/2004
CRED 12.2
Money laundering and the FSA
- 01/12/2004
CRED 12.2.1
See Notes
- 01/12/2004
CRED 12.2.2
See Notes
- 01/12/2004
CRED 12.2.3
See Notes
This chapter of CRED offers some short additional guidance to credit unions to help them understand what ML expects of them in relation to some specific aspects of ML, namely:
- 01/12/2004
CRED 12.2.4
See Notes
- 01/12/2004
CRED 12.3
Identification of the client
- 01/12/2004
CRED 12.3.1
See Notes
ML 3.1.1 G - ML 3.1.9 R establish a duty on relevant firms to carry out the identification of clients. ML 3.1.3 R makes clear that relevant firms must not, in general, carry out relevant regulated activities, or agree to do so, for a client or potential client unless the firm has taken reasonable steps to check that client's identity. That requirement applies to any person engaged in, or who has had contact with the firm with a view to engaging in, any transaction with that firm:
- (1) on his own behalf; or
- (2) as agent for or on behalf of another.
In the case of (2), the firm has to enquire into the identity of both persons, unless an exception enables it to focus solely on the person it is actually in contact with.
- 01/12/2004
CRED 12.3.2
See Notes
In the credit union context, in order to ensure that the person is who they say they are, the following information should be obtained:
- (1) a true name and name used;
- (2) correct permanent address, including postal code; and
- (3) date of birth.
- 01/12/2004
CRED 12.3.3
See Notes
- 01/12/2004
CRED 12.3.4
See Notes
In addition to the name verification, it is important that the current permanent address should also be verified. Some means of verifying address are:
- (1) checking the voters' roll; or
- (2) making a credit reference agency search; or
- (3) requesting sight of a recent utility bill, local authority tax bill, bank or building society statement (originals); or
- (4) checking a local telephone directory (not as a primary check).
- 01/12/2004
CRED 12.3.5
See Notes
- 01/12/2004
CRED 12.3.6
See Notes
- 01/12/2004
CRED 12.4
External Reporting
- 01/12/2004
CRED 12.4.1
See Notes
- 01/12/2004
CRED 12.4.2
See Notes
- 01/12/2004
CRED 12.5
Government and Financial Action Task Force findings
- 01/12/2004
CRED 12.5.1
See Notes
- 01/12/2004
CRED 12.5.2
See Notes
- 01/12/2004
CRED 12.6
Compliance Monitoring
- 01/12/2004
CRED 12.6.1
See Notes
ML 7.2.2 E sets out that, in accordance with SYSC 3.2.6 R, firms should take reasonable care to establish and maintain appropriate systems and controls. In the context of the financial crime objective, this should include requirements for, at least, annually:
- (1) a report from the MLRO;
- (2) a review of the firm's compliance with ML;
- (3) assessing the impact of any new findings under ML 5;
- (4) a review of the number of money laundering reports made by staff.
In the case of credit unions, the committee of management should consider the MLRO's report and take any action necessary to remedy deficiencies identified.
- 01/12/2004
CRED 12.7
Record keeping
- 01/12/2004
CRED 12.7.1
See Notes
- 01/12/2004
CRED 13
CRED 13
CRED 13.1
Application and purpose
- 01/12/2004
CRED 13.1.1
See Notes
This chapter applies to:
- (1) [Deleted]
- (1A) a person considering applying to the FSA for approval of the use in a name of the words "credit union" or "undeb credyd";
- (2) a person applying, or considering applying, to the FSA to become authorised as a credit union with a Part IV permission to accept deposits; and
- (3) a candidate, but only as a matter of general relevance.
- 01/12/2004
CRED 13.1.2
See Notes
This chapter gives guidance about:
- (1) what it means to become a credit union with a Part IV permission to accept deposits;
- (2) the application procedures for persons wishing to become a credit union;
- (3) the procedures by which an applicant can obtain approval for persons to perform controlled functions under the approved persons regime; and
- (4) the FSA's decision making procedures for Part IV permission and approved persons applications.
- 01/12/2004
CRED 13.2
Introduction
- 01/12/2004
CRED 13.2.1
See Notes
CRED 13.2.2
See Notes
CRED 13.2.3
See Notes
CRED 13.2.4
See Notes
- 01/12/2004
CRED 13.2.5
See Notes
CRED 13.2.6
See Notes
- 01/12/2004
CRED 13.2.7
See Notes
- (1) The application pack and accompanying explanatory notes are available on www.fsa.gov.uk or from the Corporate Authorisation department of the FSA. To contact the Corporate Authorisation department:
- (a) telephone on 020 7066 1000; or
- (b) write to the Corporate Authorisation department at The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS; or
- (c) email corporate.authorisation@fsa.gov.uk.
- (2) Copies of all current guidance are available from the FSA website www.fsa.gov.uk or through the FSA's Publication Enquiries department on 020 7066 3298. The FSA will review its guidance from time to time and may need to amend or withdraw published or written guidance in the light of changing circumstances, developing business practices or case law.
- 01/12/2004
CRED 13.2A
Use of name "credit union"
- 01/12/2004
CRED 13.2A.1
See Notes
Section 3 of the Credit Unions Act 1979 (as amended) makes the following provisions about the use of the name "credit union":
- (1) under section 3(1), every credit union with its registered office:
- (a) in England or Scotland should have "credit union" in its name;
- (b) in Wales should have "credit union" or "undeb credyd" in its name;
- (2) under section 3(2), unless one is registered as a credit union, it is an offence to:
- (a) refer to oneself as a "credit union" or "undeb credyd", or any related words;
- (b) represent oneself as being a credit union;
- subject to section 3(3) (see CRED 13.2A.1 G (3));
- (3) section 3(3) provides that section 3(2) (see CRED 13.2A.1 G (2)) does not apply:
- (a) to specified overseas deposit-takers;
- (b) to a person who has the FSA's written approval;
- (c) where an officer or employee uses a title or descriptive expression indicating his office or post with:
- (i) a credit union; or
- (ii) an organisation in CRED 13.2A.1 G (3)(a) or CRED 13.2A.1 G (3)(b).
- 01/12/2004
CRED 13.2A.2
See Notes
The effect of section 3 of the Credit Unions Act 1979 (see CRED 13.2A.1 G) is that if one of the following organisations, for example, wishes to use the words "credit union" in its name, it will need the approval in writing of the FSA:
- (1) a study group working towards registration as a credit union;
- (2) a body representing or providing services to credit unions.
- 01/12/2004
CRED 13.2A.3
See Notes
- 01/12/2004
CRED 13.2A.4
See Notes
- 01/12/2004
CRED 13.3
What does registration mean?
- 01/12/2004
CRED 13.3.1
See Notes
- 01/12/2004
CRED 13.3.3
See Notes
CRED 13.4
Process for registration
- 01/12/2004
CRED 13.4.1
See Notes
- (1) For registration, applicants must demonstrate to the satisfaction of the FSA that the statutory conditions set out in section 1 of the Credit Unions Act 1979 will be fulfilled. CRED 13 Annex 1 G contains a table listing these statutory conditions. CRED 13 Annex 2 G contains information about eligibility for membership of a credit union.
- (a) One of the conditions is that the objects of the credit union are those, and only those, of a credit union. The objects are set out in full in CRED 13 Annex 1B. Unless an activity is consistent with these objects, a credit union has no power to engage in it. It is important that a credit union satisfies itself that it has the necessary power before engaging in the activity. For instance, it is clear that a credit union is permitted to receive donations from an outside organisation, so may receive the proceeds from a lottery run by that organisation. Any such organisation will need to be independent from the credit union, with separate management and accounting.
- (b) Another condition is that admission to membership of the credit union is restricted to persons who fulfil an appropriate membership qualification ("AMQ") and that in consequence a common bond exists among the members (see CRED 13 Annex 1A - CRED 13 Annex 1C).
- (2) The application pack contains the relevant forms for registration and explanatory notes on how to complete the forms. The notes also contain information about the appropriate membership qualifications for credit unions.
- (3) CRED 13 Annex 2 G contains information about eligibility for membership of a credit union.
CRED 13.5
What does authorisation involve?
- 01/12/2004
CRED 13.5.1
See Notes
- 01/12/2004
CRED 13.5.2
See Notes
- 01/12/2004
CRED 13.5.3
See Notes
- 01/12/2004
CRED 13.5.4
See Notes
The FSA's Authorisation manual (AUTH) explains in full the circumstances in which authorisation is required, the authorisation process and the FSA's powers in relation to authorisation. The key chapters of AUTH for a person applying, or considering applying, to the FSA to become a credit union with a Part IV permission to accept deposits are:
- (1) AUTH 3: Applications for Part IV permission;
- (2) AUTH 4: Authorisation fees; and
- (3) AUTH 6: Approved persons.
CRED 13.6
Process for Part IV permission
- 01/12/2004
CRED 13.6.1
See Notes
- 01/12/2004
CRED 13.6.2
See Notes
The FSA will typically require the following information from all applicants as a minimum:
- (1) a business plan which describes the regulated activities and any unregulated activities which the applicant proposes to carry on, the management and organisational structure of the applicant and details of any proposed outsourcing arrangements;
- (2) appropriately analysed financial budget and projections which demonstrate that the applicant expects to comply with the relevant financial resources requirements applicable to credit unions (see CRED 5.2.1 G (4), CRED 8 and CRED 9);
- (3) details of the systems to be used, and the controls to be put in place, for the running of the credit union (see CRED 4.3);
- (4) details of the individuals to be involved in the running of the credit union, particularly those performing one or more controlled functions for whom approved persons status will be required (see CRED 6.3);
- (5) a statement from two directors of the applicant's committee of management confirming, to the best of their knowledge, the completeness and accuracy of the information supplied; and
- (6) confirmation of insurance against fraud or other dishonesty (see CRED 7A.4.1 R CRED 7A.4.3 R).
- 01/12/2004
CRED 13.6.3
See Notes
- 01/12/2004
CRED 13.6.4
See Notes
CRED 13.6.5
See Notes
The FSA may decide to grant an application for Part IV permission subject to limitations or requirements. For example, the FSA:
- (1) can impose limitations, for example, to limit the number of customers from whom the credit union can accept deposits during an initial period of operation; this might be used where, for example, a credit union's systems are not yet adequate to be able to process a high volume of transactions; and
- (2) the FSA can impose requirements, for example, to restrict the scope of a credit union's Part IV permission to carry on regulated activities or require a credit union to submit financial returns more frequently than normal (see AUTH 3.7).
CRED 13.6.6
See Notes
- 01/12/2004
CRED 13.6.7
See Notes
- 01/12/2004
CRED 13.6.8
See Notes
CRED 13.6.9
See Notes
- 01/12/2004
CRED 13.7
Applying for approved persons status
- 01/12/2004
CRED 13.7.1
See Notes
- 01/12/2004
CRED 13.7.2
See Notes
- 01/12/2004
CRED 13.7.3
See Notes
CRED 13.7.4
See Notes
- 01/12/2004
CRED 13.7.5
See Notes
- 01/12/2004
CRED 13.7.6
See Notes
- 01/12/2004
CRED 13.7.7
See Notes
CRED 13.7.8
See Notes
- 01/12/2004
CRED 13 Annex 1
Requirements of Registration
- 01/12/2004
The requirements of registration under the Industrial and Provident Societies Act 1965, as set out in the Credit Unions Act 1979 and referred to in CRED 13.4.1G.
See Notes
REQUIREMENT | SECTION OF THE RELEVANT ACTS | |
That the objects of the society are those, and only those of a credit union. | Credit Unions Act 1979, s.1(2)(a) | |
See CRED 13 Annex 1B G Section 1 of the Credit Unions Act 1979 (as amended). |
Credit Unions Act 1979, s.1(3) | |
That admission to membership of the society is restricted to individuals all of whom fulfil a specific qualification which is appropriate to a credit union (and that in consequence a "common bond" exists between members). | Credit Unions Act 1979, s.1(2)(b) | |
See CRED 13 Annex 1B G Section 1 of the Credit Unions Act 1979 (as amended) - CRED 13 Annex 1C G Qualifications approved by the FSA (and the Registry of Friendly Societies). |
Credit Unions Act 1979, s.1(4) | |
That the rules of the credit union are in a form as agreed by the FSA and provide for all matters required by the legislation. | Credit Unions Act 1979, s.4(1) and Schedule 1 | |
That the registered office of the credit union is in Great Britain. | Credit Unions Act 1979, s.1(1)(c) | |
See CRED 13 Annex 1B G Section 1 of the Credit Unions Act 1979 (as amended). | Credit Unions Act 1979, s.1(1)(c) | |
That a suitable name is chosen for the credit union. | Credit Unions Act 1979, s.3 | |
for credit unions with their registered office in England or Scotland their name must always include the words 'Credit Union' and have 'Limited' as the last word in the name | Credit Unions Act 1979, s.3(1) and 3(4) | |
for credit unions with their registered office in Wales their name may use 'undeb credyd' instead of 'Credit union' and 'cyfyngedig' instead of 'Limited' | The Welsh Language Act 1993, s.28 and 29 | |
That the credit union has at least 21 members. | Credit Unions Act 1979, s.6(1) | |
only individuals can be members of a credit union | Credit Unions Act 1979, s.5(1) | |
an individual is not a member of a credit union unless he holds at least one fully paid-up share in that credit union | Credit Unions Act 1979, s.1(6) |
- 01/01/2005
- Past version of CRED 13 before 01/01/2005
CRED 13 Annex 1A
Common bond
- 01/01/2005
CRED 13 Annex 1A 1
G | ||||
Application | ||||
1. | (1) | This Annex is relevant to: | ||
(a) | societies (typically known as "study groups") seeking registration as credit unions (see CRED 13 Ann 1A G 1(2)); and | |||
(b) | credit unions seeking to amend their membership qualifications. | |||
(2) | When the term "credit union" is in italics, its definition is in the Glossary to the FSA Handbook which reads: "a body corporate registered under the Industrial and Provident Societies Act 1965 as a credit union in accordance with the Credit Unions Act, which is an authorised person". When the term is not in italics, it may also refer to a credit union that does not have permission to take deposits, but is merely registered, or is a study group or other association seeking to be registered as a credit union. The term is only intended to refer to a credit union in Great Britain, not one in Northern Ireland. | |||
Introduction | ||||
2. | (1) | This Annex relates to section 1 of the Credit Unions Act 1979 (see CRED 13 Annex 1B). It explains how the FSA exercises its statutory function of satisfying itself before registration that a common bond exists among the members of a credit union. | ||
(2) | These are the key points covered by this Annex: | |||
(a) | the need for a common bond is fundamental to the regulatory regime for credit unions; | |||
(b) | an "appropriate membership qualification" does not necessarily create a common bond; | |||
(c) | the FSA has adopted the following policy for the geographical extent of terms limiting membership qualifications: | |||
(i) | "locality" is comparable in extent to a principal tier of local government (for example: a single city, London borough or county); and | |||
(ii) | "area" is comparable in extent to a single administrative region (for example: Scotland, Wales, North-East England or London); | |||
& | (d) | a membership qualification based on association between members may be combined with another qualification set out in section 1(4) of the Credit Unions Act 1979 (for example, residing in or being employed in a particular locality - see CRED 13 Annex 1B) but not with additional qualifications created under that subsection; | ||
(e) | common bonds cannot be infinitely extended, so the FSA has adopted the policy of using the following presumptions for or against the existence of a common bond for different numbers of persons eligible for membership: | |||
(i) | up to 100,000 - there is a presumption for the common bond (if supported by a statutory declaration - see CRED 13 Ann 1A G 2(2)(g)); | |||
(ii) | from 100,000 to 1 million - there is no presumption either way: the credit union has to make a case; and | |||
(iii) | over 1 million - there is a presumption against the common bond: the credit union will have to have particularly strong arguments to succeed in making a case; | |||
(f) | the common bond is not a franchise, so: | |||
(i) | when deciding whether to approve a common bond, the FSA will not take into account whether the proposed area overlaps the area of another credit union; and | |||
(ii) | it is not necessary for a credit union to demonstrate an intention to service the whole of its common bond are | |||
(g) | (i) | three members and the secretary of a credit union may make a statutory declaration that as a result of the qualification for admission to membership, a common bond exists between the members (but the FSA may require other evidence - see CRED 13 Ann1A 7(2)(b)); | ||
(ii) | there is a special form for this purpose; | |||
(iii) | a statutory declaration is made under the provisions of the Statutory Declarations Act 1835 and must be signed before a solicitor or commissioner for oaths or notary public or justice of the peace; | |||
(iv) | it is a criminal offence knowingly or wilfully to make a false statutory declaration, and an offender may be imprisoned or fined or both. | |||
Statutory function | ||||
3. | A credit union may be registered if the FSA is satisfied (among other things) that admission is restricted to persons who fulfil an "appropriate membership qualification", in consequence of which a "common bond" exists among the members (sections 1(1)(a) and 1(2)(b) of the Credit Unions Act 1979 (CRED 13 Annex 1B)). | |||
Handbook material | ||||
4. | DEC 1.2.8 -DEC 1.2.10 G provide guidance on who within the FSA makes decisions under section 1 of the Credit Unions Act 1979. It is possible for such decisions to be taken to judicial review. CRED 13 (Registration and authorisation) is concerned with the registration and authorisation of credit unions. | |||
What is a common bond? | ||||
5. | (1) | The Credit Unions Act 1979 provides for the registration of credit unions under the Industrial and Provident Societies Act 1965 (the Act under which bona fide co-operatives are registered). | ||
(2) | Credit unions are only allowed to have the objects set out in section 1(3) of the Credit Unions Act 1979 (see CRED 13 Annex 1B). They are thus restricted to providing services to their members, not to the public at large. | |||
(3) | Membership of a credit union must be restricted by an "appropriate membership qualification" that creates a common bond (section 1(2)(b) of the Credit Unions Act 1979 - see CRED 13 Annex 1B and CRED 13 Annex 1C). | |||
(4) | It is apparent from the Parliamentary debates on the Credit Unions Act 1979 that persons who had a common bond were envisaged as having some degree of shared identity, a sense of belonging or a collective interest. The FSA considers that the bond should be sufficient to encourage members to do some or all of the following: | |||
(a) | play an active role in the credit union (for example, by volunteering); | |||
(b) | save regularly; and | |||
(c) | repay loans promptly. | |||
The sense of obligation to save and repay among the members of credit unions would be greater than among persons dealing with an ordinary commercial provider. | ||||
(5) | The decision whether or not a common bond exists is made under the Credit Unions Act 1979, so the basis for the FSA's decision will be confined to criteria under that Act, and prudential issues will not be directly involved. However, in discharging its responsibilities under the Act, the FSA will need to satisfy itself that the credit union will meet or continue to meet the threshold conditions and not put its members' funds at risk. These issues will be considered in a risk-based manner when the FSA decides whether or not to give a credit union permission to accept deposits. Section 1 of the Credit Unions Act 1979 as amended (see CRED 13 Annex 1B) provides that a credit union may not be registered unless it has applied to the FSA for such permission, and the FSA shall not register a credit union unless it proposes to give the credit union permission. The FSA may give the credit union an opportunity of withdrawing an application for registration if it considers that it will not be able to grant authorisation. Prudential issues will also be considered separately when a credit union seeks to amend its membership qualification. | |||
(6) | It is important that a credit union should not admit to membership any person who does not share the common bond; that is any person who is ineligible under the credit union's membership qualification. CRED 13 Annex 2 G provides further guidance about the consequences of admitting ineligible persons. | |||
What is an "appropriate membership qualification"? | ||||
6. | (1) | "Appropriate membership qualifications" are such qualifications as "residing in a particular locality", "being employed by a particular employer" and "being a member of a bona fide organisation". Some of the qualifications were included when the Credit Unions Act 1979 was passed; others have been added to that Act by Deregulation and other Orders; and others have been approved by the FSA, or its predecessor, the Registry of Friendly Societies. A full list of "appropriate membership qualifications" is given in CRED 13 Annex 1B (Section 1 of the Credit Unions Act 1979, as amended) and CRED 13 Annex 1C (Qualifications approved by the FSA (and the Registry of Friendly Societies)). The FSA has power to approve further qualifications. | ||
(2) | The membership of a credit union is made up of the following types of member: | |||
(a) | directly qualifying member - who fulfils the "appropriate membership qualification"; | |||
(b) | indirectly qualifying member ("family member") - who lives in the same household as, and is a relative of, a directly qualifying member; and | |||
(c) | non-qualifying member - who joined the credit union as a directly or indirectly qualifying member, but has ceased to be so. | |||
Further guidance on eligibility for membership of a credit union is given in CRED 13 Annex 2 G. | ||||
(3) | The two concepts of the "appropriate membership qualification" and the "common bond" are often treated in the credit union sector as though they were interchangeable, but this is not the case. The "appropriate membership qualification" exists as the basis for creating the common bond: thus, the "appropriate membership qualification" may be viewed as the cause and the "common bond" the effect. But the fact that there is an "appropriate membership qualification" does not necessarily mean that there will be a "common bond". | |||
(4) | For registration to be possible, both the "appropriate membership qualification" and the "common bond" have to be in place. On examining the "appropriate membership qualification", the FSA could in theory infer from it the existence of a "common bond" (section 1(5)(b) of the Credit Unions Act 1979 - see CRED 13 Annex 1B) without a statutory declaration or further evidence. However, the FSA is unlikely to be able to make this inference for any but the smallest of population pools - see CRED 13 Ann 1A 7(2). | |||
(5) | Since the Regulatory Reform (Credit Unions) Order 2003, it is possible for a credit union to adopt a membership qualification combining association and one of the other qualifications set out in section 1(4)(a), (b), (c), (d) or (f) of the Credit Unions Act 1979, as amended (without the need for the FSA to approve an additional qualification for each combination, under the power in the tailpiece to that subsection - see CRED 13 Annex 1B). For example, a credit union may now adopt a membership qualification under which some members reside in the locality (but do not belong to a bona fide organisation there) and other members belong to a bona fide organisation in the locality (but do not reside there). However, a credit union cannot combine association and one of the qualifications approved by the FSA or Registry of Friendly Societies (see CRED 13 Annex 1C and CRED 13 Ann 1A G 10(2)); nor may the qualifications in section 1(4)(a), (b), (c), (d) or (f) of the Credit Unions Act 1979, as amended, be combined with each other (see CRED 13 Annex 1B). | |||
(6) | Having chosen an "appropriate membership qualification" from the list, it has always been possible for a credit union to impose within its registered rules an additional requirement upon members. This is the effect of the words in section 1(2)(b) of the Credit Unions Act 1979 see CRED 13 Annex 1B: "whether or not any other qualifications are also required by the rules". Thus it has always been possible to adopt a requirement that each member of the credit union must both reside and belong to a bona fide organisation in the locality. Under such a qualification, neither a person who merely resides (but does not belong to the organisation), nor one who merely belongs to the organisation (but does not reside) may join the credit union. | |||
(7) | CRED 13 Annex 1C lists the qualifications approved by the FSA (or its predecessor, the Registry of Friendly Societies). The FSA has power, as previously mentioned, to approve further qualifications. | |||
What has the FSA to decide? | ||||
7. | (1) | In relation to membership, the FSA has to be satisfied on two counts: | ||
(a) | there is an "appropriate membership qualification"; and | |||
(b) | in consequence of the "appropriate membership qualification", a common bond exists. | |||
It is a two-stage process: the first stage is factual (a question of technical validity); the second is judgemental (and potentially subjective). | ||||
(2) | If it considers it proper in the circumstances of the case, the FSA may: | |||
(a) | infer the existence of a common bond from the appropriate membership qualification (but see CRED 13 Ann 1A G 6(4)); or | |||
(b) | rely on a statutory declaration (by 3 members and the secretary of the credit union or prospective credit union - see CRED 13 Ann 1A 2(2)(g)) that a common bond exists (section 1(5) of the Credit Unions Act 1979 - see CRED 13 Annex 1B). Even where a statutory declaration is given, the FSA may require other evidence to support the credit union's (or prospective credit union's) contention that there is a common bond. | |||
Meaning of "locality " in "appropriate membership qualifications " based on residence | ||||
8. | (1) | Although several of the "appropriate membership qualifications" (see CRED 13 Annex 1B - CRED 13 Annex 1C) use the term "locality", it is not defined by the Credit Unions Act 1979. Historically, the Registry of Friendly Societies took a fairly restrictive view of its meaning, but the FSA is taking a broader one, drawing on case law and other statutory uses of that term. | ||
(2) | The FSA's working definition is that a "locality" is a natural geographical or administrative unit, comparable in size (but not limited to) the principal tier of local government in Great Britain, that is unitary authorities or county councils. The justification for this is that the common provision of "local" public services is currently made at this level. | |||
(3) | So the FSA will generally accept that "locality" extends up to the area covered by such local authorities, and so may cover such areas as single cities, London boroughs or counties. If larger areas were proposed, the onus would lie with credit unions to demonstrate that they still constituted a "locality". Even if a geographical or administrative area satisfies the criteria for being a "locality", that does not mean that there will be a common bond (see CRED 13 Ann 1A G 2(2)(b) and 11(1)-(5)). | |||
Meaning of "area " in "appropriate membership qualifications " based on employment | ||||
9. | The "appropriate membership qualification" based on employment in CRED 13 Annex 1C uses the term "area", but this is not defined in the Credit Unions Act 1979. The FSA accepts that the term "area" is potentially much larger in scope than "locality", and that it could extend up to the size of a single standard administrative region within Great Britain. So, for example, Scotland, Wales, the North-East of England or Greater London could be regarded as "areas" for the purpose of this "appropriate membership qualification". To be acceptable, it is not necessary for the boundary proposed by a credit union to coincide with an actual standard administrative region. | |||
Regulatory Reform (Credit Unions) Order 2003 and associational "appropriate membership qualification" | ||||
10. | (1) | The "appropriate membership qualification" in section 1(4)(e) of the Credit Unions Act 1979 is that of "being a member of a bona fide organisation or being otherwise associated with other members of the society for a purpose other than that of forming a society to be registered as a credit union". So the members must be associated through something other than the credit union. The stronger the character of the association between the individuals, the more likely it is to form the basis for the existence of a common bond. | ||
(2) | As a result of the Regulatory Reform (Credit Unions) Order 2003, it is now possible for a credit union to adopt a membership qualification combining association and one of the other qualifications set out in section 1(4)(a), (b), (c), (d) or (f) of the Credit Unions Act 1979, as amended (without the need for the FSA to approve an additional qualification for each combination, under the power in the tailpiece to that subsection - see CRED 13 Annex 1B and CRED 13 Ann 1A G 6(5)). However, it is not possible for a credit union to combine association and one of those qualifications specifically approved by the FSA or its predecessor, the Registry of Friendly Societies - see CRED 13 Annex 1C and CRED 13 Ann 1A G 6(5), nor may the qualifications in section 1(4)(a), (b), (c), (d) or (f) of the Credit Unions Act 1979, as amended, be combined with each other. This means that a single credit union may be properly formed for persons who: | |||
(a) | live or work in a locality; or | |||
(b) | associate with the residents and workers (through, for example, attending a religious centre in the locality). | |||
(3) | However, it is still necessary to establish that the qualifications establish a common bond: this may be difficult if there is no shared identity between the members qualifying under the different qualifications (even where the population pool is below 100,000 - CRED 13 Ann 1A G 11(3)). | |||
Overall size of population pool for "appropriate membership qualifications " | ||||
11. | (1) | It is in the nature of the common bond that the concept cannot be infinitely expanded: the larger the eligible population pool covered by an "appropriate membership qualification", the weaker or less plausible will be the existence of a common bond. | ||
(2) | It is not practical to expect credit unions to operate on the basis that members will be fully acquainted with each other, but there has to be some mutual identification, and some point at which this ceases to have a significant effect. | |||
(3) | The Registry of Friendly Societies (a predecessor of the FSA) adopted 100,000 as an indicative maximum for the size of the residential population in a common bond area. The FSA has further developed that thinking through its decisions in subsequent cases. For full transparency, the indicative bands currently used by the FSA are set out below: | |||
(a) | where an "appropriate membership qualification" covers a pool of up to 100,000 people eligible to be members: | |||
(i) | there is a presumption in favour of the existence of a common bond; and | |||
(ii) | the FSA will (provided the "appropriate membership qualification" is technically valid and there are no unusual features) generally accept a simple explanation of the nature of the common bond, together with a statutory declaration (but see CRED 13 Ann 1A G 10(3)). | |||
(b) | where an "appropriate membership qualification" covers a pool of between 100,000 and 1 million eligible people: | |||
(i) | there is no presumption in favour of the existence of a common bond; and | |||
(ii) | the FSA expects the credit union to make a positive, convincing case, marshalling all the information relevant to establishing that a common bond exists among the members. | |||
(c) | where an "appropriate membership qualification" covers a pool of more than 1 million eligible people: | |||
(i) | there is a presumption that the common bond is so dilute as to be meaningless; but | |||
(ii) | it is open to a credit union to make a submission to convince the FSA that a common bond exists among the members: but its arguments would have to be particularly strong for it to succeed in making a case. | |||
(4) | The FSA's decision whether or not to accept the existence of a common bond (for a new or prospective credit union) is made on an individual basis. So decisions (whether made by the FSA or its predecessor, the Registry of Friendly Societies) create no binding precedent that a population pool of a given size is acceptable for a particular "appropriate membership qualification". | |||
(5) | Given the range of "appropriate membership qualification" and the different populations covered, it is not possible to be prescriptive about the information necessary to show that a common bond is real. In general, it has been the experience of the Registry of Friendly Societies and the FSA that it is fairly straightforward to make a plausible case for the existence of a common bond where the "appropriate membership qualification" is based on employment by a single employer. For residential qualifications, applicants should draw on their local knowledge to identify those elements, geographical and social that create a sense of cohesion. For a qualification based on living or working in a particular locality, the applicants might wish to identify the ways in which workers from outside the area become involved in the activities of the residential community. | |||
(6) | The size thresholds set out above apply to the number of persons eligible for membership under any "appropriate membership qualification", not just ones based on residence. | |||
Overlapping common bond areas | ||||
12. | A common bond area cannot be regarded legally as a franchise, giving exclusive rights of access to a particular area or pool of potential members. The FSA recognises the value of consolidation in providing stronger entities, but there is no justification in current legislation for refusing the registration of a new credit union in an area already served by existing credit unions, nor even for consulting them: the FSA's decision on registration is based only on the criteria in the Credit Unions Act 1979 (see CRED 13 Ann 1A G 5(5). In the absence of express statutory support, it would be wrong for the FSA to act in a manner that could be construed as anti-competitive. So the FSA will not refuse registration on the grounds of overlap, nor will it undertake to consult credit unions whose common bond area may be overlapped by a later registration. | |||
Servicing whole of area | ||||
13. | Since the common bond is not a franchise, the FSA will not expect a credit union to service fully the whole of its area or population pool. But where the "appropriate membership qualification" covers a large population pool, the inference is that the bond is likely to be weaker, and there will need to be more justification. An intention to service only part of the area does not help to establish whether or not the "appropriate membership qualification" establishes a common bond for the area as a whole. | |||
Mergers | ||||
14. | (1) | The Credit Unions Act 1979 allows credit unions to merge, either by amalgamation (where a new credit union is created and the constituents cease to exist) or by transfer of engagements (where the credit union transferring its engagements ceases to exist, but the enlarged credit union accepting the engagements continues). | ||
(2) | For either of these procedures to be practicable in individual cases: | |||
(a) | the merged credit union will need to have an "appropriate membership qualification" that creates a "common bond"; and | |||
(b) | members of the constituent credit unions will need to be eligible for membership of the merged credit union. | |||
(3) | So in individual cases: | |||
(a) | it might not be possible for the merged credit union to adopt an "appropriate membership qualification" (for example, the new catchment area required for the merger of two residential credit unions might not qualify under the definition of "locality" - see CRED 13 Ann 1A G 8(1)-(3)); | |||
(b) | even though each credit union seeking to merge has a "common bond" among its own members, this does not necessarily mean that there would be a common bond among all the members of the merged credit union (for example, too large a population pool might be produced by the merger - see CRED 13 Ann 1A G 11(1)). | |||
What information does a credit union need to provide in support of a common bond application? | ||||
15. | Table | |||
Population pool | Information needed | |||
Up to 100,000 | Statutory declaration Simple explanation of common bond (subject to CRED 13 Ann 1A G 10(3)) |
|||
100,000 to 1 million | Convincing case that common bond exists | |||
Over 1 million | Evidence to rebut presumption against existence of common bond (special factors generating particular interaction in this population pool, despite its large size and the dilution normally expected in such circumstances) |
CRED 13 Annex 1B
Section 1 of the Credit Unions Act 1979 (as amended)
- 01/01/2005
D | |||
1. | Registration as a credit union | ||
(1) | Subject to - sections 2(1) and 7(1) of the Industrial and Provident Societies Act 1965 (in this Act referred to as "the 1965 Act"), a society may be registered under that Act if: | ||
(a) | it is shown to the satisfaction of the Authority that the conditions specified in subsection (2) below are fulfilled; | ||
(b) | the rules of the society comply with section 4(1) [of this Act]; | ||
(c) | the place which under those rules is to be the society's registered office is situated in Great Britain; | ||
(d) | the society has made an application to the Authority for Part IV permission under section 40 of the Financial Services and Markets Act 2000 (in this Act referred to as "the 2000 Act" to accept deposits; and | ||
(e) | the Authority is satisfied that, once registered under the 1965 Act, the society will satisfy, and continue to satisfy, the threshold conditions set out in Schedule 6 to the 2000 Act in relation to the regulated activity of accepting deposits; and a society which is so registered by virtue of this section shall be registered as, and is in this Act referred to as, a "credit union". | ||
(1A) | The Authority shall not issue an acknowledgement of registration under section 2(3) of the 1965 Act to a credit union unless it also proposes to give that society permission under Part IV of the 2000 Act to accept deposits. | ||
(2) | The conditions referred to in subsection (1)(a) above are - | ||
(a) | that the objects of the society are those, and only those, of a credit union; and | ||
(b) | that as a result of any provision of the rules, admission to membership of the society meets the requirement specified in subsection (3A) or (3B) below (whether or not any other qualifications for admission to membership are also required by the rules) and that in consequence, a common bond exists between members of the society. | ||
(3) | The objects of a credit union are - | ||
(a) | the promotion of thrift among the members of the society by the accumulation of their savings; | ||
(b) | the creation of sources of credit for the benefit of the members of the society at a fair and reasonable rate of interest; | ||
(c) | the use and control of the members' savings for their mutual benefit; and | ||
(d) | the training and education of the members in the wise use of money and in the management of their financial affairs. | ||
(3A) | The requirement specified in this subsection is that admission to membership of the society is restricted to persons all of whom fulfil the same specific qualification for admission to membership, being a qualification specified in, or approved under, subsection (4) below as being appropriate to a credit union. | ||
(3B) | The requirement specified in this subsection is that admission to membership of the society is restricted to persons each of whom fulfils either - | ||
(a) | the qualification for admission to membership specified by paragraph (e) of subsection (4) below as being appropriate to a credit union; or | ||
(b) | the same specific qualification for admission to membership, being a qualification which is so specified in paragraph (a), (b), (c), (d) or (f) of that subsection. | ||
(4) | The qualifications for admission to membership which are appropriate to a credit union are - | ||
(a) | following a particular occupation; | ||
(b) | residing in a particular locality; | ||
(c) | being employed in a particular locality; | ||
(d) | being employed by a particular employer; | ||
(e) | being a member of a bona fide organisation or being otherwise associated with other members of the society for a purpose other than that of forming a society to be registered as a credit union; | ||
(f) | residing in or being employed in a particular locality; | ||
and such other qualifications as are for the time being approved by the Authority. | |||
(5) | In ascertaining whether a common bond exists between the members of a society, the Authority - | ||
(a) | may, if it considers it proper in the circumstances of the case, treat as sufficient evidence of the existence of a common bond a statutory declaration which is given by three members and the secretary of the society, and is to the effect that a common bond exists | ||
(b) | may, if it considers it proper in the circumstances of the case, treat the fact that admission to membership is restricted as mentioned in subsection (2)(b) above as sufficient evidence of the existence of a common bond. | ||
(6) | For the purposes of this Act, if the rules of a credit union so provide, a person shall be treated as fulfilling a qualification for admission to membership stated in those rules if he is a member of the same household as, and is a relative of, another person who is a member of the credit union and fulfils that qualification directly. | ||
In section 1 of the Credit Unions Act 1979, the FSA is referred to as "the Authority". |
- 01/01/2005
CRED 13 Annex 1C
Qualifications approved by the FSA (and the Registry of Friendly Societies)
- 01/01/2005
D | |||
1. | The following qualifications (in addition to those set out in section 1(4) of the Credit Unions Act 1979) have been approved by the FSA (and the Registry of Friendly Societies ("RFS")): | ||
(1) | being currently in receipt of a continuing and regular contractual payment arising from employment by a particular employer; | ||
RFS:25 February 1994 | |||
(2) | being currently in receipt of a continuing and regular contractual payment arising from employment by particular employers in a particular area; | ||
RFS: 6 October 1994 | |||
(3) | being currently in receipt of a continuing and regular payment arising from participation in the provision of a public service of a particular nature, or of particular services associated with such participation; | ||
RFS: 22 May 1998 | |||
(4) | residing in a particular locality, or being a member of a bona fide organisation or group of organisations (or otherwise having a continuing and active association with one or more of such organisations) existing within that locality for a purpose other than that of forming a society to be registered as a credit union; | ||
RFS: 15 November 1999 | |||
(5) | being employed by an undertaking in a particular group of employers (and for this purpose "group" has the same meaning as in section 421 of the Financial Services and Markets Act 2000). | ||
FSA 1 January 2005 | |||
2. | Section 421 of the Act: | ||
(1) | In this Act "group", in relation to a person ("A"), means A and any person who is- | ||
(a) | a parent undertaking of A; | ||
(b) | a subsidiary undertaking of A; | ||
(c) | a subsidiary undertaking of a parent undertaking of A; | ||
(d) | a parent undertaking of a subsidiary undertaking of A; | ||
(e) | an undertaking in which A or an undertaking mentioned in paragraph (a), (b), (c) or (d) has a participating interest; | ||
(f) | if A or an undertaking mentioned in paragraph (a) or (d) is a building society, an associated undertaking of the society; or | ||
(g) | if A or an undertaking mentioned in paragraph (a) or (d) is an incorporated friendly society, a body corporate of which the society has joint control (within the meaning of section 13(9)(c) or (cc) of the Friendly Societies Act 1992). | ||
(2) | "Participating interest" has the same meaning as in Part VII of the Companies Act 1985 or Part VIII of the Companies (Northern Ireland) Order 1986; but also includes an interest held by an individual which would be a participating interest for the purposes of those provisions if he were taken to be an undertaking. | ||
(3) | "Associated undertaking" has the meaning given in section 119(1) of the Building Societies Act 1986. |
- 01/01/2005
- Future version of CRED 13 after 06/06/2008
CRED 13 Annex 2
Eligibility for membership of a credit union
- 01/12/2004
See Notes
Admission of members | |||
1. | It is a condition of registration of a credit union that its membership is restricted to persons who fulfil (directly or indirectly) the qualification stated in the credit union's registered rules (section 1(2) of the Credit Unions Act 1979). | ||
Categories of membership | |||
2. | Eligibility for membership of a credit union is determined by its registered rules. Each member of a credit union should fall within one of the following categories. | ||
(1) | Category 1. Directly qualifying member | ||
A directly qualifying member is a person who: | |||
(a) | meets the membership criteria set out in the credit union's registered rules (section 1 of the Credit Unions Act 1979); and | ||
(b) | is above the age of 16 (unless the credit union's registered rules stipulate a higher age) (section 20 of the Industrial & Provident Societies Act 1965). | ||
Note: | A member who is under the age of 18 may not be a member of the committee, trustee, manager or treasurer of the credit union (section 20 of the Industrial & Provident Societies Act 1965) or receive a loan (section 11(1) of the Credit Unions Act 1979). | ||
(2) | Category 2. Indirectly qualifying member | ||
An indirectly qualifying member ("family member") qualifies only through a directly qualifying member (Category 1 above). This category of membership is available only if the registered rules of the credit union provide for it explicitly. | |||
An indirectly qualifying member ("family member") is a person who is: | |||
(a) | a member of the same household as; and | ||
(b) | a relative of another person who is; | ||
a directly qualifying member of the credit union (section 1(6) of the Credit Unions Act 1979). | |||
(3) | Category 3. Non-qualifying member | ||
A person in this category would originally have joined the credit union as a directly qualifying member (Category 1 ) or indirectly qualifying member ("family member") (Category 2 ). This category of membership is available unless the credit union's registered rules provide otherwise. The number of non-qualifying members should not at any time exceed ten per cent of the total membership of the credit union (section 5(6) of the Credit Unions Act 1979). The registered rules of a credit union should make provision for terminating the membership of members in order to comply with this limit (paragraph 13 of Schedule 1 to the Credit Unions Act 1979). | |||
A non-qualifying member is a person who has ceased to fulfil the membership qualification; that is to say a person who: | |||
(a) | joined the credit union as a qualifying member (whether qualifying directly or indirectly); but | ||
(b) | later ceased to qualify (section 5(5) of the Credit Unions Act 1979). | ||
Note: | When directly qualifying members become non-qualifying members, then all members who qualified indirectly through them will also become non-qualifying members (unless subsequently by some other route they have themselves become either directly qualifying members or indirectly qualifying members). A person who is eligible for membership under more than one category will hold membership under the higher of those categories (so, for example, someone who is eligible under Categories 1 and 2 will be regarded as a Category 1 member, and someone who is eligible under Categories 2 and 3 will be regarded as a Category 2 member). | ||
Category of Membership | |||
Category 1 | Category 2 | Category 3 | |
Directly qualifying member | Indirectly qualifying member ("family member") | Non-qualifying member | |
DQM | IQM | NQM | |
Fulfils the membership qualification set out in the common bond rule of the credit union | Lives in the same household as, and is a relative of, a DQM | Has ceased to be a DQM or IQM | |
Persons too young to be members | |||
3. | A person too young to be a member ("juvenile depositor") may make deposits with a credit union (section 9 of the Credit Unions Act 1979). A person too young to be a member ("juvenile depositor") is a person who: | ||
(1) | is below the age of 16 (unless the credit union's registered rules stipulate a higher age for entry) (section 20 of the Industrial & Provident Societies Act 1965); and | ||
(2) | would qualify for membership (directly or indirectly) if he were old enough. | ||
This means that in a qualification of residing in a particular locality, an eligible juvenile depositor should reside there (because indirect qualification means being a member of the same household as well as a relative of a DQM). In a qualification of being employed in a particular locality, a juvenile depositor is eligible by going to school or college there. | |||
Note: | These deposit's are not shares and these depositors are not members. | ||
Status of transactions | |||
4. | Credit union's may only undertake the activities authorised by their registered rules. If they purport to undertake wider activities, then any transactions arising from such activities are void. Any transactions with an ineligible person are unenforceable. | ||
5. | If a credit union becomes aware that it has admitted ineligible persons as "members", it should immediately take steps to: | ||
(1) | reclaim any loans made to such persons; and | ||
(2) | repay to such persons any sums they have deposited with the credit union by way of share purchase. | ||
6. | There are legal rights - such as the doctrine of unjust enrichment - that should enable a credit union to recover funds lent to such persons. Similar principles should apply to enable such persons to recover any funds deposited with the credit union. | ||
7. | If a credit union discovers that it has admitted to membership a significant number of ineligible persons, it should inform the FSA at the earliest opportunity to discuss the implications and the way forward. | ||
Extension of common bond | |||
8. | Transactions with an ineligible person are not validated if that person subsequently becomes eligible for membership through, say, an extension of the common bond. Although a newly registered common bond extension allows a credit union to admit members in the additional area, it does not have retrospective effect for those who were erroneously admitted before the extension. If funds are not to be returned in accordance with the guidance given under "Status of Transactions" (paragraphs 4 to 7), immediate steps will have to be taken to ensure that proper business relations commence - and are shown to commence - after the common bond extension has been effected. The following steps should generally be taken: | ||
(1) | the credit union should issue a new pass book; | ||
(2) | share deposits and loans should be started again - stating the current position - being entered as new transactions in the new passbook. | ||
Powers available under other Acts | |||
9. | This annex draws attention to a number of offences under the Industrial & Provident Societies Act 1965 and the Credit Unions Act 1979. The existence of these offences does not preclude the FSA from using any other powers that are available to it under the Act. | ||
10. | A credit union, officer, member or other person who does anything forbidden by credit union legislation is liable on summary conviction to a fine not exceeding level 3 on the standard scale (currently £1,000) (section 61(b) of the Industrial & Provident Societies Act 1965 and section 28(1) of the Credit Unions Act 1979). | ||
11. | The registration of a credit union may be cancelled on proof that it has wilfully and after notice from the FSA violated any of the provisions of the Industrial & Provident Societies Act 1965 or Credit Unions Act 1979 (section 20 of the Credit Unions Act 1979). |
- 01/12/2004
- Future version of CRED 13 after 01/01/2006
CRED 14
Supervision
CRED 14.1
The FSA's approach to supervision
- 01/12/2004
Application and purpose
CRED 14.1.1
See Notes
- 01/12/2004
CRED 14.1.2
See Notes
- 01/12/2004
CRED 14.1.3
See Notes
CRED 14.1.4
See Notes
The design of these arrangements is shaped by the regulatory objectives. These are set out in section 2 of the Act (The Authority's general duties) and are:
- (1) maintaining confidence in the financial system;
- (2) promoting public understanding of the financial system;
- (3) securing the appropriate degree of protection for consumers; and
- (4) reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime.
CRED 14.1.5
See Notes
- 01/12/2004
The FSA's risk based approach to supervision
CRED 14.1.6
See Notes
- 01/12/2004
Tools of supervision
CRED 14.1.7
See Notes
- 01/12/2004
CRED 14.1.8
See Notes
The FSA classifies these tools under four headings:
- (1) diagnostic: designed to identify, assess and measure risks;
- (2) monitoring: to track the development of identified risks, wherever these arise;
- (3) preventative: to limit or reduce identified risks and so prevent them crystallising or increasing; and
- (4) remedial: to respond to risks when they have crystallised.
- 01/12/2004
CRED 14.1.9
See Notes
The FSA uses a variety of tools to monitor whether a credit union remains in compliance with regulatory requirements. These tools include:
- (1) desk-based reviews;
- (2) liaison with other agencies or regulators;
- (3) meetings with management and other representatives of a credit union;
- (4) on-site inspections;
- (5) reviews and analysis of periodic returns and notifications;
- (6) reviews of past business;
- (7) use of auditors;
- (8) use of skilled persons.
- 01/12/2004
CRED 14.1.10
See Notes
The FSA also uses a variety of tools to address specific risks identified in credit unions. These tools include:
- (1) making recommendations for preventative or remedial action;
- (2) setting individual requirements;
- (3) giving individual guidance to a credit union;
- (4) varying a credit union's permission.
- 01/12/2004
CRED 14.1.11
See Notes
- 01/12/2004
CRED 14.2
Information gathering by the FSA on its own initiative
- 01/12/2004
Application and purpose
CRED 14.2.1
See Notes
- 01/12/2004
CRED 14.2.2
See Notes
- 01/12/2004
CRED 14.2.3
See Notes
- 01/12/2004
CRED 14.2.4
See Notes
- 01/12/2004
CRED 14.2.5
See Notes
SUP 2.1.5 G states that the FSA has statutory powers, including:
- (1) to require the provision of information;
- (2) to require reports from skilled persons;
- (3) to appoint investigators; and
- (4) to apply for a warrant to enter premises.
- 01/12/2004
CRED 14.2.6
See Notes
- 01/12/2004
Information gathering by the FSA on its own initiative: background
CRED 14.2.7
See Notes
SUP 2.2.1 G states that failure to cooperate with the FSA makes a credit union liable to regulatory sanctions, including discipline under the Act. But this:
- (1) is not a criminal offence;
- (2) cannot lead to a person being treated as if in contempt of court.
- 01/12/2004
CRED 14.2.8
See Notes
- 01/12/2004
Information gathering by the FSA on its own initiative: cooperation by credit unions
CRED 14.2.9
See Notes
SUP 2.3.1 G sets out the various methods of information gathering that the FSA will use on its own initiative which require the cooperation of credit unions:
- 01/12/2004
CRED 14.2.10
See Notes
- 01/12/2004
CRED 14.2.11
See Notes
SUP 2.3.3 G - SUP 2.3.4 G state how the FSA considers that a credit union should cooperate in providing access to its documents and personnel:
- (1) make itself readily available for meetings as reasonably requested;
- (2) give access to any records, files, tapes or computer systems which are within its possession or control, and provide any facilities that are reasonably required;
- (3) produce specified documents, files, tapes, computer data;
- (4) print information which is held on computer or microfilm or otherwise convert it into a readily legible document;
- (5) permit copying of documents or other material on its premises at its reasonable expense;
- (6) answer truthfully, fully and promptly all questions which are reasonably put to it.
- 01/12/2004
CRED 14.2.12
See Notes
- 01/12/2004
"Mystery Shopping"
CRED 14.2.13
See Notes
CRED 14.3
Auditors
- 01/12/2004
Application and purpose
CRED 14.3.1
See Notes
- 01/12/2004
CRED 14.3.2
See Notes
- 01/12/2004
Appointment of auditors
CRED 14.3.3
See Notes
SUP 3.3.2 R states that a credit union must:
- (1) appoint an auditor to undertake the duties and responsibilities set out in SUP 3.8 (summarised in CRED 14.3.22 GCRED 14.3.31 G);
- (2) notify the FSA, without delay, when it is aware that a vacancy in the office of auditor will arise or has arisen, giving the reason for the vacancy;
- (3) appoint an auditor to fill any vacancy in the office of auditor which has arisen;
- (4) ensure that the replacement auditor can take up office at the time the vacancy arises or as soon as is reasonably practicable after that; and
- (5) notify the FSA of the appointment of an auditor, advising the FSA of the name and business address of the auditor appointed and the date from which the appointment has effect.
- 01/12/2004
CRED 14.3.4
See Notes
- 01/12/2004
Auditors' qualifications
CRED 14.3.5
See Notes
- 01/12/2004
CRED 14.3.6
See Notes
- 01/12/2004
CRED 14.3.7
See Notes
- 01/12/2004
CRED 14.3.8
See Notes
- 01/12/2004
CRED 14.3.9
See Notes
- 01/12/2004
CRED 14.3.10
See Notes
- 01/12/2004
CRED 14.3.11
See Notes
- 01/12/2004
Auditors' independence
CRED 14.3.12
See Notes
- 01/12/2004
CRED 14.3.13
See Notes
- 01/12/2004
CRED 14.3.14
See Notes
- 01/12/2004
CRED 14.3.15
See Notes
- 01/12/2004
Credit unions' cooperation with their auditors
CRED 14.3.16
See Notes
- 01/12/2004
CRED 14.3.17
See Notes
- 01/12/2004
CRED 14.3.18
See Notes
Section 341 of the Act (Access to Books etc) provides that an auditor of a credit union appointed under SUP 3.3.2 R:
- (1) has a right of access at all times to the credit union's books, accounts and vouchers; and
- (2) is entitled to require from the credit union's officers such information and explanation as he reasonably considers necessary for the performance of his duties as auditor.
- 01/12/2004
CRED 14.3.19
See Notes
- 01/12/2004
Notification of matters raised by auditor
CRED 14.3.20
See Notes
- 01/12/2004
CRED 14.3.21
See Notes
- 01/12/2004
Rights and duties of all auditors
CRED 14.3.22
See Notes
- 01/12/2004
CRED 14.3.23
See Notes
- 01/12/2004
CRED 14.3.24
See Notes
- 01/12/2004
CRED 14.3.25
See Notes
- 01/12/2004
CRED 14.3.26
See Notes
- 01/12/2004
CRED 14.3.27
See Notes
- 01/12/2004
CRED 14.3.28
See Notes
- 01/12/2004
CRED 14.3.29
See Notes
- 01/12/2004
CRED 14.3.30
See Notes
SUP 3.8.11 R states that an auditor must notify the FSA without delay if he:
- (1) is removed from office by a credit union; or
- (2) resigns before his term of office expires; or
- (3) is not re-appointed by a credit union.
- 01/12/2004
CRED 14.3.31
See Notes
SUP 3.8.12 R states that if an auditor ceases to be, or is formally notified that he will cease to be, the auditor of a credit union, he must notify the FSA without delay:
- (1) of any matter connected with his ceasing which he thinks ought to be drawn to the FSA's attention; or
- (2) that there is no such matter.
- 01/12/2004
CRED 14.4
Skilled persons
- 01/12/2004
Application and purpose
CRED 14.4.1
See Notes
- 01/12/2004
CRED 14.4.2
See Notes
- 01/12/2004
The FSA's power
CRED 14.4.3
See Notes
- 01/12/2004
Policy on the use of skilled persons
CRED 14.4.4
See Notes
- 01/12/2004
Appointment and reporting process
CRED 14.4.5
See Notes
- 01/12/2004
Duties of a credit union
CRED 14.4.6
See Notes
- 01/12/2004
CRED 14.4.7
See Notes
- 01/12/2004
Confidential information privilege
CRED 14.4.8
See Notes
- 01/12/2004
CRED 14.5
Applications to vary or cancel Part IV permission
- 01/12/2004
Application and purpose
CRED 14.5.1
See Notes
This section and SUP 6 apply to all credit unions with a Part IV permission that wish to;
- (1) vary their Part IV permission; or
- (2) cancel their Part IV permission and end their authorisation.
- 01/12/2004
CRED 14.5.2
See Notes
- 01/12/2004
CRED 14.5.3
See Notes
This section explains:
- (1) how a credit union can apply to vary or cancel its Part IV permission;
- (2) the additional procedures that apply to a credit union that needs to wind down its business over a long time period (usually more than six months);
- (3) how the FSA assesses those applications.
- 01/12/2004
CRED 14.5.4
See Notes
- 01/12/2004
Introduction
CRED 14.5.5
See Notes
- 01/12/2004
Applications for variation of permission
CRED 14.5.6
See Notes
- 01/12/2004
CRED 14.5.7
See Notes
- 01/12/2004
CRED 14.5.8
See Notes
- 01/12/2004
CRED 14.5.9
See Notes
- 01/12/2004
CRED 14.5.10
See Notes
- 01/12/2004
CRED 14.5.11
See Notes
- 01/12/2004
CRED 14.5.12
See Notes
- 01/12/2004
CRED 14.5.13
See Notes
- 01/12/2004
CRED 14.5.14
See Notes
- 01/12/2004
Applications for cancellation of permission
CRED 14.5.15
See Notes
- 01/12/2004
CRED 14.5.16
See Notes
The FSA may refuse such an application if it appears that:
- (1) the interests of members, or potential members, would be adversely affected; and
- (2) it is desirable in the interests of members or potential members for the application to be refused.
- 01/12/2004
CRED 14.5.17
See Notes
- 01/12/2004
CRED 14.5.18
See Notes
- 01/12/2004
CRED 14.5.19
See Notes
- 01/12/2004
CRED 14.5.20
See Notes
- 01/12/2004
CRED 14.5.21
See Notes
- 01/12/2004
CRED 14.5.22
See Notes
- 01/12/2004
CRED 14.5.23
See Notes
- 01/12/2004
CRED 14.5.24
See Notes
The FSA will usually not cancel a credit union's permission until the credit union can demonstrate that it has:
- (1) ceased carrying on regulated activities;
- (2) repaid all shares and deposits;
- (3) discharged, satisfied or resolved complaints against the credit union.
- 01/12/2004
CRED 14.5.25
See Notes
- 01/12/2004
CRED 14.5.26
See Notes
- 01/12/2004
CRED 14.5.27
See Notes
- 01/12/2004
CRED 14.5.28
See Notes
- 01/12/2004
Ending authorisation
CRED 14.5.29
See Notes
- 01/12/2004
Additional guidance
CRED 14.5.30
See Notes
- 01/12/2004
CRED 14.5.31
See Notes
- 01/12/2004
CRED 14.5.32
See Notes
- 01/12/2004
CRED 14.5.33
See Notes
- 01/12/2004
CRED 14.5.34
See Notes
- 01/12/2004
CRED 14.6
Individual requirements
- 01/12/2004
Application and purpose
CRED 14.6.1
See Notes
- 01/12/2004
CRED 14.6.2
See Notes
- 01/12/2004
CRED 14.6.3
See Notes
- 01/12/2004
The FSA's powers to set individual requirements on its own initiative
CRED 14.6.4
See Notes
The FSA may vary a credit union's Part IV permission on its own initiative where:
- (1) one or more of the threshold conditions is, or is likely to be, no longer satisfied;
- (2) it is desirable in order to protect members.
CRED 14.6.5
See Notes
- 01/12/2004
CRED 14.6.6
See Notes
Criteria for varying a credit union's permission
CRED 14.6.7
See Notes
The FSA expects to maintain a close working relationship with credit unions and expects that routine supervisory matters can be resolved by issuing guidance. However, the FSA may seek to vary a credit union's permission:
- (1) if it is appropriate to act formally so that enforcement action can be taken if necessary;
- (2) so that a credit union can comply without breaking agreements with third parties.
- 01/12/2004
CRED 14.6.8
See Notes
The FSA may seek to vary on its own initiative a permission if risks are presented by:
- (1) a credit union's management, business or internal controls;
- (2) its involvement in new products or selling practices;
- (3) a change in its structure, activities or strategy.
- 01/12/2004
CRED 14.6.9
See Notes
The following are some of the requirements or limitations that may be imposed:
- (1) submission of reports;
- (2) maintenance of prudential limits;
- (3) submission of business plan;
- (4) limitation of activities;
- (5) maintenance of financial resources.
- 01/12/2004
CRED 14.6.10
See Notes
- 01/12/2004
CRED 14.7
Waiver and modification of rules
- 01/12/2004
Application and purpose
CRED 14.7.1
See Notes
- 01/12/2004
CRED 14.7.2
See Notes
- 01/12/2004
Introduction
CRED 14.7.3
See Notes
The FSA may, on the application or with the consent of a credit union, direct that certain rules:
- (1) are not to apply to the credit union; or
- (2) are to apply to the credit union with such modifications as may be specified.
CRED 14.7.4
See Notes
- 01/12/2004
Applying for a waiver
CRED 14.7.5
See Notes
- 01/12/2004
CRED 14.7.6
See Notes
SUP 8.3.3 states that if a credit union wishes to apply for a waiver, it must do so to its usual supervisory contact at the FSA using the form in SUP 8 Annex 2 (Application for a waiver or modification).
- (1) [Deleted]
- (2) [Deleted]
- (3) [Deleted]
- (4) [Deleted]
- (5) [Deleted]
- (6) [Deleted]
- (7) [Deleted]
- 01/12/2004
CRED 14.7.7
See Notes
- 01/12/2004
CRED 14.7.8
See Notes
- 01/12/2004
CRED 14.7.10
See Notes
- 01/12/2004
Notification of altered circumstances relating to waivers
CRED 14.7.11
See Notes
- 01/12/2004
Publication of waivers
CRED 14.7.12
See Notes
- 01/12/2004
CRED 14.7.13
See Notes
In deciding whether or not to publish, the FSA will take into account whether:
- (1) it will be prejudicial to the commercial interests of the credit union;
- (2) it relates to a minor matter that does not affect a third party and is unlikely to be of interest to other credit unions.
- 01/12/2004
CRED 14.7.14
See Notes
- 01/12/2004
Varying waivers
CRED 14.7.15
See Notes
- 01/12/2004
Revoking waivers
CRED 14.7.16
See Notes
- 01/12/2004
CRED 14.7.17
See Notes
- 01/12/2004
CRED 14.7.18
See Notes
- 01/12/2004
Decision making
- 01/12/2004
CRED 14.8
Individual guidance
- 01/12/2004
Application and purpose
CRED 14.8.1
See Notes
- 01/12/2004
CRED 14.8.2
See Notes
- 01/12/2004
CRED 14.8.3
See Notes
- 01/12/2004
Making a request for individual guidance
CRED 14.8.4
See Notes
- 01/12/2004
CRED 14.8.5
See Notes
- 01/12/2004
CRED 14.8.6
See Notes
- 01/12/2004
Giving individual guidance to a credit union on the FSA's own initiative
CRED 14.8.7
See Notes
- 01/12/2004
CRED 14.8.8
See Notes
- 01/12/2004
Reliance on individual guidance
- 01/12/2004
CRED 14.8.10
See Notes
- 01/12/2004
CRED 14.8.11
See Notes
- 01/12/2004
CRED 14.8.12
See Notes
- 01/12/2004
CRED 14.8.13
See Notes
- 01/12/2004
CRED 14.9
Notifications to the FSA
- 01/12/2004
Application and purpose
CRED 14.9.1
See Notes
- 01/12/2004
CRED 14.9.2
See Notes
This section is a summary of SUP 15, which sets out:
- (1) guidance on the type of event or change in condition which a credit union should consider notifying to the FSA;
- (2) rules on events and changes that a credit union must notify;
- (3) rules on the core information that a credit union must provide;
- (4) rules requiring a credit union to ensure that information provided to the FSA is accurate and complete.
- 01/12/2004
General notification requirements
CRED 14.9.3
See Notes
SUP 15.3.1 R states that a credit union must notify the FSA immediately it becomes aware, or has information which reasonably suggests, that any of the following has occurred, may have occurred or may occur in the foreseeable future:
- (1) the credit union failing to satisfy one or more of the threshold conditions; or
- (2) any matter which could have a serious adverse impact on the credit union's reputation; or
- (3) any matter which could affect the credit union's ability to continue to provide adequate services to its members and which could result in serious detriment to a member; or
- (4) any matter in respect of the credit union which could result in serious financial consequences to the financial system or to other firms.
CRED 14.9.4
See Notes
- 01/12/2004
CRED 14.9.5
See Notes
Compliance with Principle 11 includes giving notice of:
- (1) any proposed restructuring, reorganisation or expansion which would have a significant impact on the risks run by the credit union;
- (2) any significant failure in the credit union's systems or controls, including those reported by the credit union's auditor;
- (3) any proposed action that could result in a material change to a credit union's capital adequacy or solvency.
- 01/12/2004
CRED 14.9.6
See Notes
- 01/12/2004
CRED 14.9.7
See Notes
SUP 15.3.11 R states that a credit union must notify the FSA of the following immediately:
- (1) a significant breach of rule or Principle;
- (2) breach of requirement imposed by the Act, regulations or order;
- (3) the bringing of a prosecution for, or a conviction of, any offence under the Act involving the credit union, members of its committee of management, officers, employees or approved persons.
- 01/12/2004
CRED 14.9.8
See Notes
SUP 15.3.15 R states that a credit union must also notify the FSA immediately of the following:
- (1) civil proceedings against the credit union where the claim is significant to its resources or reputation;
- (2) action against the credit union under section 71 or 150 of the Act (actions for damages);
- (3) the credit union is prosecuted for, or convicted of, any offence involving fraud or dishonesty or any penalties are imposed upon it for tax evasion.
- 01/12/2004
CRED 14.9.9
See Notes
- 01/12/2004
CRED 14.9.10
See Notes
SUP 15.3.17 R states that a credit union must notify the FSA immediately of the following events, if significant:
- (1) fraud by an officer against members;
- (2) fraud committed against the credit union;
- (3) irregularities in accounting or other records;
- (4) serious misconduct by officers concerning honesty or integrity.
- 01/12/2004
CRED 14.9.11
See Notes
In determining whether a matter is significant, a credit union should have regard to:
- (1) the size of any monetary loss;
- (2) reputational loss to the credit union;
- (3) weaknesses in the credit union's internal controls.
- 01/12/2004
CRED 14.9.12
See Notes
- 01/12/2004
Core information requirements
CRED 14.9.13
See Notes
SUP 15.5.1 R, SUP 15.5.4 R and SUP 15.5.6 G state that a credit union must provide the FSA with notice of:
- (1) change in name;
- (2) change in address;
- (3) change in legal structure.
- 01/12/2004
CRED 14.9.14
See Notes
- 01/12/2004
Inaccurate, false or misleading information
CRED 14.9.15
See Notes
- 01/12/2004
CRED 14.9.16
See Notes
- 01/12/2004
CRED 14.9.17
See Notes
- 01/12/2004
Form and method of notification
CRED 14.9.18
See Notes
- 01/12/2004
CRED 14.9.19
See Notes
SUP 15.7.4 R and SUP 15.7.5 R state that the notification should be addressed to the credit union's usual supervisory contact at the FSA using one of these methods:
- (1) by post to the FSA's address;
- (2) self delivery to FSA's address (and obtaining a dated receipt);
- (3) electronic mail to an address for the credit union's usual supervisory contact at the FSA and obtaining an electronic confirmation of receipt;
- (4) hand delivery to the credit union's usual supervisory contact at the FSA;
- (5) fax number to the credit union's usual supervisory contact at the FSA, followed by submission by one of the methods in CRED 14.9.19 G (1) - CRED 14.9.19 G (4).
- 01/12/2004
CRED 14.9.20
See Notes
- 01/12/2004
CRED 14.10
Reporting requirements
- 01/12/2004
Application and purpose
CRED 14.10.1
See Notes
CRED 14.10.2
See Notes
- 01/12/2004
CRED 14.10.3
See Notes
- 01/12/2004
General provisions on reporting
CRED 14.10.4
See Notes
SUP 16.3.6 -SUP 16.3.13 state that a report must:
- (1) be in writing;
- (2) give the credit union's FSA reference number;
- (3) be given to or addressed for the attention of the credit union's usual supervisory contact at the FSA;
- (4) be delivered to the FSA by one of the following methods:
- (a) by post to The Financial Services Authority, PO Box 35747, London E14 SWP;
- (b) self delivery to The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS (and obtaining a dated receipt);
- (c) electronic mail to an address for the credit union's usual supervisory contact at the FSA and obtaining an electronic confirmation of receipt;
- (d) hand delivery to the credit union's usual supervisory contact at the FSA and obtaining a date receipt;
- (e) fax to the number notified by the credit union's usual supervisory contact at the FSA, followed by one of the methods in (a) - (d) within five business days after the date of the faxed submission.
- 01/12/2004
CRED 14.10.4A
See Notes
- 01/12/2004
CRED 14.10.4B
See Notes
- 01/12/2004
CRED 14.10.4C
See Notes
- (1) SUP 16.3.13 states that a credit union must submit a report in the frequency, and so as to be received by the FSA no later than the due date, specified for that report.
- (2) SUP 16.3.13 states that if the due date for submission of a report required by SUP 16 falls on a day which is not a business day the report must be submitted so as to be received by the FSA no later than the first business day after the due date.
- (3) SUP 16.3.13 states that if the due date for submission of a report required by SUP 16 is a set period of time after the quarter end, the quarter ends will be the following dates, unless another rule or the reporting form states otherwise:
- (a) the 'credit union's accounting reference date;
- (b) 3 months after the credit union's accounting reference date;
- (c) 6 months after the credit union's accounting reference date; and
- (d) 9 months after the credit union's accounting reference date.
- 01/12/2004
CRED 14.10.4D
See Notes
CRED 14.10.4E
See Notes
- 01/12/2004
CRED 14.10.4F
See Notes
The credit union is responsible for ensuring delivery of the required report at the FSA's offices by the due date. If a report is received by the FSA after the due date and the credit union believes its delivery arrangements were adequate, it may be required to provide proof of those arrangements. Examples of such proof would be:
- (1) "proof of posting" receipts from a UK post office or overseas equivalent which demonstrate that the report was posted early enough to allow delivery by the due date in accordance with the delivery service standards prescribed by the relevant postal authority; or
- (2) recorded postal delivery receipts showing delivery on the required day; or
- (3) records of a courier service provider showing delivery on the required day.
- 01/12/2004
Change of accounting reference date
CRED 14.10.4G
See Notes
- (1) SUP 16.3.17 states that a credit union must notify the FSA if it changes its accounting reference date.
- (2) When a credit union extends its accounting period, it must make the notification in (1) before the previous accounting reference date.
- (3) When a credit union shortens its accounting period, it must make the notification in (1) before the new accounting reference date.
- 01/12/2004
CRED 14.10.4H
See Notes
- 01/12/2004
Quarterly return
CRED 14.10.5
See Notes
CRED 14.10.6
See Notes
- 01/12/2004
Annual return
CRED 14.10.7
See Notes
CRED 14.10.8
See Notes
- 01/12/2004
CRED 14.10.8A
See Notes
- 01/12/2004
Accounts and audit
CRED 14.10.9
See Notes
- 01/12/2004
CRED 14.10.10
See Notes
- (1) Every credit union must send to the FSA a copy of its audited accounts published in accordance with section 3A of the Friendly and Industrial and Provident Societies Act 1968 (See CRED 14 Annex 1 G.)
- (2) The accounts must:
- (a) be made up for the period beginning with the date of the credit union's registration or with the date to which the credit union's last annual accounts were made up, whichever is the later, and ending on the credit union's most recent financial year end; and
- (b) accompany the annual return submitted to the FSA under SUP 16.7.62 (see CRED 14.10.7 G), unless they have been submitted already.
CRED 14.10.11
See Notes
- 01/12/2004
Financial penalties for late submission of reports
CRED 14.10.12
See Notes
- (1) Financial penalties may be imposed for the late submission of:
- (a) the quarterly and annual returns referred to in CRED 14.10.5 G and CRED 14.10.7 G; and
- (b) the audited accounts referred to in CRED 14.10.10 R.
- (2) Details of the FSA's policy and procedures on financial penalties are given in CRED 15.5 (Financial penalties for late submission of reports) and CRED 15 Annex 3 G.
- 01/12/2004
Controllers and close links
CRED 14.10.13
See Notes
- (1) Credit unions are subject to the requirements of the Act and SUP 11 on controllers and close links, and are bound to notify the FSA of changes. In practice, however, credit unions cannot develop such relationships, because:
- (a) only individuals may be members of a credit union (section 5(1) of the Credit Unions Act 1979);
- (b) every member is entitled to vote and has one vote only (section 5(9) of the Credit Unions Act 1979);
- (c) the minimum number of members of a credit union is 21 (section 6(1) of the Credit Unions Act 1979) and its registration may be cancelled if membership falls below that number (section 16(1)(a)(i) of the Industrial and Provident Societies Act 1968 and section 20(1)(a) of the Credit Unions Act 1979); and
- (d) a credit union may not have a subsidiary (section 26 of the Credit Unions Act 1979).
- (2) Credit unions are therefore exempted from the requirement to submit annual reports of controllers and close links (SUP 16.1.1, SUP 16.1.3, SUP 16.4.1G(-1)(-1) and SUP 16.5.1G(-1)).
- 01/12/2004
CRED 14 Annex 1
Accounts and audit - Friendly and Industrial and Provident Societies Act 1968
- 01/12/2004
See Notes
Introduction | ||
1. | The Friendly and Industrial and Provident Societies Act 1968 applies to industrial and provident societies in general. The following is an outline of the main provisions relating to credit unions, which are a special type of industrial and provident society. | |
Books of account | ||
2. | Section 1(1) of the Friendly and Industrial and Provident Societies Act 1968 provides that every credit union is to: | |
(1) | cause to be kept proper books of account with respect to its transactions and its assets and liabilities; | |
(2) | establish and maintain a satisfactory system of control of its books of account, its cash holdings and all its receipts and remittances. | |
General provisions as to accounts and balance sheets | ||
3. | Section 3 of the Friendly and Industrial and Provident Societies Act 1968 provides that every revenue account and balance sheet of a credit union is to give a true and fair view. | |
Publication of accounts | ||
4. | Section 3A of the Friendly and Industrial and Provident Societies Act 1968 provides that a credit union is not to publish any revenue account or balance sheet unless: | |
(1) | it has been signed by the credit union's secretary and two members of its committee; | |
(2) | it has been previously audited by the auditors; | |
(3) | it incorporates a report by the auditors as to whether the revenue account and balance sheet give a true and fair view. | |
Re-appointment and removal of qualified auditors | ||
5. | Section 5(1) of the Friendly and Industrial and Provident Societies Act 1968 provides that a qualified auditor appointed to audit the accounts and balance sheet for the preceding year of account is to be re-appointed as auditor for the current year of account unless: | |
(1) | a resolution has been passed at a general meeting appointing somebody instead of him or providing expressly that he is not to be re-appointed; or | |
(2) | he has given notice of his unwillingness to be re-appointed; or | |
(3) | he is ineligible for appointment for the current year of account; or | |
(4) | he has ceased to act as auditor by reason of incapacity. | |
Obligation to appoint auditors | ||
6. | Section 4 of the Friendly and Industrial and Provident Societies Act 1968 provides that a credit union is to appoint a qualified auditor or auditors to audit the accounts and balance sheet unless: | |
(1) | the aggregate of the receipts and payments in respect of the preceding year of account did not exceed £5,000; | |
(2) | the number of members at the end of the preceding year did not exceed 500; and | |
(3) | the aggregate value of assets at the end of that year did not exceed £5,000. | |
7. | If all these conditions apply, the credit union may appoint two or more lay auditors (subject to any direction given by the FSA). | |
Qualified auditors | ||
8. | Section 7 of the Friendly and Industrial and Provident Societies Act 1968 provides that no person is a qualified auditor unless he is eligible for appointment as a company auditor under section 25 of the Companies Act 1989, that is to say a person who is registered with one of the five supervisory bodies recognised under the Companies Act 1989: | |
(1) | the Institute of Chartered Accountants in England and Wales; | |
(2) | the Institute of Chartered Accountants in Scotland; | |
(3) | the Institute of Chartered Accountants in Ireland; | |
(4) | the Chartered Association of Certified Accountants; and | |
(5) | the Association of Authorised Public Accountants. | |
Restrictions on appointment of auditors | ||
9. | Section 8 of the Friendly and Industrial and Provident Societies Act 1968 provides that none of the following persons is to be appointed as auditor of a credit union: | |
(1) | an officer or servant of the credit union; | |
(2) | a person who is a partner of, or in the employment of, or who employs an officer or servant of the credit union. | |
Auditors' report | ||
10. | Section 9(2) of the Friendly and Industrial and Provident Societies Act 1968 provides that the audit report is to state whether the revenue account and the balance sheet comply with the requirements of the Friendly and Industrial and Provident Societies Act 1968 and the Industrial and Provident Societies Act 1965 and whether in the opinion of the auditors: | |
(1) | the revenue account gives a true and fair view of the income and expenditure of the credit union as a whole for that year of account; and | |
(2) | the balance sheet gives a true and fair view either of the assets and current liabilities of the credit union and the resulting balances of its funds or of the state of affairs of the credit union (as the case may require) as at the end of that year of account. | |
11. | Section 9(4) of the Friendly and Industrial and Provident Societies Act 1968 provides that it is the duty of the auditors to make such investigations as will enable them to form an opinion as to: | |
(1) | whether the credit union has kept proper books of account in accordance with section 1(1)(a) of the Friendly and Industrial and Provident Societies Act 1968; | |
(2) | whether the credit union has maintained a satisfactory system of control over its transactions in accordance with section 1(1)(b) of the Friendly and Industrial and Provident Societies Act 1968; | |
(3) | whether the revenue account and other accounts to which the report relates, and the balance sheet are in agreement with the books of account of the credit union. | |
12. | Section 9(4) of the Friendly and Industrial and Provident Societies Act 1968 also provides that if the auditors are of the opinion that the credit union has failed to comply with section 1(1)(a) or (b) of the Friendly and Industrial and Provident Societies Act 1968, or if the revenue account, the other accounts and the balance sheet are not in agreement with the books of account of the credit union, the auditors are to state that fact in their report. |
CRED 15
Enforcement
CRED 15.1
Application and purpose
- 01/12/2004
CRED 15.1.1
See Notes
This chapter contains guidance on the investigation and enforcement powers available to the FSA, and its approach to the use of those powers, in respect of:
- (1) [Deleted]
- (2) credit unions, with respect to their activities of accepting deposits; and
- (3) approved persons of credit unions, as set out in CRED 6.
CRED 15.1.2
See Notes
- 01/12/2004
CRED 15.2
Investigation and enforcement powers
- 01/12/2004
- Future version of CRED 15.2 after 28/08/2007
CRED 15.2.1
See Notes
- 01/12/2004
CRED 15.2.2
See Notes
For ease of reference:
- (1) Annex 1 to this chapter (CRED 15 Annex 1 G) contains a table of the FSA's investigation and enforcement powers under the Industrial and Provident Societies Act 1965, the Friendly and Industrial and Provident Societies Act 1968 and the Credit Unions Act 1979; and
- (2) Annex 2 to this chapter (CRED 15 Annex 1 G) contains a table of the main relevant investigation and enforcement powers under the Act and the Unfair Terms Regulations, showing where they are considered in the Enforcement manual (ENF).
CRED 15.2.3
See Notes
- 01/12/2004
CRED 15.2.4
See Notes
- 01/12/2004
CRED 15.2.5
See Notes
- 01/12/2004
CRED 15.3
The FSA's approach to the use of its investigation and enforcement powers
- 01/12/2004
- Future version of CRED 15.3 after 28/08/2007
CRED 15.3.1
See Notes
There are a number of principles underlying the FSA's approach to the exercise of its investigation and enforcement powers in relation to credit unions:
- (1) the effectiveness of the regulatory regime depends to a significant extent on the maintenance of an open and cooperative relationship between the FSA and the management of credit unions;
- (2) the FSA will seek to exercise its investigation and enforcement powers in a manner that is transparent, proportionate and consistent with its publicly stated policies; and
- (3) the FSA will seek to ensure fair treatment when exercising its investigation and enforcement powers. For example, the FSA's decision making process for regulatory enforcement cases generally gives an opportunity for both written and oral representations to be made, and also provides for a facility for mediation in certain disciplinary cases.
CRED 15.3.2
See Notes
- 01/12/2004
CRED 15.3.3
See Notes
- 01/12/2004
CRED 15.3.4
See Notes
- 01/12/2004
CRED 15.4
The FSA's policies and procedures for taking enforcement action
- 01/12/2004
- Future version of CRED 15.4 after 28/08/2007
CRED 15.4.1
See Notes
CRED 15.4.2
See Notes
The FSA's enforcement powers in the Industrial and Provident Societies Act 1965, the Friendly and Industrial and Provident Societies Act 1968, the Credit Unions Act 1979 and the Act can be grouped into three broad categories, based on the type of procedure that applies to their use. The three broad categories are:
- (1) regulatory enforcement powers, which the FSA must exercise by statutory notice procedures;
- (2) civil enforcement powers, which the FSA must exercise by making application to the civil courts; and
- (3) criminal prosecution powers, which the FSA must exercise by bringing proceedings in the criminal courts.
- 01/12/2004
CRED 15.4.3
See Notes
When the FSA exercises its regulatory enforcement powers, the statutory notice procedure it must follow varies depending on the type of action to be taken and the provisions of the relevant legislation.
- (1) If the FSA is using its regulatory enforcement powers under the Act, it must give the reasons and various notices required by the Act and, in all cases, allow the person receiving the notice an opportunity to make representations. The FSA's decision making procedures for notices to be given by the Act are set out in DEC. CRED 16 provides an overview of DEC.
- (2) If the FSA is using its regulatory enforcement powers under the Industrial and Provident Societies Act 1965, the Friendly and Industrial and Provident Societies Act 1968 and the Credit Unions Act 1979, it will have regard to the Principles set out in CRED 3 and will, so far as appropriate, provide a process that is consistent with that in DEC.
- 01/12/2004
CRED 15.4.4
See Notes
- 01/12/2004
CRED 15.4.5
See Notes
- (1) If the FSA is considering using its regulatory enforcement, civil enforcement or criminal prosecution powers under the Act, it will apply the policies on the use of those powers set out in ENF.
- (2) If the FSA is considering using its regulatory enforcement, civil enforcement or criminal prosecution powers under the Industrial and Provident Societies Act 1965, the Friendly and Industrial and Provident Societies Act 1968 and the Credit Unions Act 1979, it will, to the extent appropriate, apply the policies on the use of similar powers under the Act (as set out in ENF).
- 01/12/2004
CRED 15.5
Financial penalties for late submission of reports
- 01/12/2004
CRED 15.5.1
See Notes
- 01/12/2004
CRED 15.5.2
See Notes
- 01/12/2004
CRED 15.5.3
See Notes
- (1) In general, the FSA's approach to disciplinary action arising from the late submission of a report will depend upon the length of time after the due date that the report in question is submitted. Where the period of delay is no more than 28 business days, the FSA considers that in the majority of cases it will be appropriate to limit the sanction imposed on the credit union concerned to a financial penalty fixed by reference to the indicative scale of penalties at ENF 13 Annex 1 G (reproduced at CRED 15 Annex 3 G).
- (2) There may, however, be exceptional circumstances in which the FSA considers that it is appropriate not to seek a penalty, or to impose a lower penalty than the one indicated by the scale. An administrative difficulty such as pressure of work does not, in itself, constitute an exceptional circumstance for this purpose.
- (3) Equally, the FSA may impose a higher penalty than the one indicated by the scale at ENF 13 Annex 1 G (CRED 15 Annex 3 G) having regard to the seriousness of the contravention and the extent to which the contravention was deliberate or reckless. This may include, for example, a case where a credit union repeatedly fails to submit its reports on time or where there is information that suggests that such a delay was deliberate.
- (4) The FSA will also have regard to the submission frequency of the late report when assessing the seriousness of the contravention. For example, a short delay in submitting a quarterly report may have more serious implications for the supervision of the credit union in question than a similar delay in submitting an annual report. Such a delay may therefore be subject to a higher penalty than the one suggested by the indicative scale.
- 01/12/2004
CRED 15.5.4
See Notes
- 01/12/2004
CRED 15.5.5
See Notes
- (1) Where a report is submitted more than 28 business days after the due date, and there are no exceptional circumstances justifying the failure to submit on time, the financial penalty imposed is likely to exceed the amount indicated by the scale at ENF 13 Annex 1 G (CRED 15 Annex 3 G) for 21 to 28 business days delay. The FSA will determine the precise level of the financial penalty to be imposed in accordance with the approach discussed in ENF 13.3.3 G (Factors relevant to determining the appropriate level of financial penalty).
- (2) In addition, in appropriate cases, the FSA may bring disciplinary action against the approved person or persons within the credit union's management who are ultimately responsible for ensuring that the credit union's reports are completed and returned to the FSA (see ENF 11.5 (Action against approved persons)).
- 01/12/2004
CRED 15.5.6
See Notes
- 01/12/2004
CRED 15.5.7
See Notes
- 01/12/2004
CRED 15.5.8
See Notes
- 01/12/2004
CRED 15.5.9
See Notes
- 01/12/2004
CRED 15.5.10
See Notes
- (1) Once a final notice has been issued relating to a financial penalty and any other relevant sanction for a late report, the FSA will consider whether it is unfair to the credit union or prejudicial to the interests of consumers to publish information relating to the decision. The FSA anticipates that in most cases where reports have been submitted late, no such unfairness or prejudice will exist. If so, it will enter details of the decision in the FSA Register.
- (2) The FSA may also publicise the sanctions on a wider basis where the contravention is considered to be particularly serious. Examples of situations that may result in wider publicity include where the period of delay exceeds 28 business days or where the credit union in question has previously failed to submit its reports on time to the FSA or to any previous regulator.
- 01/12/2004
CRED 15 Annex 1
Enforcement Powers
- 01/12/2004
See Notes
SUBJECT | SECTION OF THE RELEVANT ACTS | |
CANCELLATION OR SUSPENSION OF REGISTRATION | ||
Power to cancel the registration of a credit union | Industrial & Provident Societies Act 1965, s.16 as applied by Credit Unions Act 1979, s.20(1) | |
Power to suspend the registration of a credit union | Industrial & Provident Societies Act 1965, s.17 as applied by Credit Unions Act 1979, s.20(1) | |
INSOLVENCY PROCEEDINGS | ||
Provision of information: when a credit is in receivership | Industrial & Provident Societies Act 1965, s.43 | |
Provision of information: when a credit union is subject to a creditors' voluntary liquidation | Industrial & Provident Societies Act 1965, s.59 | |
INFORMATION GATHERING AND INVESTIGATION POWERS | ||
Power to require information from individuals who are, or have been, officers of a credit union | Industrial & Provident Societies Act 1965, s.48 extended by Credit Unions Act 1979, s.17(1) | |
Power to appoint an investigator to look into the affairs of a credit union | Industrial & Provident Societies Act 1965, s.49 extended by Credit Unions Act 1979, s.18(1) | |
AUDITING OF ACCOUNTS | ||
Power to require the financial accounts of a credit union for past years to be audited | Industrial & Provident Societies Act 1965, s.9(c) | |
COMPULSORY WINDING UP | ||
Power to petition the court for the winding up of a credit union | Credit Unions Act 1979,s.20(2) | |
PROSECUTION OF CRIMINAL OFFENCES | ||
Power to prosecute offences under the Industrial & Provident Societies Act 1965, Industrial & Provident Societies Act 1968 and the Credit Unions Act 1979 | Credit Unions Act 1979,s.28 |
- 01/12/2004
CRED 15 Annex 2
Enforcement Powers
- 01/12/2004
See Notes
This table gives the main location in the Enforcement manual where guidance appears on the powers referred to in the Act and the Unfair Terms Regulations list below. This is an edited version of the table given at ENF 1 Annex 1 |
SUBJECT | PART AND SECTION OF THE ACT | ENFORCEMENT MANUAL LOCATION |
VARIATION AND CANCELLATION OF PERMISSION AND WITHDRAWAL OF AUTHORISATION OF CREDIT UNIONS | ||
Duty to withdraw authorisation | Part III, s. 33 | ENF 5 |
Variation and cancellation on the FSA's own initiative | Part IV, s. 45 | ENF 3 (Variation), ENF 5 (Cancellation) |
Prohibitions and restrictions | Part IV, s. 48 | ENF 3.3.10 |
PROHIBITION OF INDIVIDUALS | ||
Power to make a prohibition order | Part V, s. 56 | ENF 8 |
WITHDRAWAL OF APPROVAL FROM APPROVED PERSONS | ||
Power to withdraw approval from approved persons of credit unions | Part V, s. 63 | ENF 7 |
DISCIPLINARY POWERS AGAINST APPROVED PERSONS | ||
Public statements of misconduct | Part V, s. 66 | ENF 11 and ENF 12 |
Financial penalties | Part V, s. 66 | ENF 11 and ENF 13 |
INFORMATION GATHERING AND INVESTIGATION POWERS | ||
Power to require information from credit unions | Part XI, s. 165 | ENF 2.3.2 G - ENF 2.3.7 G |
Power to require credit unions to provide a report by a skilled person | Part XI, s. 166 | ENF 2.3.8 G - ENF 2.3.11 G |
Power to appoint persons to carry out general investigations into credit unions | Part XI, s. 167 | ENF 2.3.12 G - ENF 2.3.13 G |
Power to appoint persons to carry out investigations in particular cases involving a person or a credit union | Part XI, s. 168 | ENF 2.3.14 G - ENF 2.3.15 G |
Powers of investigation appointed under s. 167 | Part XI, s. 171 | ENF 2.4.2 G - ENF 2.4.5 G and ENF 2.4.10 G - ENF 2.4.12 G |
Additional powers of investigators appointed as a result of s. 168 (1) or (4) | Part XI, s. 172 | ENF 2.4.6 G -ENF 2.4.7 G and ENF 2.4.10 G - ENF 2.4.12 G |
Powers of investigators appointed as a result of s. 168 (2) | Part XI, s. 173 | ENF 2.4.8 G and ENF 2.4.10 G - ENF 2.4.12 G |
Information and documents: supplemental provisions relating to investigators appointed under s. 167 or s. 168 | Part XI, s. 175 | ENF 2.4.10 G - ENF 2.4.12 G |
Entry of premises under warrant | Part XI, s. 176 | ENF 2.15.1 G - ENF 2.15.4 G |
DISCIPLINARY POWERS AGAINST CREDIT UNION | ||
Public censure | Part XIV, s. 205 | ENF 12 |
Financial penalties | Part XIV, s. 206 | ENF 13 |
DISQUALIFICATION OF AUDITORS APPOINTED BY CREDIT UNIONS | ||
Disqualification of auditors for failure to comply with a duty imposed under the Act | Part XXII, s. 345 | ENF 17 |
ORDERS AGAINST DEBT AVOIDANCE | ||
Provisions against debt avoidance: the right to apply for an order | Part XXIV, s. 375 | ENF 10.9 and ENF 10.10 |
INJUNCTIONS AGAINST PERSONS | ||
Injunctions for breach of a relevant requirement | Part XXV, s. 380 | ENF 6.3, ENF 6.5 and ENF 6.6 |
RESTITUTION | ||
Power to apply to court for a restitution order | Part XXV, s. 382 | ENF 9 |
Power to require restitution | Part XXV, s. 402 | ENF 9 |
PROSECUTION OF CRIMINAL OFFENCES | ||
Power to prosecute offences under the Act and subordinate legislation | Part XXVII, s. 401 | ENF 15 |
Power to prosecute other offences | Part XXVII, s. 402 | ENF 15 |
UNFAIR TERMS REGULATIONS | ||
Power to seek injunctions under the Unfair Terms Regulations. | N/A | ENF 20 (Unfair terms in consumer contracts) |
- 01/12/2004
CRED 15 Annex 3
Financial penalties
- 01/12/2004
See Notes
Number of business days late | Annual fees payable by firm Note |
|||||||
£1 to £150 | £151 to £500 | £501 to £1,000 | £1,001 to less than £10,000 | £10,000 to less than £20,000 | £20,000 to less than £50,000 | £50,000 to less than £100,000 | £100,000 or greater | |
22-28 | 40 | 100 | 200 | 400 | 800 | 2000 | 4000 | 6000 |
15-21 | 30 | 75 | 150 | 300 | 600 | 1500 | 3000 | 4500 |
8-14 | 20 | 50 | 100 | 200 | 400 | 1000 | 2000 | 3000 |
1-7 | 10 | 25 | 50 | 100 | 200 | 500 | 1000 | 1500 |
Note: | ||||||||
1. For this purpose, the annual fee payable by the credit union is the annual fee for the most recent financial year for which the FSA has fully invoiced the credit union before the date on which the relevant report first became late. | ||||||||
2. Where the credit union first becomes authorised after 2 July 2002, and at the time the report first becomes late the credit union has not previously been fully invoiced by the FSA for an annual fee, the annual fee of the credit union will be treated as that for £1 to £150. |
- 01/12/2004
CRED 16
Decision making
CRED 16.1
Application and Purpose
- 01/12/2004
CRED 16.1.1
See Notes
- 01/12/2004
CRED 16.1.2
See Notes
- 01/12/2004
CRED 16.2
Introduction
- 01/12/2004
CRED 16.2.1
See Notes
The Decision making manual (DEC), together with the other manuals described below, constitute the regulatory processes block of the Handbook. The other manuals are:
- (1) the Authorisation manual (AUTH) which sets out the relationship between the FSA and applicants for Part IV permission (amongst others);
- (2) the Supervision manual (SUP) which sets out the relationship between the FSA and authorised persons (referred to in the Handbook as firms); and
- (3) the Enforcement manual (ENF) which describes the FSA's enforcement powers under the Act and sets out its policies for using these powers.
- 01/12/2004
CRED 16.3
Guidance on DEC
- 01/12/2004
DEC 1
CRED 16.3.1
See Notes
DEC 1 describes the application and purpose of DEC and provides an introduction to the manual. That introduction explains that the Act designates certain notices as warning notices, decision notices or supervisory notices (together called 'statutory notices') for which there are certain specified procedures, actions and protections. DEC 4 explains which decisions are to be taken by the Regulatory Decisions Committee (RDC) and which are subject to executive procedures. In relation to regulatory decisions which are not subject to statutory notices, the FSA's general policy is that regulatory decisions should be taken at a level of seniority which is appropriate to the decision having regard to the following:
- (1) significance of the decision for those affected by it;
- (2) the complexity of the relevant considerations;
- (3) the alternatives;
- (4) the extent to which the factors of the case may be disputed;
- (5) the novelty of the decision in the light of stated policy and established procedure.
- 01/12/2004
CRED 16.3.2
See Notes
- 01/12/2004
DEC 2
CRED 16.3.3
See Notes
DEC 2 describes the procedure for issuing a warning notice or a decision notice. DEC 2 Annex 1 G sets out the circumstances in which the warning notice and decision notice procedures apply. Examples of such notices are:-
- (1) when the FSA is proposing or deciding to refuse an application for Part IV permission;
- (2) when the FSA is proposing or deciding to cancel a Part IV permission otherwise than by request;
- (3) when the FSA is proposing or deciding to make a prohibition order against an individual;
- (4) when the FSA is proposing or deciding to withdraw approval from an approved person.
- 01/12/2004
DEC 3
CRED 16.3.4
See Notes
- 01/12/2004
DEC 4
CRED 16.3.5
See Notes
- 01/12/2004
CRED 16.3.6
See Notes
Examples of matters to be decided by the RDC include:
- (1) refusal of an application for Part IV permission;
- (2) limitation, variation or restriction of a Part IV permission;
- (3) refusal or withdrawal of approved person status;
- (4) exercise of the FSA's powers to impose a financial penalty or public censure on any person.
- 01/12/2004
CRED 16.3.7
See Notes
Examples of matters to be decided by executive procedures include:
- (1) imposing a requirement to submit regular reports;
- (2) imposing a requirement to submit a business plan;
- (3) establishing or varying prudential limits, for example on capital or liquidity.
- 01/12/2004
CRED 16.3.8
See Notes
- 01/12/2004
CRED 16.3.9
See Notes
- 01/12/2004
DEC 5
- 01/12/2004
CRED 17
Complaint handling procedures for credit unions
CRED 17.1
Application and Purpose
- 01/12/2004
CRED 17.1.1
See Notes
- 01/12/2004
CRED 17.1.2
See Notes
CRED 17.1.3
See Notes
- 01/12/2004
CRED 17.1.4
See Notes
- 01/12/2004
CRED 17.1.5
See Notes
The purpose of this chapter is to set out the rules relating to the internal handling of complaints by a credit union, including:
- (1) the procedures which a credit union must put in place;
- (2) the time limits within which a credit union must deal with a complaint;
- (2A) the referral of complaints;
- (3) the records of a complaint which a credit union must make and retain; and
- (4) the requirements for a credit union to report information about complaints to the FSA.
CRED 17.1.6
See Notes
- 01/12/2004
CRED 17.2
Internal complaint handling procedures: general requirements
- 01/12/2004
CRED 17.2.1
See Notes
A credit union must establish, maintain and implement appropriate and effective internal complaint handling procedures (which must be written down) for:
- (1) handling any expression of dissatisfaction whether oral or written, and whether justified or not, from or on behalf of an eligible complainant about that credit union's provision of, or failure to provide, a financial services activity: and
- (2) referring to another firm, A, expressions of dissatisfaction about A's services, if the credit union markets (or has marketed) A's financial services or if the credit union's financial services are marketed by A.
CRED 17.2.2
See Notes
CRED 17.2.3
See Notes
- 01/12/2004
CRED 17.2.4
See Notes
The internal complaint handling procedures should provide for:
- (1) receiving complaints;
- (2) responding to complaints;
- (2A) referring complaints to other firms;
- (3) the appropriate investigation of complaints; and
- (4) notifying complainants of their right to go to the Financial Ombudsman Service, where relevant.
CRED 17.2.5
See Notes
When deciding what constitutes an appropriate complaint handling procedure, a credit union should have regard to:
- (1) the type of business it undertakes;
- (2) its size and organisational structure;
- (3) the nature and complexity of the complaints it is likely to receive; and
- (4) the number of complaints it is likely to receive and have to investigate.
- 01/12/2004
CRED 17.2.6
See Notes
- (1) A credit union is not prevented from using a third party administrator (for example, an outside organisation) for the purposes of handling complaints.
- (2) It is acceptable for two or more credit unions to set up arrangements, such as a one-stop shop for complaints handling under a service level agreement, provided that this still secures for complainants an equivalent standard of service and, if appropriate, redress. Any such arrangements should be made clear to an eligible complainant.
CRED 17.2.7
See Notes
- 01/12/2004
CRED 17.2.8
See Notes
A credit union must:
- (1) refer in writing to the availability of its internal complaint handling procedures when, or as soon as possible after, a person is admitted as a member or juvenile depositor;
- (2) publish details of its internal complaint handling procedures, supply a copy on request and supply a copy automatically to the complainant when it receives a complaint (unless the complaint is resolved by close of business on the next business day); and
- (3) display at its registered office a notice that it is covered by the Financial Ombudsman Service.
- 01/12/2004
CRED 17.2.9
See Notes
- 01/12/2004
CRED 17.2.10
See Notes
- 01/12/2004
CRED 17.2.11
See Notes
A credit union's internal complaint handling procedures must make provision for:
- (1) complaints to be investigated by a suitable person (officer, director or member of staff of the credit union) who, where appropriate, was not directly involved in the matter which is the subject of the complaint;
- (2) the person charged with responding to complaints to have the authority to settle complaints (including the offering of redress where appropriate) or to have ready access to someone who has the necessary authority; and
- (3) responses to complaints to address adequately the subject matter of the complaint and, where a complaint is upheld, to offer appropriate redress.
- 01/12/2004
CRED 17.2.12
See Notes
- 01/12/2004
CRED 17.2.13
See Notes
- 01/12/2004
CRED 17.2.14
See Notes
- 01/12/2004
CRED 17.2.15
See Notes
- 01/12/2004
CRED 17.2.16
See Notes
- 01/12/2004
CRED 17.2.17
See Notes
- 01/12/2004
CRED 17.2.18
See Notes
- 01/12/2004
CRED 17.2.19
See Notes
- 01/12/2004
CRED 17.3
Eligible complainants
- 01/12/2004
CRED 17.3.1
See Notes
CRED 17.3.2
See Notes
The FSA regards the general definition of eligible complainant as meaning, in the credit union context:
- (1) those having a direct relationship with the credit union:
- (a) members, potential members and former members of the credit union;
- (b) juvenile depositors, potential juvenile depositors and former juvenile depositors of the credit union.
- (2) those having an indirect relationship with the credit union:
- (a) businesses with a turnover of less than £1million (where, for example, the business has guaranteed a member's loan); if in doubt a credit union should assume that the business is eligible;
- (b) beneficiaries of those having a direct relationship with the credit union (where, for example, a person has been nominated to receive property on a person's death).
- (3) the representatives of those having a direct or indirect relationship with the credit union (where, for example, a person is acting on behalf of a deceased member).
- 01/12/2004
CRED 17.4
Internal complaint handling procedures: additional requirements
- 01/12/2004
CRED 17.4.1
See Notes
The additional requirements in CRED 17.5 - CRED 17.7 (on time-limits, record-keeping; reporting and cooperation with Ombudsman) do not apply:
- (1) where the credit union has taken reasonable steps to determine, and has determined, that the complaint:
- (a) is not made by, or on behalf of, an eligible complainant; or
- (b) does not relate to an activity of that credit union (or of any other firm with whom that credit union has some connection in marketing financial services) which comes under the jurisdiction of the Financial Ombudsman Service; or
- (c) does not involve an allegation that the complainant has suffered, or may suffer, financial loss, material distress or material inconvenience; or
- (2) where the complaint has been resolved by close of business on the business day following receipt.
CRED 17.4.2
See Notes
DISP 2.6 sets out the activities which come under the jurisdiction of the Financial Ombudsman Service, as follows:
- (1) regulated activities;
- (2) lending money secured by a charge on land;
- (3) lending money (other than restricted credit);
- (4) paying money by a plastic card (other than a store card);
- (5) the provision of ancillary banking services;.
CRED 17.4.3
See Notes
- 01/12/2004
Referring complaints
CRED 17.4.4
See Notes
- (1) A credit union which has reasonable grounds to be satisfied that another firm may be solely responsible for the fault alleged in a complaint may refer the complaint to that other firm but if it does so it must:
- (a) refer the complaint promptly and in any event within five business days of the date on which it became satisfied that such other firm may be responsible for the subject matter of the complaint;
- (b) make the referral using a durable medium; and
- (c) inform the complainant of the referral by way of a final response and include the other firm's contact details.
- (2) A credit union which has reasonable grounds to be satisfied that another firm may be jointly responsible for the fault alleged in a complaint, may refer the complaint to that other firm but if it does so it must:
- (a) refer the complaint promptly and in any event within five business days of the date on which it became satisfied that such other firm may be jointly responsible for the subject matter of the complaint;
- (b) make the referral using a durable medium;
- (c) at the same time inform the complainant of the referral and include the other firm's contact details; and
- (d) comply with the obligations in CRED as to the investigation of that part of the complaint that is the credit union's responsibility and, as soon as possible, inform the complainant of the outcome by a final response.
- 14/01/2005
Dealing with a referred complaint
CRED 17.4.5
See Notes
- 14/01/2005
CRED 17.4.6
See Notes
- 14/01/2005
CRED 17.5
Time limits for dealing with a complaint
- 01/12/2004
CRED 17.5.1
See Notes
CRED 17.5.2
See Notes
- 01/12/2004
CRED 17.5.3
See Notes
- 01/12/2004
CRED 17.5.4
See Notes
By the end of eight weeks after its receipt of a complaint, the credit union must send the complainant either:
- (1) a final response; or
- (2) a response which;
- (a) explains that the credit union is still not in a position to make a final response, gives reasons for the further delay and indicates when it expects to be able to provide a final response; and
- (b) informs the complainant that he may refer the complaint to the Financial Ombudsman Service if he is dissatisfied with the delay and encloses a copy of the Financial Ombudsman Service's explanatory leaflet.
- 01/12/2004
CRED 17.5.5
See Notes
When a credit union sends a complainant its final response, the final response must:
- (1) inform the complainant that he may refer the complaint to the Financial Ombudsman Service if he is dissatisfied with the final response and that he must do so within six months; and
- (2) enclose a copy of the Financial Ombudsman Service's explanatory leaflet (unless it has already done so).
- 01/12/2004
CRED 17.5.6
See Notes
- 01/12/2004
CRED 17.5.7
See Notes
Under CRED 17.5.4 R and CRED 17.5.5 R:
- (1) even if the credit union has failed to resolve the complaint within eight weeks, the complainant may decide to give the credit union more time before exercising any right he may have to refer a complaint to the Financial Ombudsman Service; and
- (2) the six month time limit within which a complainant must refer a complaint to the Financial Ombudsman Service begins at the date when the final response is sent by the credit union.
- 01/12/2004
CRED 17.6
Record Keeping and Reporting
- 01/12/2004
CRED 17.6.1
See Notes
- 01/12/2004
CRED 17.6.2
See Notes
The records required are for the purposes of monitoring by the FSA and also to ensure that the credit union is able to cooperate, as necessary, with the Financial Ombudsman Service. These should include:
- (1) the name of the complainant;
- (2) the substance of the complaint; and
- (3) any correspondence between the credit union and the complainant, including details of any redress offered by the credit union; and
- (4) documentation relating to the referral of a complaint under CRED 17.4.4 R.
CRED 17.6.3
See Notes
A credit union must provide the FSA, once a year, with a report in the format set out in CRED 17 Annex 1 R (Credit Union complaints return) which contains (for the relevant reporting period) information about:
- (1) the total number of complaints received by the credit union (except those referred to in CRED 17.4.1 R) broken down according to the categories and in respect of each of the generic product types described in CRED 17 Annex 1 R (Credit union complaints return) which are relevant to the credit union;
- (2) the number of complaints closed by the credit union:
- (a) within eight weeks of receipt; and
- (b) more than eight weeks after receipt;
- (3) the total number of complaints:
- (a) upheld by the credit union in the reporting period;
- (b) that the credit union knows have been referred to, and accepted by, the FOS during the reporting period; and
- (c) outstanding at the end of the reporting period;
- (4) the total amount of redress paid in respect of complaints during the reporting period; and
- (5) the single contact within the credit union for complainants.
CRED 17.6.4
See Notes
For the purpose of CRED 17.6.3 R, and upon completing the return, the credit union should note that:
- (1) Where a complaint could fall into more than one category, the complaint should be recorded against the category that the credit union considers to form the main part of the complaint.
- (2) Where a complaint has been upheld under CRED 17.6.3 R (3)(a), a credit union should report any complaints to which it has given a final response which accepts the complaint and, where appropriate, offers redress, even if the redress offered is disputed by the complainant. Where a complaint is upheld in part, the credit union should treat the whole complaint as upheld for reporting purposes. Where a credit union rejects a complaint, yet chooses to make an ex-gratia payment to the complainant, the complaint should be recorded as rejected.
- (3) Where a credit union reports on the amount of redress paid under CRED 17.6.3 R (4), redress should be interpreted to include any amount paid, or cost borne, by the credit union, where a cash value can be readily identified, and should include:
- (a) amounts paid for distress and inconvenience;
- (b) a free transfer out to another provider which transfer would normally be paid for;
- (c) ex-gratia payments and goodwill gestures;
- (d) interest on delayed settlements
- (e) waiver of an excess on an insurance policy; and
- (f) payments to put the consumer back into the position the consumer should have been in had the act or omission not occurred.
- (4) Where a credit union reports on the amount of redress paid under CRED 17.6.3 R (4), such redress would not, however, include repayments or refunds of premiums which had been taken in error (for example where a credit union had been taking, by direct debit, twice the actual premium amount due under a policy). The refund of the overcharge would not count as redress.
CRED 17.6.5
See Notes
For the purposes of CRED 17.6.3 R:
- 01/12/2004
CRED 17.6.6
See Notes
- (1) Financial penalties may be imposed for the late submission of the complaints report required by CRED 17.6.3 R.
- (2) Details of the FSA's policy and procedures on financial penalties are given in CRED 15.5 (Financial penalties for late submission of reports) and CRED 15 Annex 3 G.
- 01/12/2004
CRED 17.6.7
See Notes
For the purposes of making reports under CRED 17.6.3 R, a closed complaint is a complaint:
- (1) where the credit union has sent a final response;
- (2) where the complainant has positively indicated acceptance of the credit union's earlier response; or
- (3) where the complainant has failed to revert to the credit union within eight weeks of the credit union's most recent letter.
- 01/12/2004
CRED 17.6.8
See Notes
A report under this section must be given or addressed, and delivered, in the way set out in SUP 16.3.6 R - SUP 16.3.16 G (General provisions on reporting) (see CRED 14.10.4 G - CRED 14.10.4F G), except that:
- (1) instead of the credit union's usual supervisory contact, the report should be given to or addressed for the attention of the Notification, Reporting and Data Maintenance department of the FSA; and
- (2) in addition to the methods of submission of reports in SUP 16.3.9 R, a credit union may submit a report under this section through, and in the electronic format specified in, the FSA's Complaints Reporting System.
CRED 17.6.8A
See Notes
- 01/12/2004
CRED 17.6.8B
See Notes
If a credit union is unable to submit a report in electronic format because of a systems failure of any kind, the credit union must:
- (1) submit its report under this section through one of the alternative methods of submission of reports in SUP 16.3.9 R (see CRED 14.10.4 G); and
- (2) notify the FSA, in writing and without delay, of that systems failure.
CRED 17.6.9
See Notes
- 01/12/2004
CRED 17.6.10
See Notes
- 01/12/2004
CRED 17.7
Cooperation by credit unions with the Ombudsman
- 01/12/2004
CRED 17.7.1
See Notes
- 01/12/2004
CRED 17.7.2
See Notes
- 01/12/2004
CRED 17 Annex 1
Credit union complaints return
- 01/12/2004
See Notes
Credit union complaints return - FSA/docs/cred/cred17_ann1R_01082009.pdf
CRED App 1
Contents of the Handbook
CRED App 1.1
This is the table referred to in CRED 2.2.2G.
- 01/12/2004
CRED App 1.1.1
Sourcebook or manual | Reference code | |
High Level Standards | Principles for Businesses | PRIN |
Senior Management Arrangements, Systems and Controls | SYSC | |
Statements of Principle and Code of Practice for Approved Persons | APER | |
The Fit and Proper test for Approved persons | FIT | |
General provisions | GEN | |
Business Standards | 5 Interim Prudential sourcebooks | IPRU |
Integrated Prudential Sourcebook | PRU | |
Conduct of Business | COB | |
Client assets | CASS | |
Market conduct, including: Code of Market Conduct Price stabilising rules Inter-professional conduct Alternative Trading Systems |
MAR | |
Training and Competence | TC | |
Money laundering | ML | |
Regulatory Processes | Authorisation | AUTH |
Supervision | SUP | |
Enforcement | ENF | |
Decision making | DEC | |
Redress | Dispute resolution: Complaints | DISP |
Compensation | COMP | |
Complaints against the FSA | COAF | |
Specialist sourcebooks | Collective investment schemes | CIS |
New Collective Investment Scheme sourcebook | COLL | |
Credit unions | CRED | |
E-Commerce Directive | ECO | |
Professional firms | PROF | |
Lloyd's | LLD | |
Mortgages | MORT | |
Recognised investment exchanges and Recognised clearing houses | REC | |
Listing, Prospectus and Disclosure | Listing Rules | LR |
Prospectus Rules | PR | |
Disclosure Rules and Transparency Rules | DTR | |
Schedules: Transitional provisions Summary schedules: 1. Record keeping requirements 2. Notification requirements 3. Fees and other required payments 4. Powers exercised in making the Handbook 5. Rights of action for damages 6. Rules that can be waived 7. Releases |
||
Glossary of definitions | ||
Index |
Export chapter as
CRED App 2
The Credit Unions sourcebook
CRED App 2.1
Detailed contents of CRED
- 01/12/2004
CRED App 2.1.1
1 | Introduction | ||
1.1 | The Credit Unions sourcebook | ||
2 | Reader's Guide | ||
2.1 | What is this guide? | ||
2.2 | Structure | ||
2.3 | Contents of CRED | ||
2.4 | Status of provisions | ||
2.4.2 | Rules: R | ||
2.4.4 | Evidential provisions: E | ||
2.4.6 | Guidance: G | ||
2.4.11 | Direction: D | ||
2.5 | Numbering: Pages | ||
2.6 | Numbering: Contents | ||
2.7 | Defined terms | ||
2.8 | Schedules | ||
2.8.2 | Transitional provision | ||
2.8.3 | Schedule 1: Rules that can be waived | ||
2.8.4 | Schedule 2: Notification requirements | ||
2.8.5 | Schedule 3: Contents of the FSA Handbook | ||
2.8.6 | Schedule 4: Powers exercised in making the Handbook | ||
2.8.7 | Schedule 5: Rights of action for damages | ||
2.8.8 | Schedule 6: Rules that can be waived | ||
2.8.9 | Schedule 7: Schedule of releases | ||
3 | The FSA's Principles for Businesses | ||
3.1 | Application and Purpose | ||
3.2 | The Principles | ||
3.3 | Consequences of breaching the Principles | ||
4 | Senior management arrangements, systems and controls | ||
4.1 | Application and purpose | ||
4.2 | Apportionment of responsibilities | ||
4.3 | Systems and controls | ||
4.3.1 | General | ||
4.3.5 | Rules and evidential provisions | ||
4.3.15 | Committee of management | ||
4.3.19 | Organisation | ||
4.3.28 | Documentation of systems of control | ||
4.3.32 | Accounting records and systems | ||
4.3.37 | Compliance | ||
4.3.41 | Management information | ||
4.3.46 | Information for the FSA | ||
4.3.47 | Personnel | ||
4.3.50 | Internal Audit | ||
4.3.61 | Business planning | ||
4.3.69 | Documentation of policies and procedures | ||
4.3.72 | Business continuity | ||
5 | Threshold conditions | ||
5.1 | Application and purpose | ||
5.2 | The Conditions | ||
6 | The Approved persons Regime | ||
6.1 | Application and purpose | ||
6.2 | The Statements of Principle of Code of Practice for Approved Persons (APER) | ||
6.2.2 | Introduction | ||
6.2.4 | The Statements of Principle | ||
6.2.6 | Code of Practice for Approved persons | ||
6.2.7 | Factors relevant to Statements of Principle | ||
6.2.9 | Enforcement procedures | ||
6.3 | Approved Persons | ||
6.3.2 | Introduction | ||
6.3.3 | Purpose of the regime | ||
6.3.4 | Controlled functions | ||
6.3.5 | Specification of functions | ||
6.4 | Assessing fitness and propriety | ||
6.4.1 | Purpose | ||
6.4.2 | Background | ||
6.4.3 | Assessing fitness and propriety | ||
7 | Investment and borrowing | ||
7.1 | Application, purpose and interpretation | ||
7.2 | Investment | ||
7.2.1 | Types of investment | ||
7.2.2 | Maturity of investments | ||
7.2.4 | Cash in custody of officers | ||
7.2.5 | Investment conditions no longer satisfied | ||
7.2.6 | Transactions between credit unions | ||
7.3 | Borrowing and Financial risk management | ||
7.3.1 | Borrowing | ||
7.3.7 | Financial risk management policy statement | ||
7A | Shareholding | ||
7A.1 | Application and purpose | ||
7A.2 | Members' shares | ||
7A.2.1 | Maximum shareholdings | ||
7A.2.5 | Joint accounts | ||
7A.2.7 | Dividends on shares | ||
7A.3 | Deposits | ||
7A.4 | Insurance against fraud or other dishonesty | ||
Ann 1 | Insurance against fraud or other dishonesty | ||
8 | Capital requirements | ||
8.1 | Application and purpose | ||
8.2 | Components of capital | ||
8.3 | Version 1 credit unions | ||
8.3.1 | Requirement to maintain positive net worth | ||
8.3.5 | Building reserves | ||
8.3.9 | Minimum initial capital | ||
8.3.12 | Capital requirement for version 1 credit unions wishing to lend amounts of more than £5,000 in excess of the borrowing member's shareholding | ||
8.3.14 | Capital requirements for large version 1 credit unions | ||
8.4 | Version 2 credit unions | ||
8.4.3 | Minimum initial capital | ||
9 | Liquidity | ||
9.1 | Application, purpose and interpretation | ||
9.2 | General requirements | ||
9.3 | Minimum liquidity requirements | ||
10 | Lending to members | ||
10.1 | Application and purpose | ||
10.2 | General requirements | ||
10.3 | Lending limits | ||
10.4 | Large exposures | ||
10.5 | Provisioning | ||
11 | Conduct of business | ||
11.1 | Introduction | ||
11.2 | Financial promotion | ||
11.3 | Statutory status disclosure | ||
11.4 | Entering into a distance contract for accepting deposits | ||
12 | Money Laundering | ||
12.1 | Introduction | ||
12.1.1 | What is Money laundering? | ||
12.2 | Money laundering and the FSA | ||
12.3 | Identification of the Client | ||
12.4 | External Reporting | ||
12.5 | Government and Financial Action Task Force findings | ||
12.6 | Compliance Monitoring | ||
12.7 | Record keeping | ||
13 | Registration and Authorisation | ||
13.1 | Application and purpose | ||
13.2 | Introduction | ||
13.2A | Use of name "credit union" | ||
13.3 | What does registration mean? | ||
13.4 | Process for registration | ||
13.5 | What does authorisation involve? | ||
13.6 | Process for Part IV permission | ||
13.7 | Applying for approved persons status | ||
13.8 | The FSA's decision making procedures | ||
Ann 1 | Requirements of Registration [table] | ||
Ann 1A | Common bond | ||
Ann 1B | Section 1 of the Credit Unions Act 1979 (as amended) | ||
Ann 1C | Qualifications approved by the FSA (and the Registry of Friendly Societies) | ||
Ann 2 | Eligibility for membership of a credit union | ||
14 | Supervision | ||
14.1 | The FSA's approach to supervision | ||
14.1.1 | Application and purpose | ||
14.1.6 | The FSA's risk based approach to supervision | ||
14.1.7 | Tools of supervision | ||
14.2 | Information gathering by the FSA on its own initiative | ||
14.2.1 | Application and purpose | ||
14.2.7 | Information gathering by the FSA on its own initiative: background | ||
14.2.9 | Information gathering by the FSA on its own initiative: cooperation by credit unions | ||
14.2.13 | "Mystery Shopping" | ||
14.3 | Auditors | ||
14.3.1 | Application and purpose | ||
14.3.3 | Appointment of auditors | ||
14.3.5 | Auditors' qualifications | ||
14.3.12 | Auditors' independence | ||
14.3.16 | Credit unions' cooperation with their auditors | ||
14.3.20 | Notification of matters raised by auditor | ||
14.3.22 | Rights and duties of all auditors | ||
14.4 | Skilled persons | ||
14.4.1 | Application and purpose | ||
14.4.3 | The FSA's power | ||
14.4.4 | Policy on the use of skilled persons | ||
14.4.5 | Appointment and reporting process | ||
14.4.6 | Duties of a credit union | ||
14.4.8 | Confidential information privilege | ||
14.5 | Application to vary or cancel Part IV permission | ||
14.5.1 | Application and purpose | ||
14.5.5 | Introduction | ||
14.5.6 | Applications for variation of permission | ||
14.5.15 | Applications for cancellation of permission | ||
14.5.29 | Ending authorisation | ||
14.5.30 | Additional guidance | ||
14.6 | Individual requirements | ||
14.6.1 | Application and purpose | ||
14.6.4 | The FSA's powers to set individual requirements on its own initiative | ||
14.6.7 | Criteria for varying a credit union's permission | ||
14.7 | Waiver and modification of rules | ||
14.7.1 | Application and purpose | ||
14.7.3 | Introduction | ||
14.7.5 | Applying for a waiver | ||
14.7.11 | Notification of altered circumstances relating to waivers | ||
14.7.12 | Publication of waivers | ||
14.7.15 | Varying waivers | ||
14.7.16 | Revoking waivers | ||
14.7.19 | Decision making | ||
14.8 | Individual guidance | ||
14.8.1 | Application and purpose | ||
14.8.4 | Making a request for individual guidance | ||
14.8.7 | Giving individual guidance to a credit union on the FSA's own initiative | ||
14.8.9 | Reliance on individual guidance | ||
14.9 | Notifications to the FSA | ||
14.9.1 | Application and purpose | ||
14.9.3 | General notification requirements | ||
14.9.13 | Core information requirements | ||
14.9.15 | Inaccurate, false or misleading information | ||
14.9.18 | Form and method of notification | ||
14.10 | Reporting requirements | ||
14.10.1 | Application and purpose | ||
14.10.4 | General provisions on reporting | ||
14.10.5 | Quarterly Return | ||
14.10.7 | Annual Return | ||
14.10.9 | Accounts and audit | ||
14.10.12 | Financial penalties for late submission of reports | ||
14.10.13 | Controllers and close links | ||
Ann 1 | Accounts and audit - Friendly and Industrial and Provident Societies Act 1968 | ||
15 | Enforcement | ||
15.1 | Application and purpose | ||
15.2 | Investigation and enforcement powers | ||
15.3 | The FSA's approach to the use of its investigation and enforcement powers | ||
15.4 | The FSA's policies and procedures for taking enforcement action | ||
15.5 | Financial penalties for late submission of reports | ||
Ann 1 | Enforcement Powers [table - powers available under Industrial and Provident Societies legislation and the Credit Unions Act 1979] | ||
Ann 2 | Enforcement Powers [table - powers referred to in ENF] | ||
Ann 3 | Financial Penalties [table - indicative scale of financial penalties for reports no more than 28 days late] | ||
16 | Decision making manual (DEC) | ||
16.1 | Application and purpose | ||
16.2 | Introduction | ||
16.3 | Guidance on DEC | ||
16.3.1 | DEC 1 | ||
16.3.3 | DEC 2 | ||
16.3.4 | DEC 3 | ||
16.3.5 | DEC 4 | ||
16.3.10 | DEC 5 | ||
17 | Complaint handling procedures for credit unions | ||
17.1 | Application and purpose | ||
17.2 | Internal complaint handling procedures: general requirements | ||
17.3 | Eligible complainants | ||
17.4 | Internal complaint handling procedures: additional requirements | ||
17.5 | Time limits for dealing with a complaint | ||
17.6 | Record keeping and reporting | ||
17.7 | Co-operation by credit unions with the Ombudsman | ||
Ann 1 | Complaints report |
Export chapter as
Transitional Provisions and Schedules
CRED TP 1
Transitional provisions
Transitional provisions
(1) | (2) Material to which the transitional provision applies | (3) | (4) Transitional provision | (5) Transitional provision: dates in force | (6) Handbook provision: coming into force |
1 | Every rule in the Handbook relating to a credit union | R | Where a transitional provision in the Handbook refers to "commencement", in relation to a credit union it means "credit unions day". | From credit unions day | varies depending on rule concerned |
2 | As for 1 | G | Where a rule applies to a credit union, its related transitional provision will also apply. The effect of paragraph 1 is to ensure that the transitional provision applies from credit unions day (and not from the earlier date of commencement). | As for 1 | As for 1 |
3 | CRED 15.5 CRED 15 Annex 3 G |
G | Expired | ||
4 | CRED 17.6.5 R | R | In the year ending 31 March 2003, the relevant period is from 1 October 2002 to 31 March 2003. | from 1 April 2003 | credit unions day |
5 | CRED 17.4.4 R - CRED 17.4.6 | R | A credit union must apply CRED as it applied before amendment by the Depolarisation Instrument with respect to complaints received by a credit union before 14 January 2005. | From 14 January 2005 | From 14 January 2005 |
- 01/04/2005
- Past version of CRED TP 1 before 01/04/2005
CRED Sch 1
Record keeping requirements
- 01/12/2004
CRED Sch 1.1
See Notes
The aim of the guidance in the following table is to give the reader a quick overall view of the relevant record keeping requirements. | |
It is not a complete statement of those requirements and should not be relied on as if it were. |
- 01/12/2004
CRED Sch 1.2
See Notes
Handbook reference | Subject of reference | Contents of record | When record must be made | Retention period |
CRED 4.2.11 G | Apportionment of significant responsibilities | Record of arrangements and how responsibilities are shared. | Immediately | 6 years |
CRED 12.2.3 G | Money Laundering | Reference to ML 7 in relation to compliance and record keeping. | On-going in accordance with ML 7 | 5 years from dates specified in ML 7.3 |
CRED 12.7.1 G | Money Laundering | Specifies retention periods in relation to evidence of identity etc. | On-going | As per ML 7 |
CRED 17.6.1 R | Complaints Handling | Specifies retention period of complaints. | From date of receipt | 3 years |
CRED Sch 2
Notification requirements
- 01/12/2004
See Notes
The aim of the guidance in the following table is to give the reader a quick overall view of the relevant record keeping requirements. |
The aim of the guidance in the following table is to give the reader a quick overall view of the relevant record keeping requirements. |
It is not a complete statement of those requirements and should not be relied on as if it were. |
Handbook reference | Matter to be notified | Contents of notification | Trigger event | Time allowed |
CRED 4.3.5 R | Business plan | Copy of business plan. | Upon request | As soon as reasonably practical |
CRED 4.3.7 R | Policies and procedures manual | Copy of policies and procedures manual. Wide range of detail as specified as guidance in Chapter 4. |
Upon request | As soon as reasonably practical |
CRED 4.3.9 R | Documented system of control | Systems of control. | Upon request | As soon as reasonably practical |
CRED 6.3.12 G | Approved Persons | Application to perform a controlled function. | When applicable | Asap |
Notice to withdraw application. | Asap | |||
Notice of ceasing to perform. | Within 7 days of cessation | |||
Notification of changes in application details. | Asap | |||
CRED 7.3.10 R | Financial risk Management Policy | Statement of financial risk management policy. | On conversion to version 2 | Upon request to convert to version 2 |
CRED 9.2.3 R | Liquidity | Liquidity Management Policy Statement for version 2 credit unions. | After adoption and/or review or amendment | As soon as reasonably practical |
CRED 10.2.1 R - CRED 10.2.2 R | Lending Policy | Current lending policy statement. | After adoption and/or review or amendment | As soon as reasonably practical |
CRED 10.4.6 G | Large Exposures | Limits on large exposures to avoid concentration of risk. | Upon request | As soon as reasonably practical |
CRED 12.6.1 G | Money Laundering | Report from MLRO. | Upon request | As soon as reasonably practical |
CRED 14.3.3 G | Appointment of Auditors | Notification of vacancy of auditor. Notification of appointment of auditor. |
As applicable | Immediately |
CRED 14.3.21 G | Matters raised by auditors | Possible notification to the FSA of any written communication from its auditor commenting on internal controls. | When relevant | Immediately |
CRED 14.3.30 G | Duties of auditors on ceasing to audit a credit union | Notification of his removal by the credit union. Resignation before his term in office expires. Is not re-appointed by a credit union |
When applicable | Immediately |
CRED 14.3.31 G | Duties of the auditors on ceasing to audit a credit union | Notification of any matter connected with cessation of duties that should be drawn to the FSA's attention or that there is no such matter. | When applicable | Immediately |
CRED 14.7.11 G | Notification of altered circumstances relating to a waivers | Specifies the reference point the credit union must refer to if a waiver is no longer relevant or appropriate. | When applicable | Immediately |
CRED 14.9.3 G | General notification | Credit union at risk of: Failure to satisfy threshold conditions; Reputation at risk; Services to members at risk; Any matter that may result in serious financial consequences. |
When applicable | Immediately |
CRED 14.9.5 G | General notification | Any proposed re-organisation that may have a significant impact. Failure in systems or controls. Material change to capital adequacy or solvency. |
As soon as the credit union is aware | At an early stage |
CRED 14.9.7 G | General notification | Breaches of rules or principles, statutory requirements or the prosecution or conviction of any of the committee of management. | As soon as the credit union is aware | Immediately |
CRED 14.9.8 G | General notification | Significant civil proceedings, action for damages against the credit union or prosecution or conviction of the credit union. | As soon as the credit union is aware | Immediately |
CRED 14.9.10 G | General notification | Fraud, irregularities and misconduct. | As soon as the credit union is aware | Immediately |
CRED 14.9.12 G | General notification | Legal steps involving insolvency, bankruptcy or winding up. | As soon as the credit union is aware | As soon as possible |
CRED 14.9.13 G | Core information requirements | Change in name, address or legal structure. | As soon as the credit union is aware | Immediately |
CRED 14.9.16 G | Inaccurate, false or misleading information | Notification that information already provided is incorrect. | As soon as the credit union is aware | Immediately |
CRED 14.10.4 G | Reporting :change of accounting reference date | The fact of a change in accounting reference date | A change in accounting reference date | If extending its accounting reference period, before the previous accounting reference date. If shortening its accounting period, before the new accounting reference date. |
CRED 14.10.5 G | Quarterly Return | Key financial data | Quarter end | 1 month after quarter end |
CRED 14.10.7 G | Annual Return | Extended financial data | Financial year end | 7 months after financial year end |
CRED 14.10.10 R | Audited accounts | Revenue account and Balance sheet | Financial year end | Until submission of Annual Return |
CRED 17.6.6 G | Complaints report | Analysis of complaints. | 31 March each year | 1 month after period end. |
CRED 17.6.8 R | Complaints report | Intention to stop submitting report in electronic format | When applicable | Immediately |
CRED Sch 3
Fees and other required payments
- 01/12/2004
CRED Sch 3.1
See Notes
There are no requirements for fees or other payments in CRED. |
The table below summarises the fee requirements for credit unions detailed elsewhere. |
- 01/12/2004
CRED Sch 3.2
See Notes
Description of fee | Reference |
FSA fees rules relating to the periodic fee | SUP 20 |
Schedule of periodic fees payable | SUP 20 Annex 2 Part 1 |
FSA rules relating to authorisation fees | AUTH 4 |
Schedule of authorisation fees payable | AUTH 4 Annex 1 |
FSCS funding rules | COMP 13 |
Financial Ombudsman Service funding rules | DISP 5 |
CRED Sch 4
Powers exercised
- 01/12/2004
CRED Sch 4.1
See Notes
The following powers and related provisions in or under the Act have been exercised by the FSA to make the rules in CRED: | |
Section 138 (General rule-making power) | |
Section 149 (Evidential provisions) | |
Section 156 (General supplementary powers) | |
Articles 9 (Designation of existing provisions to take effect as rules) and 10 (Modification of existing provisions) of the Financial Services and Markets Act 2000 (Consequential Amendments and Transitional Provisions) (Credit Unions) Order 2002 (SI 2002/1501) |
CRED Sch 4.2
See Notes
The following powers in or under the Act have been exercised by the FSA to give the guidance in CRED: | |
Section 157(1) (Guidance) | |
Article 14 (Guidance on continued provisions) of the Financial Services and Markets Act 2000 (Consequential Amendments and Transitional Provisions) (Credit Unions) Order 2002 (SI 2002/1501) |
- 01/12/2004
CRED Sch 5
Rights of actions for damages
- 01/12/2004
CRED Sch 5.1
See Notes
The table below sets out the rules in CRED contravention of which by an authorised person may be actionable under Section 150 of the Act (Actions for damages) by a person who suffers loss as a result of the contravention. |
If a "Yes" appears in the column headed "For private person?", the rule may be actionable by a "private person" under section 150 (or, in certain circumstances, his fiduciary or representative). A "Yes" in the column headed "Removed" indicates that the FSA has removed the right of action under Section 150(2) of the Act. If so, a reference to the rule in which it is removed is also given. |
If a "Yes" appears in the column headed "For private person?", the rule may be actionable by a "private person" under section 150 (or, in certain circumstances, his fiduciary or representative). A "Yes" in the column headed "Removed" indicates that the FSA has removed the right of action under Section 150(2) of the Act. If so, a reference to the rule in which it is removed is also given. |
The column headed "For other person?" indicates whether the rule is actionable by a person other than a private person (or his fiduciary or representative). If so, an indication of the type of person by whom the rule is actionable is given. |
- 01/12/2004
CRED Sch 5.2
See Notes
Right of action under section 150 | |||||
Chapter / Appendix | Section / Annex | Paragraph | For private person? | Removed? | For other person? |
All rules in CRED with the status letter 'E'. | No | No | No | ||
All rules in CRED that require a credit union to have or maintain financial resources. | No | No | No | ||
All other rules in CRED. | Yes | No | No |
- 01/12/2004
CRED Sch 6
Rules that can be waived
- 01/12/2004
CRED Sch 6.1
See Notes
- 01/12/2004
CRED Sch 7
[Deleted]
- 01/12/2004
CRED Sch 7.1
- 01/12/2004