CRED 7A
Shares and deposits
CRED 7A.1
Application and purpose
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CRED 7A.1.1
See Notes
This chapter
applies to all credit unions.
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CRED 7A.1.2
See Notes
The purpose of this chapter is to provide
for limits on holdings of shares and deposits, joint accounts, dividends and
insurance cover (based on the aggregate value of shares and deposits).
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CRED 7A.1A
Members and juvenile depositors
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Sections 1 and 5 of the Credit Unions Act 1979
CRED 7A.1A.1
See Notes
In relation to membership of credit unions, the Credit Unions Act 1979 provides that:
- (1) a common bond has to exist among the members (section 1(2)(b) - see CRED 13 Annex 1A, CRED 13 Annex 1B, CRED 13 Annex 1C and CRED 13 Annex 2 G);
- (2) only individuals may be members (section 5(1)); and
- (3) a member has to hold at least one share (section 5(2)).
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CRED 7A.1A.2
See Notes
Membership of a credit union is open only to individuals acting in a private capacity and in their own right. It is not open to:
- (1) a body corporate; or
- (2) an individual acting as a representative of a body corporate or unincorporated association.
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Section 9(1) of the Credit Unions Act 1979
CRED 7A.1A.3
See Notes
Section
9(1) of the Credit Unions Act 1979 provides that a credit union may take deposits from a person
who is under the age at which he may become a member.
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CRED 7A.1A.4
See Notes
- (1) An explanation of section 9(1) of the Credit Unions Act 1979 is given at paragraph 3 of CRED 13 Annex 2 G.
- (2) The deposits referred to in CRED 7A.1A.2 G (1) are not shares and the persons who make those deposits are not members.
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CRED 7A.2
Shares
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Maximum shareholdings
CRED 7A.2.1
See Notes
A credit
union must not permit a member to have or claim any interest
in the shares of the credit
union exceeding the greater of £10,000 or 1.5 per cent of the total shareholdings
in the credit union.
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CRED 7A.2.2
See Notes
Where CRED
7A.2.1 R or CRED
7A.2.6 R would be breached in
relation to a member of a credit
union because of a reduction in the total shareholdings in the credit union, those rules must, in relation
to him, have effect, as respects any shares which he had, or interest which
he claimed, immediately before the reduction, as if there were added at the
end "at the time, or latest time, when he acquired shares, or an interest
in the shares of the credit
union."
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CRED 7A.2.3
See Notes
CRED
7A.2.2 R makes
it unnecessary for a member to reduce his shareholding merely because of a
reduction in the total shareholdings of the credit union.
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CRED 7A.2.4
See Notes
For the purposes of CRED
7A.2.1 R and CRED
7A.2.2 R,
the total shareholdings in a credit
union at any time must be taken to be the total shareholdings
as shown in the most recent annual return to have been sent to the FSA under SUP 16.7.62 (see CRED
14.10.7 G).
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Joint accounts
CRED 7A.2.5
See Notes
Shares in a credit union must not be held in the joint
names of more than two members.
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CRED 7A.2.6
See Notes
For the purpose only of the limit in CRED
7A.2.1 R, the interest of a member
in a joint account must be treated as 50 per cent of the shareholding in that
account.
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Dividends on shares
CRED 7A.2.7
See Notes
A version 1 credit union must not:
- (1) pay different dividends on different accounts unless:
- (a) at the time of the payment of any dividends it has a capital to total assets ratio of at least 5%; and
- (b) the payment of any of those dividends does not reduce the capital to total assets ratio to below 5%; or
- (2) pay dividends out of interim profits more than once a year.
- 01/01/2007
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.
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CRED 7A.3
Deposits
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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 £10,000 or 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.
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CRED 7A.3.1A
See Notes
Credit unions that provide CTFs should ensure that
under their rules depositors under the age of 18 whose deposits are held within a CTF continue to be treated as juvenile depositors
until the age of 18. This will provide for the fact that CTF account holders may not withdraw any
money from the CTF until
they reach the age of 18 in contrast to the position in relation to other deposits which become
shares and may be withdrawn earlier.
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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)
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CRED 7A.4
Insurance against fraud or other dishonesty
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CRED 7A.4.1
See Notes
A credit
union must at all times maintain in force a policy of insurance
complying with CRED
7A.4.2 R.
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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.
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CRED 7A.4.3
See Notes
From the losses and liabilities against
which a policy complying with CRED
7A.4.2 R must
insure there must be excepted all loss suffered or liability incurred by a credit union other than
direct pecuniary loss discovered during the currency of the policy of insurance
or within 18 months of the date on which either the policy of insurance lapses,
or the duties of the officer or employee concerned are terminated, whichever
occurs first.
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CRED 7A.4.4
See Notes
- (1) The "aggregate value" in CRED 7A Annex 1 R comprises the shares and deposits (including those held in a CTF) referred to in CRED 7A.3.1 R (1)(a) and (b).
- (2) The tables in CRED 7A Annex 1 R set out the minimum levels of insurance cover required by a credit union. It is prudent for a credit union to consider whether additional cover:
- (a) is needed for its own particular circumstances; and
- (b) should be obtained to cater for actual or projected growth in the "aggregate value" (see paragraph 1 of CRED 7A Annex 1 R) between "relevant dates" (see paragraph 3 of CRED 7A Annex 1 R).
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CRED 7A Annex 1
Insurance against fraud or other dishonesty
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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. |
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