ABCUL welcomes Bank of England package of reforms to credit union capital requirements

By Patrick Thorpe posted 25-10-2019 09:50:31


ABCUL has warmly welcomed the Bank of England’s announcement this week of a package of reforms to the credit union capital requirements which, if approved, will provide a more proportionate approach to the challenges of capital accumulation for growing credit unions.

Based on proposals first put forward by ABCUL early in 2019, the Bank of England is proposing to move from the current approach to tiered capital bands to a new system which applies graduated capital requirements as credit unions move through size bands on their assets.

The proposals can be summarised as follows:

  • Capital requirements based on membership numbers and performing “additional activities” are to be abolished
  • The 3% capital requirement for credit unions under £5 million in assets is retained
  • Credit unions between £5 million and £10 million in assets must hold 5% capital to assets on all assets as is currently the case
  • Credit unions over £10 million in assets must hold 8% capital to assets on all assets above the £10 million threshold and below £50 million
  • Credit unions over £50 million in assets must hold 10% capital to assets on all assets over £50 million

In yesterday’s announcement, Chief Executive Officer of the Bank of England, Sam Woods said: “The effect of these changes should be to reduce overall capital requirements for the credit union sector by roughly one quarter”

Commenting on the proposals, ABCUL’s Head of Policy & Communications, Matt Bland said: “Our membership has been calling on us consistently over a number of years now to make reform of the capital requirements for credit unions our top priority in our advocacy and lobbying efforts.

“We are therefore delighted to see yesterday’s proposals announced by the Bank of England. We believe that these measures will provide a strong platform for credit unions to fulfill their growth potential and it is the ideal backdrop for the sector as it finalises a shared vision and strategy for the future ABCUL’s Town Hall consultation process.”