The Bank of England, in partnership with the Prudential Regulation Authority (PRA), has issued a report on country\u2019s finance mutuals, with recommendations for ways to ease the start-up process and reduce admin costs.<\/p>\n
Measures proposed in the report include a review of credit union law, the launch of a Mutual Societies Development Unit by the Financial Conduct Authority (FCA), and continued efforts to deliver more proportionate regulation.<\/p>\n
Mutuals, credit unions and other member-owned lenders in the UK \u2013 and around the world \u2013 have complained that regulations designed for \u2018too big to fail\u2019 banking giants, especially in the wake of the 2009 financial crisis, had left them labouring under time-consuming and costly regulation that do not reflect their risks.<\/p>\n
\u201cThe PRA and FCA recognise the government\u2019s commitment to grow the mutual and co-operative sector as a whole<\/a>,\u201d says the report. \u201cEffective and proportionate regulation has an important role in achieving this outcome by enabling sustainable growth and protecting consumers, alongside an appropriate legislative framework and a clear vision driven by the mutuals sector.\u201d<\/p>\n The PRA has already introduced proportionality through its Strong and Simple regime for small deposit takers and Solvency UK for insurers, the report added. <\/p>\n Meanwhile, the report promises active support for growth ambitions with initiatives like the FCA\/PRA Scale-up Unit, and FCA support services.<\/strong><\/p>\n Related: Reeves pledges council for co-ops and mutuals in Mansion House speech<\/a><\/strong><\/p>\n \u201cMutuals are a unique sector and so require a tailored regulatory response,\u201d the report says. \u201cIn the last year we have eased regulations for building societies to enable them to compete more easily with banks, supported credit unions by helping them set up shared service organisations, and worked with the Law Commission to modernise Friendly Societies legislation for insurers.\u201d<\/p>\n Regulation of the credit union sector will be reformed to reflect the evolving role of the sector, the report says. \u201cWe are committed to engaging with the sector to undertake a comprehensive review and to consider the longer-term evolution of the sector\u2019s regulatory framework.\u201d<\/p>\n One significant change in the sector in recent years is the growth of some credit unions, often through consolidation, to a size similar to smaller building societies \u2013 a trend which may continue as common bond rules are relaxed.<\/p>\n \u201cThis suggests the need for a review of the regulatory regime that applies to larger or more complex credit unions to ensure it continues to reflect the risks and needs posed by these firms,\u201d the report says.\u00a0<\/p>\n But, it adds, \u201cWe have aimed to apply governance requirements in a balanced way by introducing a simpler framework for approving senior positions in credit unions, recognising the reliance on voluntary staff.\u201d<\/p>\n Another ask from the credit union sector is a relaxation around the rules on credit union service organisations (cusos<\/a>) \u2013 secondary co-ops which allow them to pool resources, build scale and access services.\u00a0<\/p>\n \u201cThe PRA recognises that cusos can have an important role in facilitating credit union growth and ensuring their sustainability,\u201d the report says, \u201cand therefore proposes to remove barriers to cusos while establishing guardrails to ensure any associated prudential risks are managed in changes expected to be introduced in early 2026.\u201d<\/p>\n Related: Doubling the size \u2013 hit, miss or maybe?<\/a><\/strong><\/p>\n Similar help is being offered elsewhere in the mutual landscape, with insurers being offered a simpler process when it comes to consolidation to build scale, a simplification of the rules around life insurance product description.<\/p>\n And there will be simplification of liquidity and capital requirements for building societies \u2013\u00a0particularly those operating at smaller scale.\u00a0<\/p>\n Published alongside the report was the FCA\u2019s Registering Authority landscape report, which sets out improvements to t<\/strong>he Mutuals Public Register. The FCA is setting up a new Mutual Societies Development Unit, to \u201cengage policymakers, academics and researchers, think-tanks, trade bodies and others on policy and understanding relating to mutual societies.<\/p>\n \u201cWe have longstanding experience as a registering authority across seven pieces of mutuals legislation,\u201d\u00a0says the FCA in the report. \u201cWe can use this experience to support public authorities and governments across the UK in their consideration of mutuals.\u00a0<\/p>\n \u201cAs historic growth in the society model has come from discrete policy initiatives (eg housing, agriculture, etc), we feel this is of particular value.\u201d<\/p>\n