Regulation of N. Ireland Credit Unions to Transfer to FSA
The Financial Services Authority (FSA) and HM Treasury (HMT) have set out proposals giving increased protection to credit unions in Northern Ireland as they move to transfer the regulation of these unions from the NI Department of Enterprise, Trade and Investment (DETI) to the FSA.
The FSA’s move will bring enhanced consumer protection to the 177 NI credit unions and their members in line with other British credit unions. The transfer is due to take place on March 31, 2012.
In a letter to all credit unions in N. Ireland dated August 31, 2011, the FSA said the “Treasury and the FSA would like to work with credit unions in Northern Ireland and all other stakeholders to make sure that the transfer takes place as smoothly as possible and to develop an appropriate regulatory regime.”
As part of this process, the joint consultation paper outlines proposed legislative amendments and FSA rules that will apply to all NI credit unions. These changes will place NI credit unions within the UK Financial Services Compensation Scheme (FSCS) and within the compulsory jurisdiction of the Financial Ombudsman Service (the ombudsman service).
The joint Consultation Paper will affect credit unions in Northern Ireland, their members,
their officers and volunteers, their trade associations, their IS systems and software providers and
those planning to set up new credit unions in Northern Ireland.
“This will significantly enhance consumer protection as only some, but not all, NI credit unions are currently covered, to varying levels, by voluntary protection schemes operated by the relevant trade associations,” the FSA said.
Prudential standards for NI credit unions will be aligned to those of other credit unions in Great Britain with a focus particularly on capital, liquidity and financial reporting.
Martin Stewart, the FSA’s head of building societies and credit unions, said: “We have been working closely with HMT and DETI on the legislative and regulatory amendments necessary to transfer the regulation of NI credit unions to our remit.
“This will finally bring NI credit unions in line with other credit unions in Great Britain and will result in beneficial changes for these credit unions and their members. One of the main benefits will be that, for the first time, members will have greater consumer protection with cover from the FSCS and the ombudsman service.
“Over the next few months we will be engaging with NI credit unions and other stakeholders to encourage them to provide us and HMT with their views and suggestions so we can ensure the transfer process is as smooth as possible.”
Joleen Cunningham, senior consumer affairs officer at the Consumer Council, considered the announcement as acknowledging “the invaluable role that credit unions have been playing in Northern Ireland for decades in supporting and providing affordable credit and savings for consumers.”
The joint consultation paper requires NI credit unions to comply with an updated version of the Credit Union Sourcebook that currently applies to all credit unions in Great Britain from March 2012. This sets out, in one place, the prudential and reporting requirements specific to credit unions. The requirements will be proportionate to different levels of risk dependent on the type of activity the credit union undertakes.
The Treasury and the FSA will next consider all the responses they receive as part of the consultation
process. In December 2011, it will publish a joint Policy Statement and near final rules, which will
come into effect on the date of the transfer.