Prudential Regulation Authority Rulebook

3.1

For the purposes of the limits set out in this Chapter, the attached shares attributable to a member in respect of that member’s interest in a joint account must be treated by a credit union as no more than the amount arrived at by dividing the balance in the joint account by the number of members with an interest in that account.

3.2

Subject to 3.3, a credit union must not make:

1. (1) an unsecured loan that is repayable within more than five years from the date of its provision; or
2. (2) a secured loan that is repayable within more than ten years from the date of its provision.

3.3

If a credit union complies with 10.3, it may make:

1. (1) an unsecured loan that is repayable within ten years from the date of its provision; or
2. (2) a secured loan that is repayable within 25 years from the date of its provision.

3.4

Subject to 3.5, 3.6 and 3.7 the outstanding balance of a loan:

1. (1) to a member, must not exceed £15,000 in excess of that member’s attached shares; and
2. (2) to another credit union that is not a member, must not exceed £15,000.

3.5

Subject to 3.6 and 3.7, the outstanding balance of a loan by a credit union that satisfies the requirements in 10.3:

1. (1) to a member, must not exceed 1.5% of total non deferred shares in excess of that member’s attached shares; and
2. (2) to another credit union that is not a member, must not exceed 1.5% of total non deferred shares.

3.6

A large exposure must not exceed 25% of the credit union's capital.

3.7

The aggregate of all large exposures must not exceed 500% of the credit union's capital.

3.8

A credit union must not lend to a member more than £7,500 in excess of the attached shares held by that member, or to another credit union more than £7,500, unless it has a capital-to-assets ratio of at least 5%.

3.9

A credit union that is owed by a member a total amount greater than £7,500 in excess of the attached shares held by that member, or by another credit union an amount greater than £7,500, must maintain a capital-to-total-assets ratio of at least 5%.

3.10

A credit union must make adequate provision for bad debts.

3.11

A credit union must make specific provision in its accounts for bad debts of at least the amounts set out below:

1. (1) 35% of the net liability to the credit union of borrowers where the amount is more than three months in arrears;
2. (2) 60% of the net liability to the credit union of borrowers where the amount is more than six months in arrears;
3. (3) 80% of the net liability to the credit union of borrowers where the amount is more than nine months in arrears; and
4. (4) 100% of the net liability to the credit union of borrowers where the amount is more than twelve months in arrears.

3.12

Where a delinquent loan is rescheduled or the arrears capitalised, the provision a credit union is required to make immediately prior to the rescheduling or recapitalisation must be maintained until the loan has performed for six months.

3.13

A credit union must not make a subordinated loan unless it:

1. (1) is provided to a credit union; and
2. (2) qualifies as capital within the meaning of 8.2.

3.14

Prior to the provision of a subordinated loan, a credit union must carry out an assessment of the financial implications of making the loan.

3.15

A credit union must retain, for a period of five years following the date of a subordinated loan, a written record of the assessment in 3.14.