UK PRA consults on safeguards for Northern Ireland credit union referrals and loan participation

The Prudential Regulation Authority (PRA) has opened a consultation on changes to its rules and supervisory expectations to accommodate planned legislative reforms for Northern Ireland credit unions. The proposals would classify member referrals and loan participation as “additional activities,” applying enhanced governance and risk management requirements to firms choosing to undertake them as legislation expands their permitted services. For member referrals, the receiving credit union would bear credit risk, with arrangements structured to prevent that risk passing back to the referring firm. Governance, due diligence and clear contracts would underpin these arrangements. Loan participation would allow credit unions to jointly fund loans or share credit risk, subject to clear legal structures, defined risk ownership and controls over exposures. The originating credit union would retain the borrower relationship. Existing member lending limits and large exposure rules would apply to participation loans, alongside proposed amendments to provisioning and capital requirements. Other amendments would accommodate deferred shares and apply existing rules and expectations to hire purchase, conditional sale agreements and insurance distribution, activities already permitted for credit unions in Great Britain. Investment in social projects remains constrained by existing rules and will be considered in the wider review of credit union regulation. Implementation of the consultation proposals is proposed for April 2027, aligned with the planned legislative reforms and conditional on the enacted legislation remaining consistent with the draft Credit Unions (Amendment) Bill.