United Kingdom's Prudential Regulation Authority (PRA) has issued an annual assessment letter to boards of credit unions with total assets up to GBP 50 million, setting out key findings from its sector review and the actions it expects firms to take over the next 12 months. The PRA highlights operational resilience and the risk of disorderly failure as the main risks for this peer group, alongside continued supervisory focus on governance and risk management. On operational resilience, the PRA’s 2026 thematic work will focus on contingency planning, arrangements to replace key staff and directors, and managing dependencies on critical third parties and outsourcing, including cyber and other operational incidents. A separate attached letter sets out more detailed expectations on operational risk and resilience, and the PRA also provided a modified CQUEST questionnaire for boards to assess cyber strengths and weaknesses. To reduce the risk of disorderly failure, boards are expected to monitor prudential positions and performance against forecasts and, where activities become unsustainable, consider alternatives and engage early with regulators and trade bodies; the PRA notes that services such as transactional accounts or processing Department for Work and Pension benefits can increase disorderly failure risk and should be reflected in planning and member communications. Governance remains an area of interest, with boards encouraged to strengthen succession planning, keep policies and management information under review, improve business planning (including objectives, targets, forecasts and risk assessment), and implement formal appraisals for board and senior management performance; supervisors will continue targeted engagement with individual credit unions. The PRA expects credit unions to remain open and cooperative with supervisors and to notify it promptly of events likely to affect their prudential position or ability to provide services. It also flags that its next sector-wide Dear CEO letter will be published in January and that it will invite firms to a credit union conference call to discuss how the priorities apply to the sector.
Prudential Regulation Authority 2025-11-28
United Kingdom's Prudential Regulation Authority sets 2026 supervisory expectations for credit unions under GBP 50 million assets with focus on operational resilience and avoiding disorderly failure
The Prudential Regulation Authority has issued an annual assessment letter to boards of credit unions with total assets up to GBP 50 million, highlighting operational resilience and the risk of disorderly failure as key risks, alongside governance and risk management. The authority’s 2026 thematic work will focus on contingency planning, key staff replacement, critical third-party and outsourcing dependencies, and cyber resilience, supported by a modified CQUEST questionnaire. Boards are expected to monitor prudential positions, plan for potential unsustainable activities, strengthen governance and succession planning, and maintain open, timely engagement with supervisors.