Question to the HM Treasury:

To ask the Chancellor of the Exchequer, with reference to the Prudential Regulation Authority's consultation paper entitled CP7/22 – Credit Unions: Changes to the Regulatory Regime, published 21 September 2022, what assessment he has made of the potential impact of a 50 per cent cap on interest-bearing deferred shares on (a) the ability of the sector to raise capital and (b) access to finance for financially excluded consumers.

The Prudential Regulation Authority (PRA) is an independent, non-governmental body responsible for regulating and supervising the financial services industry, including credit unions. Although the Treasury sets the legal framework for the regulation of credit unions, it has limited powers in relation to the PRA’s decision-making processes, including any proposed changes as part of their sectoral consultation work.

Regulators are obligated to provide a cost benefit analysis on any proposed changes and an estimate of those costs and benefits if reasonable. This consultation paper includes a cost-benefit analysis; the PRA estimates that any costs are, overall, proportionate to the additional risks involved.

The Government is a strong supporter of the mutuals sector and recognises the unique role credit unions play in their communities, providing savings and affordable loans to their members. As part of the Financial Services and Markets Bill, the Government is bringing forward changes to the Credit Unions Act 1979 to allow credit unions to offer a wider range of products and services. This will allow credit unions to continue to grow sustainably in the future and support them in the vital role they play in financial inclusion.