Northern Ireland and HM Treasury Ministers have decided to transfer responsibility for the regulation of credit unions in Northern Ireland from the Northern Ireland Department of Enterprise, Trade and Investment (DETI) to the FSA.
The transfer of regulation will occur on 31 March 2012.
The reason for the transfer is to ensure credit unions in Northern Ireland are subject to the same regulatory requirements as other UK authorised deposit taking firms, and to provide members of credit unions in Northern Ireland with the same level of protection currently afforded to customers of other UK authorised deposit taking firms (such as banks, building societies and credit unions elsewhere in the UK).
Credit unions in Northern Ireland will also fall within the jurisdiction of the Financial Ombudsman Service (FOS).
The Financial Services Authority (FSA), HM Treasury and the Bank of England recently completed a programme of work designed to strengthen the protection offered to credit union members (and customers of other deposit taking firms such as banks and building societies). As a result, the FSA and the FSCS have been working to increase public awareness of the compensation arrangements that will operate should a deposit taker get into difficulty and not be able to pay back money it owes its depositors.
As a result of the work to increase public awareness of the compensation arrangements, all deposit taking firms must meet certain requirements in accordance with rules introduced by the FSA effective from 31 December 2010. These rules form part of the FSA’s COMP rules. Once the transfer of regulation for credit unions in Northern Ireland becomes effective they will also need to meet these requirements from 30 September 2013.
In December 2011, the FSA published its consultation paper (CP11/29: Deposit Protection: raising consumer awareness), in which it proposes that all authorised deposit taking firms prominently display, in their branches and on their websites, posters and/or stickers detailing the current deposit protection arrangements. Details of the consultation, what firms can expect and how they may be affected are available on the FSA’s website.
Faster payout requirements
In the event of the failure of a deposit taking firm, the rules require the firm to ensure it can provide information to the FSCS, within 72 hours, on all customers who are eligible for compensation. This enables the FSCS to pay compensation to eligible depositors of failed deposit taking firms quickly and effectively. The Northern Ireland Credit Union Q&A’s set out in further detail the information to be provided, known as the Single Customer View (SCV).
Single customer view (SCV) requirements
You will find full details of the SCV requirements in COMP 17. The deadline for meeting the SCV requirements is 30 September 2012.
Credit unions with more than 5,000 accounts held by eligible claimants must be able to submit an electronic SCV file in a format that is readily transferable to, and compatible with, the FSCS’ systems. By accounts we mean actual accounts held - for example, if one member holds four different accounts, this will count as four accounts.
Credit unions with fewer than 5,000 accounts held by eligible claimants are able to opt out of the electronic SCV requirements by notifying the FSA. However, these credit unions will still be required to provide an SCV file in paper format within 72 hours of a default, or of a request being received from the FSA or the FSCS.
The FSCS is aware that many smaller credit unions below the 5,000 limit will still retain customer / account data in an electronic format (e.g. database / spreadsheet). Therefore the FSCS encourages these credit unions to review the SCV requirements and, where possible, to also consider adhering to the electronic SCV requirements.
Smaller credit unions that wished to opt out of electronic requirements should have notified the FSA by 30 June 2012.
Once the credit union has received confirmation from the FSA that their notification has been received, they:
However from 30 September 2012, these credit unions will still be required to provide an SCV file in electronic or paper format within 72 hours of a default, or of a request being received from the FSA or the FSCS.
The required fields are illustrated in the Faster Payout Q&A’s.
All credit unions in Northern Ireland must have:
And if they do not opt out:
For further information please contact the Verification Team at FSCS:
The Financial Conduct Authority website includes a searchable database of all firms authorised and regulated by the FCA and the Prudential Regulation Authority (PRA).