The Conduct of Business sourcebook (COBS) sets out additional requirements for credit unions that are CTF providers in relation to cash deposit CTFs. 2) Other permissions are covered elsewhere in the handbook. CREDS 10 refers to other more generally applicable provisions in the Handbook which are likely to be relevant to credit unions with Part 4A permission to accept deposits. For details on these provisions, we expect credit unions to access the full text of the handbook.
The purpose of this chapter is to provide rules and guidance regarding senior management arrangements, systems and controls specific to credit unions. This chapter is also intended to remind credit unions that the Senior Management Arrangements, Systems and Controls (SYSC) sourcebook also contains a number of high-level rules and guidance relating to senior management arrangements, systems and controls designed to provide general apply to all firms, including credit unions. Subject to the exceptions in (2) and (3) below,■SYSC 1,■SYSC 4to■SYSC 10 and■SYSC 21 apply to all credit unions in respect of the continuation of their regulated activities and unregulated activities in a prudential context. ■SYSC 18 applies to all credit unions in respect of both their regulated activities and unregulated activities.
General provisions
Appropriate systems and controls
Business plan
Policies and procedures manual
System of control
Internal audit function
Segregation of duties
Governing body
Organisation
Documentation of systems of control
Controls must be defined and their purpose defined so that their effectiveness can be evaluated. The documents must also state how long the evidence must be kept, taking into account■SYSC 9.1. Keep instructions clear and precise, avoiding terms like "usually" and "if possible." g) Documents must be practical and easy to review and use when managing and reviewing systems. h) Documents must be up to date.
There should be a precise description of the function that the control must address. When changes are made to the function, the relevant control systems must be updated and documented at the same time. The documentation of IT controls should be integrated into the overall documentation of a credit union's control system.
Accounting records and systems
Documentation should not be limited to "lower level" controls applied to processing transactions, but should also cover "higher level" controls including:. The governing body must ensure that accounting and other records are kept in a complete, integrated and orderly manner so as to reveal, with reasonable accuracy and speed, the state of the business at all times.
The compliance function
Management information
To form a view of whether the management information system is sufficiently comprehensive, the governing body must consider whether, where necessary, the substance of the reports provides a clear statement of loans, arrears and provisions. These issues should be compared with the limits, ratios and other parameters set by the governing body, as well as with regulatory requirements.
Personnel
Internal Audit
The internal audit function (see ■CREDS 2.2.11G) should develop an audit plan covering all aspects of the credit union's operations. These should be specified with precision and include, among other things, the scope and objectives of the audit committee and the internal audit function (see■CREDS 2.2.11G), access to records, powers to obtain information and explanations of. It should be assessed whether the specific controls put in place to address these risks are sufficient.
Each program must be comprehensive, and specify the frequency with which the different parts of the. The internal audit function (see■CREDS 2.2.11 G) must be independent of all the functions it inspects. To review the overall effectiveness of the internal audit function, it should consider the following:.
Business planning
These should be based on the internal audit plan, together with the controls and their objectives set out in the control documentation. These should be kept as evidence of who did the work, how it was monitored and controlled and to record the conclusions reached. Formal reports should be submitted at the completion of each aspect of the planned work outlining the areas covered along with any recommendations and conclusions reached.
The qualifications, experience and training of individuals performing the internal audit function (see ■CREDS 2.2.11 G) should be appropriate in relation to its objectives. The planning system must be clearly defined, adequately documented, and planning-related tasks and decision-making responsibilities clearly divided within the credit union. Conclusions, recommendations, projections and assumptions defined in the business plan must be supported by analysis, based on adequate data and properly documented for comparison with the facts.
Documentation of policies and procedures
The governing body must have a satisfactory planning system in place to provide a framework for growth and development of the credit union, and to enable it to identify, measure, manage and control risks of regulatory importance. The business plan must cover a period of three years from the current financial year, ie the remainder of the current financial year and the two following financial years. The governing body must consider the range of possible outcomes in relation to different risks.
These risks increase if the credit union provides ancillary services, such as issuing and managing means of payment and money transfer, which in particular causes higher liquidity and operational risks.
Business continuity
Governance and senior management arrangements: general
Governance and senior management arrangements
2) ■SYSC 25.4.14G has guidelines for management responsibility cards for small businesses, which are likely to be of particular interest to credit unions.
Governance and senior management arrangements: allocation of senior management responsibilities
Governance and senior management arrangements: handover procedures
Certification regime
Credit Unions sourcebook
3A.1 Application and purpose
Application
Purpose
3A.2 Shares and deposits
Joint accounts
Deposits including child trust funds
Sale of deferred shares
3A.3 Borrowing
3A.4 Insurance against fraud or other dishonesty
3A.5 Requirements on the retail distribution and financial
Statements requirement relating to the retail distribution of deferred shares
CREDS 3A : Shares, deposits and section 3A.5 : Requirements for the retail trade. loan distribution and financial promotion of capital instruments. Direct investment in deferred shares can be high risk and is very different from investing in deposit accounts or other savings products. In particular, you should note that: a) the entire amount you pay for the deferred share is at risk;.
2) "I am making this statement in connection with my proposed investment in deferred shares issued by a credit union. I have been advised that it is unlikely to be in my best interest to invest more than 10% of my net assets in deferred shares issued of a Credit Union, Credit Union Subordinated Debt and Stock I declare that the proposed investment will not result in more than 10% of my net assets being invested in credit union deferred stock, credit union subordinated debt and mutual company stock.
Net worth here means my financial wealth after deducting any debts I have. I have on my home, unless this is more than the current value of my home, in which case the amount above the current value is included in the debts. My financial assets for these purposes do not include:. a) the property that is my primary residence or any money raised through a loan secured on that property;
I accept that the investment to which this statement relates exposes me to a significant risk of losing all the money invested.
Assessing the appropriateness of an investment in deferred shares
Statements requirement in the case of a direct offer financial promotion relating to subordinated debt
2) “I am making this statement in connection with my proposal for a subordinated loan to the credit union. I learned that I invest more than 10% of my net worth in the credit union. subordinated debt, deferred shares issued by a credit union, and mutual company shares are unlikely to be in my best interest. I declare that the proposed investment will not result in the investment of more than 10% of my net assets in credit union subordinated debt, deferred shares issued by the credit union and mutual company shares.
Application of exemptions in COBS 22.2.4R
Record keeping
Electronic documents
Responsibility of the credit union
Liquidity
- Application and purpose
- General requirements
Liquid assets
Liquid management policy statement
Minimum liquidity requirements
Lending to members
- Application, purpose and interpretation
Interpretation
General requirements concerning lending policy
A credit union must establish, maintain and implement an up-to-date credit policy statement that is approved by its governing body and is prudent and appropriate to the scale and nature of its operations. The credit union's governing body must review and approve its credit policy whenever there is a material change in the conditions of the credit union or its membership, or, in the absence of such change, on an annual basis. The lending policy should take into account the terms and amounts of loans to members, individual mandates and the handling of loan applications.
A credit union should have a documented arrears management policy that sets out the procedures and process for dealing with borrowers who are in arrears. A credit union should have a clear, robust and effective approach to. dealing with arrears and being able to satisfy the FCA on an ongoing basis that it has adequate management and control systems in place to monitor arrears. However, this does not mean that a credit union can give a loan to a member who merely intends to pass the loan on to another body that will actually fulfill the purpose.
Supervision
- Application and purpose
- Reporting requirements
The purpose of this section is to provide additional rules and guidance regarding reporting requirements specific to credit unions. Credit unions must also comply with the relevant SUP provisions regarding reporting, including SUP 16.3 and SUP 16.12.
Accounts and audit
Financial penalties for late submission of reports
Approved persons
The purpose of this section is to provide guidance regarding the FCA's Approved Person requirements that apply to credit unions. The PRA also has a regulation on approved persons in credit unions, which can be found in its Rulebook.
Summary of the FCA’s requirements about approved persons in credit unions
Complaints reporting rules for
Application and purpose
Complaints reporting Section 9.2 : Reporting
- Reporting
Where a complaint is upheld in part, or where the credit union does not have enough information to make a decision but chooses to make a goodwill payment to the complainant, the credit union must treat the complaint as upheld for handled for reporting purposes. Where a credit union rejects a complaint, but still chooses to make an ex-gratia payment to the complainant, the complaint must be recorded as rejected;. Financial penalties may be imposed for late submission of the complaint report required by ■CREDS.
A report pursuant to this section must be made or addressed and delivered in the manner specified in ■SUP 16.3.6 Rto■SUP 16.3.16 G (General Provisions on . Reporting), except that instead of the usual credit union supervisory authority contact, forward or address the report to the Central Reporting Team at the FCA. The point of contact in ■CREDS 9.2.1 R may be by name or job title and may include, for example, a telephone number.
Complaints reporting Annex 1 rules for credit unions
9Credit union complaints return
Application of other parts of
Application and purpose
Application of other parts of the Handbook and of Regulatory Guides to Credit Unions
Key Definitions
Key Definitions
CREDS TP 1
Transitional Provision
Credit Unions sourcebook Schedule 1
Record keeping requirements
Credit Unions sourcebook Schedule 2
Notification requirements
Credit Unions sourcebook Schedule 3
Fees and other required payments
Credit Unions sourcebook Schedule 4
Powers exercised
G [deleted]
G [deleted]
Credit Unions sourcebook Schedule 5
Rights of actions for damages
Credit Unions sourcebook Schedule 6
Rules that can be waived
