Unity Trust Bank

The Financial Services Authority has announced tougher prudential standards for credit unions according to the FT Adviser.

It published "near final" rules today aimed at strengthening the financial resilience of the credit union sector and reducing the number of credit union failures.

The FSA said on average, around six credit unions were declared in default each year with customers compensated by the Financial Services Compensation Scheme (FSCS).

The regulator said the new rules aimed to improve the financial soundness of credit unions and therefore maintain consumer choice in the financial services sector.

The new rules will require new credit unions to have adequate initial capital, the amount of which will be dependent on the nature, scale and complexity of their business.

In most cases, smaller credit unions will need to have initial capital of at least £10,000 and larger credit unions at least £50,000.

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