Credit Unions Protected From PMS-style Crash

Northern Ireland's credit unions will be offered more protection under a new form of regulation, the Financial Services Authority (FSA) has said.

In changes that are being made in the wake of the collapse of the Presbyterian Mutual Society, the regulation of all 177 credit unions will pass from the Department of Enterprise to the FSA and will therefore fall under the compensation scheme, which underwrites savers' accounts up to £85,000.

HM Treasury and the FSA yesterday published a joint consultation paper on the future regulation of Northern Ireland credit unions (NICUs).

These proposals aim to enhance consumer protection across all NICUs, and align both the prudential and consumer standards of NICUs with those of credit unions in other parts of the United Kingdom.

NICUs will be regulated by the FSA, brought under the protection of the Financial Services Compensation Scheme and within the jurisdiction of the Financial Ombudsman Service.

These measures will provide NICU members with increased protection and peace of mind, as the Government strongly believes financial services consumers in Northern Ireland should have the same rights as those in the rest of the UK.

The Government is committed to promoting mutuals across the UK financial services sector. As mutuals, credit unions play a major role in the overall financial services sector in Northern Ireland, a statement said.

Mark Hoban MP, Financial Secretary to the Treasury, said: "Members of Northern Ireland Credit Unions don't have the same rights and can't access the same products as members of credit unions in the rest of the United Kingdom.

"It is time for this to change. We have asked the FSA to regulate them and thereby strengthen the rights of members of credit unions in Northern Ireland.

"This is a further sign of our commitment to strengthen financial mutuals and foster diversity in financial services throughout the whole of the United Kingdom," he said, adding that the paper builds on a consultation issued by HM Treasury in March 2010. This previous consultation set out proposals for the regulatory reform of NICUs.

It proposed the transfer of regulation to the FSA and the future transfer of the registration function from Northern Ireland.

Regulation of NICUs will transfer from the NI Department of Enterprise, Trade and Investment (DETI) to the FSA on 31 March 2012.

Welcome

Alliance Finance Spokesperson Judith Cochrane has welcomed the change from the Department of Enterprise, Trade and Investment to the Financial Services Authority as this means accounts will be underwritten up to £85,000.

Judith Cochrane MLA said: "Extra protection for credit union savers is crucial and we only have to look at what happened to the Presbyterian Mutual Society to see why a measure like this is so important.

"People work hard to build up their savings and it is vital that they are not lost if something goes wrong within an organisation.

"People who invested money with the PMS had a very long and worrying wait to find out what would happen with their savings and we never want to see a repeat of these troubling circumstances," she said.

See: PMS Savers Get Summer Pay-out Offer

(BMcC/CD)