CREDS 3
Investment and borrowing
CREDS 3.1
Application, purpose and interpretation
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Application
CREDS 3.1.1
See Notes
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Purpose
CREDS 3.1.2
See Notes
- (1) The rules and guidance contained in this chapter are designed to address risks that can arise from the structure of a credit union's balance sheet.
- (2) These risks include the risk that a credit union's income is not sufficiently large to cover its funding, operational and other costs, and the risk that a credit union may not be able to renew or replace wholesale funding at an affordable rate.
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Interpretation
CREDS 3.1.3
See Notes
For the purposes of this chapter:
- (1) the maturity of a security or loan is the last or only date on which it will be repayable by or under its terms; and
- (2) surplus funds means funds not immediately required for a credit union's accepting deposits, lending and ancillary purposes.
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CREDS 3.2
Investment
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Types of investment
CREDS 3.2.1
See Notes
Subject to the general limitations on its powers contained in the Credit Unions Act 1979 and to the limitations contained in CREDS 3.2.2 R and CREDS 3.2.3 R, a credit union may invest its surplus funds and funds serving liquidity purposes only in the following types of investment:
- (1) deposits or loans to a UK domestic firm with Part IV permission to accept deposits;
- (2) deposits or loans to an institution which is authorised in any other EEA State to accept deposits;
- (3) sterling-denominated securities issued by the government of any EEA State;
- (4) fixed-interest sterling-denominated securities guaranteed by the government of any EEA State, provided that any guarantee is unconditional in respect of the payment of both principal and interest on those securities.
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Maturity of investments
CREDS 3.2.2
See Notes
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CREDS 3.2.3
See Notes
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Cash in custody of officers
CREDS 3.2.4
See Notes
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Investment conditions no longer satisfied
CREDS 3.2.5
See Notes
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Transactions between credit unions
CREDS 3.2.6
See Notes
- (1) A credit union may accept a loan from another credit union (section 10(1) of the Credit Unions Act 1979).
- (2) CREDS 3.2.2 R to CREDS 3.2.3 R apply to loans between credit unions, except for subordinated loans qualifying as capital under CREDS 5.2.1 R (4). (See CREDS 3.2.1 R and CREDS 5.2.8 R (2).)
- (3) CREDS 5.2.1 R to CREDS 5.2.9 G apply to subordinated loans between credit unions qualifying as capital under CREDS 5.2.1 R (4).
- (4) CREDS 7 (Lending) (which covers loans to members) does not apply to loans between credit unions (see CREDS 7.1.1 R). However, in relation to those loans, credit unions should have regard to the principles outlined in CREDS 7.4.6 G and CREDS 7.5 (Provisioning).
- (5) CREDS 6.3.4 R (2) applies to loans between credit unions in relation to liquidity.
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CREDS 3.2.7
See Notes
Loans between credit unions should only be arranged after careful consideration by both parties. For example:
- (1) the borrower should consider the financial implications of relying on such borrowing in order to lend to members, or to finance share withdrawals; and
- (2) the lender should assess the risk of late and non-repayment arising from the borrower's own liquidity and credit risks, and keep the aggregate of its loans to other credit unions to a very modest level.
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CREDS 3.3
Borrowing and financial risk management
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Borrowing
CREDS 3.3.1
See Notes
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CREDS 3.3.2
See Notes
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CREDS 3.3.3
See Notes
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CREDS 3.3.4
See Notes
- (1) The borrowing of a version 1 credit union must not exceed an amount equal to 20% of the total non-deferred shares in the credit union at the end of more than two consecutive quarters.
- (2) Contravention of CREDS 3.3.4 E (1) may be relied on as tending to indicate contravention of CREDS 3.3.3 R.
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CREDS 3.3.5
See Notes
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CREDS 3.3.6
See Notes
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Financial risk management policy statement
CREDS 3.3.7
See Notes
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CREDS 3.3.8
See Notes
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CREDS 3.3.9
See Notes
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CREDS 3.3.10
See Notes
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