Prudential Regulation Authority Rulebook

14.1

Credit unions that invest in more complex investments under Rules 6.4(7) and 6.4(8) of the Credit Unions Part of the PRA Rulebook are expected to adhere to the investment expectations set out in Chapter 11 (paragraphs 11.1-11.6).

14.2

The PRA expects credit unions undertaking additional activities and/or credit unions investing in more complex investments (supranational bonds, corporate bonds, non-UK bank bonds, and money market funds) to maintain a board-approved investment policy. This should:

• set out organisational arrangements including the roles and responsibilities of officers involved in the credit union’s investments;
• set out their strategy for managing investments, including:
  • the credit union’s risk appetite;
  • the characteristics of the investments the credit union will make including quality, counterparty, and maturity; and
  • how the credit union will manage market risk including specifically listing institutions, issuers, and counterparties that may be used, or criteria for their selection, and limits on the amounts that may be invested with each;
• include the credit union’s approach to assessing credit worthiness and counterparty risk and maintaining a diversified investment portfolio;
• consider liquidity and funding risks arising from maturity mismatch and consider if and when additional liquidity may be required; and
• be reviewed regularly (at least annually).

14.3

Credit unions that invest in more complex investments are expected to meet the liquidity stress testing expectations set out in paragraphs 12.1 to 12.4.