The financial regulators have announced a series of measures aimed at supporting growth across the UK mutuals sector, including a review of credit union regulations and the creation of a dedicated Mutual Societies Development Unit within the Financial Conduct Authority.
The proposals form part of a wider package published in a joint report from the Prudential Regulation Authority and the FCA, setting out steps to help mutuals expand, collaborate and navigate regulatory change.
The new FCA Mutual Societies Development Unit will act as a central hub for expertise and insight, supporting societies as they respond to shifting policy and legislative requirements.
It will also back initiatives such as co-operative networks designed to help mutuals share resources, strengthen resilience and scale their operations.
The PRA and FCA will jointly review credit union regulations, considering more risk-based capital requirements for larger and more complex firms while applying greater proportionality for smaller credit unions.
Further measures include free pre-application support for firms establishing mutual societies or adapting their business models, and a reduction in application processing times for new societies through the FCA’s online portal, with the target cut from 15 to 10 working days.
The PRA has also confirmed that its Building Societies Sourcebook has been removed from the rulebook with immediate effect.
Sam Woods, CEO of the PRA and deputy governor at the Bank of England, said: “Mutuals are a vital part of our financial system.
“Today’s report examines how the financial mutuals sector is growing, and what we can do to help it thrive in the period ahead.”
The FCA has also published a separate report assessing the condition and development of the mutuals sector in its role as registering authority.
Nikhil Rathi, chief executive of the FCA, said: “The mutuals sector is remarkably diverse and rooted in the communities and members it serves.
“They support people to buy a home, insure against the worst events, increase financial inclusion and bring communities together, whether in the club, pub or on an allotment.
“We want to help them grow, and our new Development Unit will provide dedicated support. We’re also making it faster for mutuals to start-up.”
Lucy Rigby, economic secretary to the Treasury, said: “We have committed to double the size of the mutuals sector, and are pleased the regulators are taking concrete steps to support the sector’s growth so it can deliver better value for members and communities.
“Mutuals form an important part of the UK’s financial and business landscape, supporting the savings, borrowing, pensions and more of millions of people.”
The announcements build on existing initiatives designed to support mutuals and the wider financial services industry, including proposals to streamline the Senior Managers and Certification Regime, the launch of the Scale-up Unit for high-growth firms, and simplified capital requirements for smaller firms under the PRA’s Strong and Simple rules.
“Other recent reforms include Solvency UK, which reduces regulatory burdens for insurers, and the FCA’s mortgage market changes, adopted by 85% of the market, enabling lenders such as building societies to offer around £30,000 more in borrowing.
The UK mutuals sector includes 93 mutual insurance firms, 42 building societies and around 350 credit unions, serving more than 30 million members.
A further 12 million memberships span more than 8,400 co-operative and community benefit societies, collectively holding over £223bn in assets. The reports were launched at an FCA and PRA event in Rochdale attended by Rigby.
Ewen Tweedie, actuarial director at Broadstone, said: “The FCA’s proposals to galvanise and support the growth of mutuals are aimed at achieving the Government’s ambition of doubling the size of the sector. Mutuals play a critical role in supporting their members and are a catalyst for improving financial inclusion and building greater financial resilience.
“Mutuals serve over 30 million members across the UK – nearly half the total population – so their importance to the nation’s finances should not be underestimated. The sector delivers a brilliant level of customer experience and a larger role in the financial services ecosystem would certainly represent an improvement in consumer choice.
“Access to capital is cited by mutuals as a key barrier to innovation and growth, however there are financing options available to mutuals to access capital through existing structures, such as Tier 2 loans or reinsurance structures.
“To double, requires thinking differently. This means transforming into businesses that not only serve their customers well, and respect their heritage, but that are cost efficient and scalable. The launch of the FCA’s Mutual Societies Development Unit alongside the PRA’s Scale-Up unit is a welcome innovation to support mutuals deliver this, providing a quicker route to test innovations at lower cost.
“The proposals make it simpler to establish new mutuals with regulatory support and reduced application times aim to encourage more activity in this part of the financial services ecosystem. Similarly, more proportionate regulation will help smaller firms thrive and serve their membership rather than pulling up the ladder.
“Mutuals look after their members, it’s what they do best, and these developments position them strongly to play a more significant role in a thriving and resilient financial system in the UK.”
