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CREDS 3.2 Investment

Types of investment

CREDS 3.2.1R

Subject to the general limitations on its powers contained in the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985 (as appropriate)1 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. (1)

    deposits or loans to a UK domestic firm with Part 4A permission to accept deposits;

  2. (2)

    deposits or loans to an institution which is authorised in any other EEA State to accept deposits;

  3. (3)

    sterling-denominated securities issued by the government of any EEA State;

  4. (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.

[Note: a transitional provision applies to this rule: see CREDS TP 1.7.]1

Maturity of investments

CREDS 3.2.2R

Any securities invested in, or loans made, in accordance with CREDS 3.2.1 R by a version 1 credit union must have a maturity date of not more than 12 months from the date on which the investment is made.

[Note: a transitional provision applies to this rule: see CREDS TPs 1.8 and 1.9.]1

CREDS 3.2.3R

Any securities invested in, or loans made, in accordance with CREDS 3.2.1 R by a version 2 credit union must have a maturity date of not more than five years from the date on which the investment is made.

[Note: a transitional provision applies to this rule: see CREDS TP 1.10.]1

Cash in custody of officers

CREDS 3.2.4R

Surplus funds not invested by a credit union in accordance with CREDS 3.2.1 R to CREDS 3.2.3 R must be held as cash in the custody of officers of the credit union.

Investment conditions no longer satisfied

CREDS 3.2.5R

Where under CREDS 3.2.1 R to CREDS 3.2.3 R above, a firm or another institution ceases to satisfy the conditions necessary for a credit union to invest with it or lend to it, and any funds of a credit union are with that firm or other institution, the credit union must take all practicable steps to call in and realise that investment or loan within three months of that cessation, or, if that is not possible, as soon after the end of that period as possible.

Transactions between credit unions

CREDS 3.2.6G
  1. (1)

    A credit union may accept a loan from another credit union (section 10(1) of the Credit Unions Act 1979) or article 27(1) of the Credit Unions (Northern Ireland) Order 1985 (as appropriate)1.

  2. (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. (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. (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. (5)

    CREDS 6.3.4 R (2) applies to loans between credit unions in relation to liquidity.