Credit Unions and the Senior Managers Regime

Credit unions are member-owned financial co-operatives that take savings from, and lend to, their members. In Great Britain they range from small community organisations with a few hundred members and part-time or volunteer staff, to larger credit unions with professional management teams, significant balance sheets and tens of thousands of members. Because they take deposits, they are authorised by the PRA and regulated by both the PRA and the FCA.

When the Senior Managers regime was extended to credit unions, the regulators applied it proportionately. Larger credit unions follow a structure closer to that of other deposit-takers, with functions such as chief executive and chair. Smaller credit unions can instead have a single Credit Union Senior Manager, SMF8, who is the person responsible for managing the credit union’s affairs. The detailed rules sit in the parts of the PRA Rulebook that apply to credit unions, and the FCA’s requirements are in its SUP 10C rules and its Credit Unions sourcebook.

Which Credit Unions Need SMF8?

Whether a credit union uses SMF8 or the fuller set of functions depends on its size and the regulators’ thresholds. The rules distinguish between smaller and larger credit unions using measures set out in the PRA Rulebook, and those thresholds can change. Rather than relying on a summary, boards should check the current rule wording and their own position each year, particularly if the credit union is growing quickly or merging with another.

Our guides to which SMFs apply at which firm tier and PRA and FCA dual regulation explain the wider framework.

What the SMF8 Holder Is Responsible For

The Credit Union Senior Manager is the person responsible for managing the affairs of the credit union, under the oversight of the board. In practice, at a small credit union, that usually means:

Like every Senior Manager, the SMF8 holder needs approval before taking the role, has a Statement of Responsibilities and is subject to the Senior Manager Conduct Rules, including the duty to take reasonable steps to ensure the business is controlled effectively.

The Role of the Board and Volunteers

Many credit union boards are made up of volunteer directors drawn from the common bond, the community, employer or association the credit union serves. Those volunteers bring local knowledge and commitment, but they may not have financial services experience. The Senior Managers regime doesn’t change the board’s responsibility for overseeing the credit union; it adds personal accountability for the person running it.

That makes the relationship between the board and the SMF8 holder important. The board needs to receive information it can understand and challenge, and the SMF8 needs a board that supports and holds them to account. Boards should also consider how they will cover the role if the SMF8 holder leaves or is absent for a long period; our guide to SMF succession planning is a useful starting point. The Association of British Credit Unions publishes guidance and training for credit union boards and managers.

Approval and Fit and Proper

An SMF8 candidate is assessed against the regulators’ fit and proper standards: honesty and integrity, competence and capability, and financial soundness. The regulators apply those standards proportionately to the size and complexity of the credit union, but they will still expect the candidate to understand the credit union’s business, its risks and the regulatory requirements it must meet.

The application should include a clear Statement of Responsibilities, evidence of relevant experience and, where the candidate has worked in regulated roles before, regulatory references. Candidates who have come from outside financial services, as many credit union managers have, should be ready to explain how their experience equips them to manage a deposit-taking institution.

When a Credit Union Grows

Credit unions that grow, merge or expand their services may cross into the larger category, at which point the fuller set of Senior Manager Functions applies. That transition can mean appointing a chief executive and chair as Senior Managers, approving existing people for new functions, and strengthening governance, risk management and finance. Boards should plan well ahead, because each approval takes time and the right people may need to be recruited. Our guide to moving up a regulatory tier covers the same principles in the FCA context, and our governance and SMF structure review can help map the new structure.

Recruiting for an SMF8 or Larger Credit Union Role

Credit union recruitment has its own character. Candidates need to understand the co-operative model and the common bond, as well as lending, savings and regulation. Pay is often modest compared with banks, so the right candidates are usually motivated by the mission as much as the package. When recruiting, credit unions should:

• Confirm the designation. Check whether the role is SMF8 or, for a larger credit union, SMF1 or another function.
• Look across the sector. Experienced credit union managers, and managers from building societies and community finance, are often the strongest candidates.
• Assess approvability early. Check experience, financial soundness and any regulatory history before making an offer.
• Plan the handover. Allow for the approval period, and use any overlap with the outgoing manager well.

Our page on SMF recruitment for banks and building societies covers deposit-taker searches more broadly, and our urgent SMF replacement service helps where a Senior Manager leaves without warning.

Frequently Asked Questions

Which credit unions need an SMF8?

Smaller credit unions, as defined by thresholds in the PRA Rulebook. Larger credit unions have a fuller set of functions. Check the current rules for your credit union’s size.

Who usually holds SMF8?

The person who manages the credit union day to day, such as the general manager or most senior officer.

Does SMF8 need approval?

Yes. Like all Senior Manager Functions, the holder must be approved before taking the role.

Can a volunteer hold SMF8?

The rules focus on the role and the person’s fitness and propriety, not on whether they are paid. In practice, the regulators will expect the holder to have the time and competence to manage the credit union properly.

What happens if our credit union grows?

If it crosses into the larger category, the fuller set of Senior Manager Functions will apply, and new approvals will be needed. Plan ahead.