CRED 8.1 Application and purpose

It amplifies Principle 4 under which a firm must maintain adequate financial resources and the threshold condition that a firm's resources must be adequate in relation to the regulated activities that it carries on.

The purpose of setting capital requirements is to ensure that a credit union has an appropriate level of capital available to absorb unexpected losses.

The capital and net worth requirements set out in this chapter represent the minimum requirements that a credit union must comply with. A credit union should decide for itself the amount of capital that it needs to hold over and above these minimum standards proportionate to its scale of operations and its risk profile.

The FSA may require a credit union to hold minimum amounts of capital greater than those set out below where it considers that particular circumstances make that appropriate.