CREDS 3.3 Borrowing and financial risk management
Borrowing
A credit union must not borrow from a natural person, except by subordinated loan qualifying as capital under CREDS 5.2.1 R (4).
CREDS 3.3.1 R does not apply to borrowing from a body corporate. A loan made to a credit union by a body corporate can either be a subordinated loan (providing regulatory capital within CREDS 5.2.1 R (1)(c)) or a senior loan (providing ordinary funding, but not constituting regulatory capital).
Financial risk management policy statement
A version 2 credit union must establish, maintain and implement an up-to-date financial risk management policy statement approved by the committee of management.
[Note: a transitional provision applies to this rule: see CREDS TP 1.6.]1
This policy should address both interest rate and funding risk. It should cover aggregate limits on holdings of investments and borrowings from sources other than members. It should deal with avoidance of funding concentrations (both source and time-band concentrations) and should detail the organisational arrangements, systems and controls in respect of these matters.
A credit union's committee of management should review and approve its financial risk management policy at least once a year, and more frequently if necessary, especially in the light of significant changes in business.
A version 2 credit union must send to the FSA a copy of its financial risk management policy statement as soon as reasonably practicable after it has been approved by the committee of management.