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Archive for August 2nd, 2010

Liverpool credit union manager Marie Gray welcomes FSA proposals to strengthen sector

Monday, August 2nd, 2010

Proposals by the financial regulator to strengthen the credit union sector and protect its members have been welcomed by a Liverpool credit union.

Lodge Lane & District Credit Union project manager Marie Gray described the proposals as “fair and proportionate”.

Credit unions are seen as an alternative to high street banks for people unable to open conventional bank accounts or borrow money from the big banking groups.

The Lodge Lane credit union was involved in the Financial Services Authority’s (FSA) original consultation process.

Among suggestions in the FSA’s “near final rules” were moves to ensure new credit unions had enough capital.

Smaller credit unions would have to secure initial capital of at least £10,000, while larger credit unions would need at least £50,000.

The watchdog also proposed a liquid assets level of at least 5% of liabilities for all credit unions, but not below 10% in two consecutive quarters.

And it has called for annual financial returns to be filed within six months instead of the current seven.

Any changes would be phased in by September 2013 to give credit unions enough time to comply.

FSA prudential policy division director Paul Sharma said: “We want to make sure credit unions are financially sound and well managed, with fewer failures and defaults.

“We are publishing near final rules now so that credit unions have enough time to be able to meet the stronger prudential requirements and to prepare for future Government legislative changes.”

New Government legislation, including proposals to allow credit unions to carry out a wider range of financial activities, is currently before Parliament.

Mr Sharma added: “Our reforms focus on improving the areas of weakness that we still see in the credit union sector, by raising requirements for capital, liquidity and financial reporting.”

Marie Gray said: “There was a consultation and we were one of the credit unions that responded. What is clear is that the FSA has taken note of a lot of people’s concerns.

“On balance some things are staying the same and some have a two to three year lead in period and I feel it is all fair and proportionate.”

She added: “The requirement to have a stronger financial base will increase the public’s confidence in credit unions.

“The proposals should also help the public perception of credit unions that we are not a ‘Mickey Mouse’ small savings club.”

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Please note: Information in this blog post is content property of LDP Business News and the full original article can be found by clicking here.

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Businesses urged to be more transparent with year end accounts

Monday, August 2nd, 2010

Euler Hermes, the UK’s largest credit insurer, is urging UK companies to consider how they plan to release their 2009 company accounts which will inevitably give a picture of company performance at the depth of the recession, and may impact future credit.

September represents the looming deadline for limited companies, with a 31st December financial year end, to file their accounts with Companies House.

Whilst Euler Hermes employs regional risk analysts to obtain up-to-date information that is not publicly available from companies on which to base its underwriting decisions, most credit ratings agencies and other credit insurers do not, and only reference filed accounts, Kris Macauley, Head of Risk Information for Euler Hermes UK explains:

“As the economy has emerged from the recession we would hope to see a recovery in the health of UK businesses,” he says. “However, 2009 audited accounts being filed now will in many cases tell a very different story – possibly one of declining profits or losses – and this is unfortunately what many companies will be judged on in terms of their credit rating.”

Euler Hermes UK has long been campaigning for businesses to be more transparent in order to help credit insurance policyholders (and the companies themselves) but as the economy recovers and business performance with it, Mr Macauley expects to see more engagement from businesses who will want to share a more meaningful picture of their up-to-date financial position.

“Where end of year accounts play such a crucial role in credit ratings decisions,” he says, “companies should be aware of the impact they can have. If businesses feel the ‘recession-era’ information they are publishing in Companies House will reflect negatively on them, and they have a better story to tell, I can only urge them to be more transparent and open in their dealings with their suppliers and the credit insurers to ensure their lines of credit remain open.”

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk) and the full original article can be found by clickin here.

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