Smaller credit unions will need a minimum capital to assets ratio of at least 3 per cent and the regulator is increasing the initial start up capital for new credit unions to £10,000 for small start-ups and £50,000 for larger ones.
These changes will be phased in over two to three years to give firms enough time to comply with any new rules.
The FSA says the proposed regime could help ensure credit unions are prepared for the new government legislation allowing them to carry out a wider range of financial activities.
The regulator is also proposing to reduce the submission period for annual financial returns from seven to four months.
FSA director of prudential policy Paul Sharma says: “Our reforms for credit unions will ensure they are financially sounder, well managed with fewer failures and defaults. Raising the standards will also enable firms to be better placed to take advantage of the proposed legislative changes.”