PS8/21 | CP9/20 Non-systemic UK banks: The Prudential Regulation Authority’s approach to new and growing banks

Policy Statement 8/21 | Consultation Paper 9/20
Alongside this PS, the PRA has re-launched the New Banks Start-up Unit webpage. The updated webpage has been developed as a reference tool for firms considering setting up a bank in the UK, and for newly authorised firms, and contains information covering a range of supervisory topics. We encourage firms to use this as a key source of information when developing their business propositions and regulatory documents.

Published on 15 April 2021

Non-systemic UK banks: The Prudential Regulation Authority’s approach to new and growing banks - PS8/21

Overview

This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 9/20 ‘Non-systemic UK banks: The PRA’s approach to new and growing banks’. It also contains the PRA’s final policy, as follows:

  • a final Supervisory Statement (SS) 3/21 ‘Non-systemic UK banks: The PRA’s approach to new and growing banks’ (Appendix 1);
  • an updated SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’, containing a reference to SS3/21 in paragraph 5.25 (Appendix 2); and
  • an updated Statement of Policy (SoP) ‘The PRA’s methodologies for setting Pillar 2 capital’, containing a reference to SS3/21 in paragraph 9.45 (Appendix 3).

This PS is primarily relevant to new and growing non-systemic UK-incorporated banks, although some banks in this category will have sufficient experience and resources to be able to move quickly to the standard expected of most established banks. This determination will depend on a number of factors, notably on: (i) whether the bank is part of an established domestic or international banking group; (ii) the size and complexity of its activities; and (iii) the extent of its available financial and non-financial resources. The PRA would consider each case on its merits and apply supervisory judgement to ensure that the policy is applied appropriately. See SS3/21 Box 1 – Supervision of UK bank subsidiaries of international groups, for relevant examples. 

This PS is relevant to the following types of banks: 

  • banks in their first few years of being authorised by the PRA as a deposit taker (typically less than five years post-authorisation); and 
  • prospective banks interested in and currently applying for authorisation as a deposit taker (UK applicant banks). 

Chapter 6 of SS3/21 is relevant to non-systemic UK banks that are ‘established’ (typically beyond five years post–authorisation and in the ‘without restrictions’ stage of their lifecycle). 

There are a number of types of banks and other PRA-authorised firms that are not covered in this PS. These include: 

  • banks incorporated outside of the UK authorised to accept deposits through a branch in the UK;
  • systemically important firms, referring to firms that are designated under the other systemically important institutions (O-SII) identification process; 
  • building societies;
  • credit unions; and 
  • UK designated investment firms. 

While this PS is not directly relevant to these firms, it may be of interest to them. This PS also does not alter the change in control process for buying an existing bank. Firms are encouraged to speak with their normal supervisory contact if further clarity is required. 

Summary of responses

The PRA received 17 responses to the CP. Respondents generally welcomed the PRA’s proposals, but made a number of observations and requests for clarification, which are set out in Chapter 2 of this PS.

Implementation

The expectations in SS3/21 will take effect upon publication on Thursday 15 April 2021.

Policy Statement 8/21


Published on 22 July 2020

Non-systemic UK banks: The Prudential Regulation Authority’s approach to new and growing banks - CP9/20

Overview

In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its proposed approach to supervising new and growing, non-systemic UK banks (collectively referred to as ‘banks’). All the proposals are clarifications of the PRA’s current supervisory approach with the exception of: (i) proposed changes to the calculation of the PRA buffer for new banks; and (ii) setting expectations in relation to solvent wind down plans.

The proposals in this CP would:

  • create a new supervisory statement (SS): ‘Non-systemic UK Banks: The Prudential Regulation Authority’s approach to new and growing banks’ (Appendix 1); 
  • reference to the new SS in paragraph 5.25 of Pillar 2 capital policy in SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’ (Appendix 2); and
  • reference the new SS in paragraph 9.45 of the Statement of Policy (SoP) ‘The PRA’s methodologies for setting Pillar 2 capital’ (Appendix 3).

This CP is primarily relevant to new and growing non-systemic UK Banks, though not all, as some firms in this category will have sufficient experience and resources to be able to move quickly to the standard expected of most established banks.

Implementation

The PRA proposes that the amendments set out in this CP would take effect in the first half of 2021.

Responses and next steps

This consultation closes on Wednesday 14 October 2020. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP09_20@bankofengland.co.uk.

Consultation paper 9/20

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