The Prudential Regulation Authority published a near-final policy statement setting out Phase 2 of its Strong and Simple framework, including the proposed simplified capital regime and related liquidity simplifications for Small Domestic Deposit Takers (SDDTs). The package provides feedback on responses to CP7/24 and related consultations, and sets out near-final rulebook and supervisory materials covering Pillar 1, Pillar 2A, buffers, capital deductions, reporting and how the SDDT regime will operate, while noting that final rules will be made once the Basel 3.1 package is finalised. As of 13 October 2025, 56 firms had opted in to become SDDTs out of around 80 estimated to be eligible. Key changes from the consultation include dropping the proposed Pillar 2A operational risk “bucketing” approach in favour of a scenario-analysis-led assessment aligned with non-SDDTs, and tightening the Pillar 2A single-name concentration “cluster limit” trigger for supervisory engagement to 200% of Tier 1 capital while excluding exposures to credit institutions from the calculation. The near-final package also reduces minimum ICAAP update expectations for most SDDTs to every two years (including Pillar 2A and Pillar 2B elements) and reduces ILAAP update frequency to every two years, mandates full CET1 deduction for qualifying holdings outside the financial sector, certain securitisation positions and free deliveries, and further streamlines regulatory reporting by increasing the number of capital-related templates from which SDDTs are descoped to 51. It maintains the move to a Single Capital Buffer set at no less than 3.5% of RWAs, publishes an example of the non-cyclical stress test “SDDT scenarios”, and confirms the Interim Capital Regime will not proceed given Basel 3.1 and the SDDT capital regime are planned to commence on the same date. The PRA expects to publish the final SDDT capital regime policy statement and rule instruments in 2026 Q1 alongside, or shortly after, the final Basel 3.1 package, with the SDDT capital regime intended to take effect from 1 January 2027. It set 31 March 2026 as the deadline for SDDT-eligible firms to consent, or notify an intention to consent, to the SDDT modification by consent if they want the SDDT regime to apply from 1 January 2027, and plans an off-cycle review of firm-specific Pillar 2 capital requirements and expectations for all SDDTs ahead of implementation with further details to be communicated separately.
Prudential Regulation Authority 2025-10-28
Prudential Regulation Authority issues near-final Strong and Simple capital regime for Small Domestic Deposit Takers
The Prudential Regulation Authority released a near-final policy statement for Phase 2 of its Strong and Simple framework, detailing a simplified capital regime and liquidity simplifications for Small Domestic Deposit Takers (SDDTs). Key changes include a shift from the proposed Pillar 2A operational risk "bucketing" to a scenario-analysis-led assessment, a tightened Pillar 2A single-name concentration trigger, and reduced ICAAP and ILAAP update frequencies. The final SDDT capital regime is expected in Q1 2026, with implementation on 1 January 2027.