The Prudential Regulation Authority (PRA) published a letter from its Chief Executive, Sam Woods, responding to the Prime Minister’s request on regulation and sustainable economic growth. The letter explains how the PRA is pursuing its secondary objectives, particularly its objective to facilitate the competitiveness and growth of the UK economy, while maintaining its primary objectives on bank and insurer safety and soundness and policyholder protection. The response highlights recent actions framed around three channels: capital allocation in the UK economy, the competitiveness of UK-regulated banks and insurers, and the UK’s attractiveness for foreign firms. It points to the PRA’s implementation of Basel 3.1 with UK tailoring, including adjustments that lower capital requirements to support lending to small and medium-sized enterprises, infrastructure and trade finance, while not materially increasing overall capital requirements for the UK banking system. It also notes implementation of Solvency UK, including reforms to Matching Adjustment rules intended to enable life insurers to invest across a wider range of assets, joint work with the Financial Conduct Authority to remove the bank bonus cap, a review of the Senior Managers and Certification Regime with further PRA changes planned to reduce bureaucracy and increase flexibility in the Senior Managers Regime, and operational efficiency improvements in authorisations with 100% of cases meeting service standards in the most recent quarter. Looking ahead, the PRA flags further initiatives including its ongoing Strong and Simple work to simplify capital requirements for small banks, which it says depends on final implementation of Basel 3.1. It plans consultations in 2025 on a Matching Adjustment Investment Accelerator to allow insurers to invest more quickly while awaiting full permissions, and on changes to the UK framework for Insurance Special Purpose Vehicles to simplify and accelerate authorisation. The letter also references an ongoing consultation on remuneration changes for banks that would substantially reduce senior bankers’ bonus deferral periods, and work in 2025 to streamline regulatory data reporting from banks, including potential reforms to how data is collected that may require levy-funded upfront investment. Additional, less-developed ideas to explore with government include a concierge-style service for inbound firms, rationalising the PRA’s approximately 25 “have regards”, and reducing overlaps between PRA requirements and legislative or other regulators’ governance and disclosure regimes.
Prudential Regulation Authority 2025-01-15
Prudential Regulation Authority sets out competitiveness and growth actions in response to the Prime Minister
The Prudential Regulation Authority (PRA) outlined its strategy to support UK economic growth while maintaining bank and insurer safety, in response to the Prime Minister's request. Key initiatives include implementing Basel 3.1 with UK-specific adjustments, Solvency UK reforms, and operational efficiency improvements. Future plans involve simplifying capital requirements for small banks, accelerating insurer investments, and streamlining data reporting.