UK Prudential Regulator Consults on Supervision of New and Growing Non-Systemic Banks

The U.K. Prudential Regulation Authority has published a consultation on proposed changes to its supervision of new and growing non-systemic U.K. banks. The consultation will primarily be relevant to banks in their first few years of authorization as a PRA deposit-taker and prospective banks interested in, or currently, applying for deposit taker authorization. The PRA notes that some new and growing banks may have sufficient experience and resources to quickly move to the standard expected of established banks. In deciding which banks should be subject to its new policy, the PRA would consider each banks' case on its merits and apply supervisory judgement. Responses to the consultation should be submitted by October 14, 2020. The PRA expects the amendments set out in the consultation to take effect in the first half of 2021.

The PRA's proposals include clarifications to the recovery and resolvability plans of new and growing non-systemic banks and an expectation that solvent wind-down plans will be in place at the point of authorization until the banks move to a PRA buffer set on a stress test basis. Following the 2008 financial crisis, the UK government was keen to encourage competition in the banking sector. The PRA and Financial Conduct Authority's New Banks Start up Unit was designed to facilitate competition and, in the intervening years, 22 new start-up banks have achieved PRA authorization. According to a speech given by Sarah Breeden, Executive Director of UK Deposit Takers Supervision at the Bank of England, on July 22, 2020, the PRA now believes the industry would benefit from clarification on its expectations of new banks, including on contingency plans, which the PRA foresees may be particularly important as the stress of COVID-19 sets in.

View the PRA's consultation on revisions to its supervision of new and growing non-systemic banks.

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