UK PRA and BoE statement of policy on approach to CBA

The Bank of England (BoE) and the UK Prudential Regulation Authority (PRA) have published updated Statements of Policy (SoP) setting out their respective approaches to cost benefit analysis (CBA). The BoE SoP sets out how it conducts CBAs when making rules for financial market infrastructures, in particular central counterparties and central securities depositories. It explains that CBA is integral to the BoE's policymaking and statutory obligations under the Financial Services and Markets Act 2000, with a primary focus on assessing impacts on UK financial stability and economic output, while also having regard to innovation.

The updated PRA SoP14/24 similarly confirms that CBA is an integral part of PRA policymaking for PRA regulated firms and explains how the PRA assesses expected costs and benefits (including impacts on safety and soundness, policyholder protection, competition and UK competitiveness). In parallel, it published a technical note setting out its standard cost model, which provides a structured and proportionate methodology for estimating firms' direct operational compliance costs or savings arising from regulatory changes. The PRA welcomes feedback on the model, as stated in a new webpage, to support its continuous improvement.

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