April 2024
The PRA's latest Business Plan, covering 2024/25, was published on 11 April. The programme of work is intended to maintain the resilience of the UK's banking and insurance sectors and deliver against the same four strategic priorities as last year. The key areas of focus, as expected, are financial and operational resilience, enforcement policies, and diversity and inclusion. Emerging risks called out include the financial risks of climate change, the impacts of artificial intelligence and machine learning, and digital money and innovation.
There is nothing inherently new or surprising in the Business Plan for firms as it follows relatively soon after the 2024 supervisory priority letters for international banks, UK deposit takers and insurers. However, it is interesting to note the PRA's ongoing concerns about the potential impacts of NBFIs on financial stability and its continuing ambition to become a more dynamic and responsive regulator.
Competitiveness and growth
This will be the first full year in which the PRA operates under the Financial Services and Markets Act (FSMA 2023), which expanded its rulemaking responsibilities and gave it a new secondary growth and competitiveness objective (the SGCO) in the UK. A significant portion of the plan considers how the PRA will balance the SGCO with its primary commitments to safety and soundness of the banking and insurance sectors.
The following key initiatives underpin the PRA's work to promote UK competitiveness and growth:
- The 'Strong and Simple' (SDDT) regime — simplifying regulatory requirements for smaller, non-systemic banks banks and building societies, in order to reduce compliance burdens without compromising on robust prudential standards.
- Reforms to bank ring-fencing — following the independent Skeoch Review.
- The 'Solvency UK' reforms of insurance capital standards — aiming to reduce bureaucracy in the regulatory regime, while allowing insurers to invest in a wider range of productive assets.
- Insurance special purpose vehicles (ISPVs) — consulting on reforms to allow a wider range of transaction structures in the UK regime, improve the speed of the application process, and clarify expectations of UK insurers who cede risks to ISPVs.
- Improvements to the authorisation processes — building on progress in improving the speed and efficiency of authorisations. Also, introducing a new 'mobilisation' regime to facilitate entry and expansion for new insurers from 31 December 2024.
The FCA has also used the consultation to gather views on minor amendments to its requirements relating to the Task Force on Climate-Related Disclosures (TCFD) and existing SDR rules, for example to amend the definition of portfolio management, and to simplify and clarify the on-demand disclosure requirements for unauthorised AIFs.
It also announced that it will carry out a post-implementation review of the entire SDR and labelling rules in three years' time.
Strategic Priorities
The PRA's four strategic priorities (SPs) are to:
- Maintain and build on the safety and soundness of the banking and insurance sectors and ensure continuing resilience.
- Be at the forefront of identifying new and emerging risks, and developing international policy.
- Support competitive and dynamic markets, alongside facilitating international competitiveness and growth, in the sectors that it regulates.
- Run an inclusive, efficient, and modern regulator within the central bank.