Prudential Regulation Authority Rulebook

1.1

This Supervisory Statement (SS) provides an overview of how the Prudential Regulation Authority’s (PRA)’s supervisory expectations of ‘new¹ and growing²’non-systemic³ UK-incorporated banks^4,5 (collectively referred to as ‘banks’), evolve as they grow from the point of authorisation to being regarded as fully established banks.

• Chapter 2 provides background on progress to date with new bank authorisations; common issues of new and growing banks; and an overview of how the PRA’s supervisory approach evolves as banks grow and develop.
• Chapter 3 provides further detail on supervisory expectations of new and growing banks with a focus on common issues including business model, governance, risk management and controls.
• Chapter 4 sets out the PRA’s expectations for capital management in new and growing banks, and includes a revision and simplification of the PRA methodology for calibrating the PRA buffer for these banks.
• Chapter 5 sets out the PRA’s and the Bank of England’s coordinated approach to ensuring new and growing banks can exit the market in an orderly manner.
• Chapter 6 sets out the PRA’s supervisory approach once banks become established.

1.2

This SS is primarily relevant to new and growing non-systemic UK banks, though not all, as some banks in this category will have sufficient experience and resources to be able to move quickly to the standard expected of most established banks. This determination will depend on a number of factors, notably on whether the bank is; (i) part of an established domestic or international banking group; (ii) the size and complexity of its activities; and (iii) the extent of its available financial and non-financial resources. The PRA would consider each case on its merits and apply supervisory judgement to ensure that the policy is applied appropriately. See Box 1 ‘Supervision of UK bank subsidiaries of international groups’ for relevant examples.

1.3

This SS is relevant to the following types of banks:

• banks in their first few years of being authorised by the PRA as a deposit-taker (typically less than five years post-authorisation); and
• prospective banks interested in and currently applying for authorisation as a deposit-taker (UK applicant banks).

1.4

Chapter 6 of the SS is relevant to non-systemic UK banks that are ‘established’ (typically beyond five years post–authorisation, and in the ‘without restrictions’ stage of their lifecycle).

1.5

There are a number of types of banks and other PRA-authorised firms that are not covered in this SS. These include:

• banks incorporated outside of the UK authorised to accept deposits through a branch in the UK;⁶
• systemically important firms, referring to firms that are designated under the other systemically important institutions (O-SII) identification process;^{7 8}
• building societies;⁹
• credit unions; and
• UK designated investment firms.

1.6

While this SS is not directly relevant to these firms it may be of interest to them. This SS also does not propose changes to the change in control process for buying an existing bank.¹⁰ Firms are encouraged to speak with their normal supervisory contact if further clarity is required.

1.7

This SS should be read in conjunction with:

• the PRA’s approach to banking supervision;¹¹
• the following joint Bank / Financial Services Authority (FSA)¹² publications: ‘A review of requirements for banks entering into or expanding in the banking sector (the 2013 report)’;¹³ and ‘A review of requirements for banks entering into or banks expanding in the banking sector: one year on (the 2013 report plus one year)’;¹⁴
• SS31/15‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’;¹⁵ and
• the Pillar 2 Statement of Policy (SoP) ‘The PRA’s methodologies for setting Pillar 2 capital’.¹⁶

1.8

The SS additionally draws upon previous publications from the Bank and the PRA on new bank authorisation,¹⁷ various SSs and SoPs (see Table 1), and the Bank's approach to resolution.¹⁸

1.9

The Financial Conduct Authority (FCA) is the conduct regulator for all firms operating in the UK. The policy in this SS does not affect the application of the FCA’s rules or requirements.

Table 1: Materials¹⁹ to be read alongside SS3/21 ‘Non-systemic UK Banks: the Prudential Regulation Authority’s approach to new and growing banks’