The Prudential Regulation Authority (PRA) will be looking at the capital requirements for small banks, banker remuneration and streamlining data reporting from banks to boost economic growth.
In a letter to Prime Minister Keir Starmer, CEO Sam Woods said it “recognises and strongly supports” the government’s focus on “delivering a higher rate of sustainable economic growth in the UK”.
He noted that the PRA’s objectives were designed to support economic growth and its primary objective was to “promote safety and soundness of banks and insurers and protection for policyholders”.
Woods said the PRA had already undergone several actions to boost economic growth, such as proceeding with Basel 3.1, implementing the Solvency UK prudential regime for insurers, removing the bonus cap for banks, reviewing the Senior Managers and Certification Regime and improving operational efficiency to support regulated markets.
He said that, looking ahead, the PRA would look to simplify the prudential regime for small banks, which would include a “material simplification of capital requirements”.
“The aim of this work is to enhance effective competition and competitiveness by enabling a dynamic and diverse banking sector in the UK, without making the sector more fragile, thereby increasing the sector’s efficiency and productivity. It will also lower costs for small firms without increasing riskiness, which will enhance their resilience and ability to support their customers and so the economy,” he added.
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He said that finalisation was dependent on implementing Basel 3.1 standards. This has been delayed by a year.
Woods added that he wanted to up the ability of the insurance sector to invest in the economy and was consulting on creating a ‘Matching Adjustment Investment Accelerator’.
“This innovation would reduce barriers to investment by insurance firms, enabling them to deliver more quickly on their commitments to make additional investments in the UK and so support economic growth,” he noted.
Woods said it was also consulting on remuneration requirements for banks, which would “enhance growth and competitiveness of the banking sector while maintaining its resilience.”
He explained: “The changes would substantially reduce the period over which senior bankers’ bonuses are deferred, in which area our current rules have become something of an international outlier.”
Woods said it would also look to simplify regulator data reporting from banks, reducing collection of “little-used or duplicate data”, which would lower the burden on firms.
He added that it would like to explore the “scope and industry appetite” for reforms regarding data collection to “drive potentially material cost efficiencies for firms”, but this could require some “upfront investment” through the PRA levy.
Woods noted that the PRA would also like to explore a concierge service for new inbound foreign firms, rationalising its ‘have regards’ scheme and looking for overlaps between the PRA and other regulators.
