On 28 October 2025, the Prudential Regulation Authority (PRA) issued Policy Statement 20/25 ‘The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs) (near-final)’ (PS20/25).

Background

On 12 September 2024, the PRA published Consultation Paper CP7/24 ‘The Strong and Simple Framework: The simplified capital regime for SDDTs (CP7/24) which sets out proposals aimed at significantly simplifying the capital regime for SDDTs whilst maintaining their resilience. In CP7/24, the PRA proposed simplifications to all elements of the capital stack – specifically:

  • Pillar 1 risk-weighted assets would be calculated using Basel 3.1 rules, with some simplifications for SDDTs.
  • Pillar 2 would be radically simplified.
  • There would be a single, more constant and predictable capital buffer.

On the same date, the PRA published Consultation Paper 9/24: Streamlining the Pillar 2A capital framework and the capital communications process (CP9/24). In CP9/24 the PRA set out proposals to streamline the Pillar 2A capital framework and capital communications process.

The deadline for responses to both CP7/24 and CP9/24 was 12 December 2024.

On 15 October 2024, the PRA published Consultation Paper 13/24 – Remainder of CRR: Restatement of assimilated law (CP13/24), which set out the PRA’s proposals to restate the relevant provisions in the assimilated Capital Requirements Regulation (CRR) in the PRA Rulebook and other policy material such as supervisory statements and statements of policy. The PRA also proposed to update the credit ratings mapping tables in some assimilated technical standards and to restate them in the PRA Rulebook.

The deadline for responses to CP13/24 was 15 January 2025.

On 18 October 2024, PRA issued Consultation Paper 14/24 – Large Exposures Framework (CP14/24). In CP14/24 the PRA sets out proposals to implement the remaining Basel large exposures standards.

The deadline for comments on CP14/24 was 17 January 2025.

Second phase

PS20/25 represents the second and final phase of the PRA’s ‘strong and simple’ initiative.

Phase 2 sets out the simplified capital regime and additional liquidity simplifications for SDDTs. It builds on Phase 1 which focused on simplifications to liquidity and disclosure requirements. The Phase 1 simplifications, along with the criteria that must be met to be an SDDT, were finalised in Policy Statement 15/23.

As such in PS20/25 the PRA provides feedback to responses it received to CP7/24. PS20/25 also contains feedback to responses the PRA received to proposals in CP9/24, CP13/24 that are related to the proposals in CP7/24, and CP14/24 that are relevant to the proposals in CP7/24.

Changes

The PRA has made certain adjustments and clarifications to the policy proposed in CP7/24 where it considers this to be appropriate. The most material of these are summarised in para 1.38 of PS20/25 and include:

  • The removal of the bucketing approach for operational risk in the Pillar 2A framework for SDDTs.
  • Amendments to the proposed Pillar 2A credit concentration risk single-name concentration monitoring (i.e. cluster limit) to improve risk sensitivity and transparency for firms.
  • Reductions in the minimum expected frequency of Pillar 2A and Pillar 2B updates to Internal Capital Adequacy Assessment Process (ICAAP) documents for SDDTs (excluding those which are new and growing banks) from annually to every two years, in line with the frequency of updates to the overall ICAAP and Liquidity Adequacy Assessment Process documents.

Near final policy

The appendices to PS20/25 contain the PRA’s near-final policy materials which include near final:

  • PRA Rulebook: CRR firms: SDDT Regime Instrument [2026] (Appendix 2).
  • Amendments to Supervisory Statement (SS) 31/15 – The ICAAP and the Supervisory Review and Evaluation Process (SREP) (Appendix 3).
  • Amendments to statement of policy (SoP) 5/15 – The PRA’s methodologies for setting Pillar 2 capital (Appendix 4).
  • SoP5/25 – The PRA’s methodologies for setting Pillar 2 capital for SDDTs (Appendix 5).
  • SS4/25 – The ICAAP and the SREP for SDDTs (Appendix 6).
  • Amendments to SoP2/23 – Operating the SDDT regime (Appendix 7).
  • Amendments to SS3/21 – Non-systemic UK banks: The PRA’s approach to new and growing banks (Appendix 8).
  • Amendments to SS6/14 – Implementing capital buffers (Appendix 9).
  • Amendments to SS16/16 – The minimum requirement for own funds and eligible liabilities (MREL) – buffers and Threshold Conditions (Appendix 10).
  • Amendments to SS24/15 – The PRA’s approach to supervising liquidity and funding risks (Appendix 11).
  • Amendments to SS32/15 – Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082, PRA 111, and PRA119 (Appendix 12).
  • Amendments to SS34/15 – Guidelines for completing regulatory reports (Appendix 13).
  • Updated reporting templates and instructions (Appendix 15).

The PRA has not made final rule instruments and policies for the SDDT capital regime at this stage as the Pillar 1 requirements for SDDTs will be based on the final rules for the Basel 3.1 standardised approaches to credit risk and operational risk.

The PRA intends to make the final rules and policy covering the entire Basel 3.1 package once HM Treasury has made the commencement regulations to revoke the relevant provisions of the CRR.

The PRA intends to make all SDDT capital regime final policy materials and rule instruments at the same time as, or shortly after, it makes its final policy on the implementation of the Basel 3.1 standards.

The PRA does not intend to change the policy or make substantive alterations to the SDDT capital regime instrument before the making of the final policy material.

FPC

The Financial Policy Committee has also issued a short press release welcoming PS20/25.