On 22 July 2020, the PRA published Consultation Paper 9/20 ‘Non-systemic UK banks: the PRA’s approach to new and growing banks’ (CP9/20).

In CP9/20 the PRA sets out its proposed approach to supervising new and growing non-systemic UK banks (collectively referred to as ‘banks’). All the proposals are clarifications of the PRA’s current supervisory approach, with the exception of: (i) proposed changes to the calculation of the PRA buffer for new banks; and (ii) setting expectations in relation to solvent wind down plans.

The proposed approach to supervision of new and growing banks is a follow-up to the 2013 joint Bank of England (BoE) / FSA publication ‘A review of requirements for firms entering into or expanding in the banking sector’. The PRA states that its proposals are not a fundamental change, but formalise its current policy approach. Any changes from the current approach are signposted in chapter 2 of CP9/20.

In CP9/20 and the draft supervisory statement (see below) the PRA sets out some of the key issues it has observed regarding new and growing banks, and proposes how its expectations would apply to banks as they grow and mature. This path of maturity is necessary for new banks as, while they must meet the PRA’s Threshold Conditions, they are unlikely to meet all the expectations the PRA has of an established bank, and in many cases will require time to build and demonstrate capabilities, and to meet the requirements for authorisation. Through the draft policy proposed in CP9/20, the PRA intends to help new and growing banks understand what is expected of them as they consider their future growth objectives and strategy. In doing so, the PRA aims to communicate a way for banks to have a positive regulatory relationship with the PRA through open, constructive, and forward-looking communication.

Specifically in CP9/20 the PRA proposes to:

  • Create a new supervisory statement (SS): ‘Non-systemic UK Banks: The PRA’s approach to new and growing banks’ (Appendix 1).
  • Reference the new SS in paragraph 5.25 of SS31/15 ‘The Internal Capital Adequacy Assessment Process and the Supervisory Review and Evaluation Process (Appendix 2).
  • Reference the new SS in paragraph 9.45 of the Statement of Policy ‘The PRA’s methodologies for setting Pillar 2 capital’ (Appendix 3).

The deadline for comments on CP9/20 is 14 October 2020.