On 27 February 2023, the PRA published Consultation Paper 4/23 ‘The Strong and Simple Framework: Liquidity and Disclosure requirements for Simpler-regime Firms’ (CP4/23).
As set out in Consultation Paper 5/22 ‘The Strong and Simple Framework: a definition of a Simpler-regime Firm’ (CP4/23) and Discussion Paper 1/21 ‘A strong and simple prudential framework for non-systemic banks and building societies’, the PRA is proposing simplifications to the prudential framework for Simpler-regime Firms. The changes seek to mitigate the ‘complexity problem’ that can arise for smaller banks and building societies, when the same prudential requirements are applied to all firms but the costs of understanding, interpreting and operationalising those requirements are higher relative to the associated public policy benefits for smaller firms than larger firms. The PRA‘s strong and simple initiative seeks to simplify the prudential framework for small, domestic banks and building societies, while maintaining their resilience and reducing barriers to growth.
CP4/23 sets out the first phase of proposed simplifications that would apply to Simpler-regime Firms. These proposals consist of:
- new liquidity requirements for the application of the net stable funding ratio;
- revisions to the application of Pillar 2 liquidity add-ons;
- a new, streamlined Internal Liquidity Adequacy Assessment Process template;
- the removal of certain liquidity reporting templates;
- new Pillar 3 disclosure requirements for Simpler-regime Firms; and
- simplifications to certain proportionality approaches currently applicable in the PRA Rulebook.
The deadline for responses to cp4/23 is 30 May 2023.