On 2 May 2023, the Prudential Regulation Authority (PRA) published its 2023/24 Business Plan. The Business Plan sets out the workplan for each of the PRA’s four strategic priorities to support the delivery of its strategy, together with an overview of the PRA’s budget for 2023/24.
The PRA’s strategic priorities for 2023/24 are to:
- Maintain and build on the safety and soundness of the banking and insurance sectors, and ensure continuing resilience.
- Be at the forefront of identifying new and emerging risks, and developing international policy.
- Support competitive and dynamic markets, alongside facilitating international competitiveness and growth, in the sectors regulated by the PRA.
- Run an inclusive, efficient and modern regulator within the central bank.
These updated priorities for 2023/24 reflect, among other things, the introduction of the Financial Services and Markets Bill, which proposes to grant the PRA an expanded role as a rule-maker alongside the new secondary objective to facilitate international competitiveness and growth of the sectors it regulates.
The Business Plan sets out how the PRA plans to deliver each of its strategic priorities over the coming year.
In terms of maintaining and building on the safety and soundness of the banking sector, the Business Plan mentions that the Bank of England (BoE) and the PRA have returned to the annual cyclical scenario (ACS) framework to test system-wide financial resilience, following two years of pandemic crisis-related stress test analysis. The ACS 2022 timeline was postponed following Russia’s invasion of Ukraine, resulting in the ACS scenario being published in late 2022 and firms submitting their forecasts in January 2023. As a result, the BoE and the PRA expect to publish the results of the test this summer.
The 2022/23 ACS will test the resilience of the UK banking system to deep simultaneous recessions in the UK and global economies, large falls in asset prices and higher interest rates, and a separate stress of misconduct. In addition, in collaboration with the BoE, the PRA will run, for the first time, a system-wide exploratory scenario exercise. This will investigate the behaviours of banks and non-bank financial institutions following a severe but plausible stress to financial markets.