On 22 February 2024, the Prudential Regulation Authority (PRA) published Policy Statement PS4/24, which provides feedback to responses to Consultation Paper CP11/23 on its proposed approach to reviewing its rules. PS4/24 also contains the PRA’s final statement on the review of rules, which the PRA is required to publish under section 3RB of the Financial Services and Markets Act 2000 (FSMA).

Background

FSMA (as amended by the Financial Services and Markets Act 2023) introduced a statutory requirement for the PRA to keep its rules under review and to prepare and publish a statement of its policy relating to its review of rules. The review of PRA rules and supervisory statements (‘rule review’) is already a familiar part of the PRA’s existing approach to policymaking. The PRA reviews existing rules to assess if they are operating effectively and delivering their intended impact.

In CP11/23, the PRA set out its proposed approach to reviewing its rules. Specifically, it:

  • Described the PRA’s framework for undertaking rule reviews.
  • Set out how the PRA communicated its rule review work to the public.
  • Explained how stakeholders could engage with the PRA on rule reviews.
  • Explained how the PRA intended to coordinate with other public bodies on rule reviews covering areas of shared responsibility.

In CP11/23, the PPRA also invited responses to the following questions:

  1. What type of information should the PRA be collecting to inform its reviews?
  2. Do you have any views on how the PRA prioritises and selects rules to review?
  3. Do you have any views on how the PRA selects review methods?
  4. Do you have any views on the channels for stakeholders to engage with the PRA on rule reviews?
  5. Do you have any views on the way the PRA communicates its ongoing reviews and outcomes of past reviews?

Summary of responses

Of the 13 responses received to CP11/23, the PRA notes that overall, they did not raise major concerns with the rule review framework. There were, however, some suggestions about how aspects of the PRA statement could be changed, including further ways for stakeholders to engage with the PRA, additional information on rule reviews that could be published by the PRA (such as the outcomes of reviews), and suggestions on how the PRA prioritises and selects rules for review (highlighting the importance of the PRA’s secondary objectives). Respondents welcomed the framework’s flexibility that comes with a mix of quantitative and qualitative methods, which can be used depending on the context of a review and the availability of data.

PS4/24 explains how the PRA addresses the responses, and its reasoning behind the changes made in the framework where appropriate.

Changes to draft policy

After considering the responses, the PRA has made several changes to the draft statement on the review of rules, including:

  • Adding additional text to further clarify how stakeholder representations (including those made by statutory panels) are considered in the rule review process.
  • Changing the labelling of the selection criterion ‘learning potential’ to ‘Implications for the effectiveness of PRA Rulemaking’ to clarify that the core purpose is ultimately to improve the effectiveness of the PRA’s rulemaking process, rather than to just fill potential knowledge gaps in the PRA.
  • Adding a reference to sections 3RA and 3RB of FSMA, which require the PRA to keep its rules under review and to publish this statement with respect to its review of rules.

Next steps

The PRA published the final version of its statement on the review of rules alongside PS4/24. The implementation date for the statement is 21 February 2024.