UK Finance has responded to PRA’s consultation paper on its proposed definition of a simpler-regime firm. It supports the principle, but has suggested it would be appropriate to increase the ceiling below which firms would be eligible to be supervised under the regime. The PRA proposed £15bn but UK Finance suggests £25bn would be more appropriate. It supports PRA’s idea of a multi-layered approach, and to start with the lowest layer, but feels that the “large but simple” regime can benefit firms that aspire to grow and achieve the critical market mass needed, and that raising the threshold could help with this. while it would extend the simpler firm regime to more firms, the “squeezed” middle cohort are what are needed to bring competition to the systemic banks.
It also makes a number of other comments and suggestions, including expressing concern that firms will be making a choice before they know what the capital requirements will be before of the need for the consistency with Basel 3.1 – it sees every merit in implementing the scheme with Basel 3.1, which means it should be finalised by the end of 2023. Another key comment focuses on the proposal that only banks with 85% domestic activity will be included. While UK Finance agrees the regime should not be available to international firms, it notes that this threshold will cause problems for firms with simple business models but which do include lending to ex-pats in relation to mortgages secured on UK property and exposures in the Channel Islands, Isle of Man and Gibraltar which are closely linked to the UK and domestic business.