In response to a letter of 24 December 2024, the PRA has written to the Prime Minister, Chancellor and Secretary of State, setting out its ongoing work and plans to advance competitiveness and growth.
The PRA sees its main impact on competitiveness and growth through three channels: the allocation of capital in the UK economy; how well UK banks and insurers are equipped to compete; and how attractive the UK is as a location for foreign banks and insurers.
It highlighted the following actions it has already taken:
- Implementing the Basel 3.1 framework in banking regulation;
- Implementing the Solvency UK prudential regime for insurers;
- Removing the ‘bonus cap’ for banks;
- Working with the FCA and HM Treasury to review the SMCR; and
- Driving improvements in operational efficiency, with a particular focus on timely handling of authorisation applications.
The PRA then drew attention to a number of initiatives that will contribute to growth once implemented:
- Simplifying the prudential regime for small banks with the ‘Strong and Simple’ framework;
- Increasing the ability of the insurance sector to invest in the UK economy. This will include:
- consulting on establishing a ‘Matching Adjustment Investment Accelerator’, to allow firms to make investments more rapidly while waiting for full regulatory permissions; and
- liaising with HM Treasury, the insurance industry and the National Wealth Fund to explore whether the latter can generate investment opportunities appropriate for insurers;
- Improving the UK framework for Insurance Special Purpose Vehicles (ISPVs), including by simplifying and accelerating the authorisation process;
- Making further amendments to remuneration requirements. This will include:
- consulting on changes to substantially reduce the period over which senior bankers’ bonuses are deferred, an area where the PRA identifies the UK as an international outlier; and
- Simplifying regulatory data reporting from banks.
In addition, the PRA would also like to explore the following with HM Treasury and the Department of Business and Trade (although its thinking on these items is less developed than those outlined above):
- ‘Concierge service’ for new inbound foreign firms;
- Rationalising the UK financial services regulators’ ‘have regards’; and
- Looking for potential overlaps between the PRA’s governance and disclosure requirements and those of legislation or other relevant regulators.