Guidance

SS3/21 – Non-systemic UK banks: The Prudential Regulation Authority’s approach to new and growing banks

Chapter

Introduction

Printed on: 06/11/2024

Rulebook at: 01/10/2025

1

Introduction

1.1

This Supervisory Statement (SS) provides an overview of how the Prudential Regulation Authority’s (PRA)’s supervisory expectations of ‘new[1] and growing[2]’non-systemic[3] UK-incorporated banks[4],[5] (collectively referred to as ‘banks’), evolve as they grow from the point of authorisation to being regarded as fully established banks.

  • Chapter 2 provides background on progress to date with new bank authorisations; common issues of new and growing banks; and an overview of how the PRA’s supervisory approach evolves as banks grow and develop.
  • Chapter 3 provides further detail on supervisory expectations of new and growing banks with a focus on common issues including business model, governance, risk management and controls.
  • Chapter 4 sets out the PRA’s expectations for capital management in new and growing banks, and includes a revision and simplification of the PRA methodology for calibrating the PRA buffer for these banks.
  • Chapter 5 sets out the PRA’s expectations on new and growing banks to make preparations for recovery planning, solvent exit planning, and resolution.
  • Chapter 6 sets out the PRA’s supervisory approach once banks become established.
  • 1. New banks refers to firms that are in the ‘mobilisation stage’ (authorisation with restrictions) and those that have received authorisation without restrictions within the past 12 months (e.g. exited mobilisation or authorised without using the mobilisation period).
  • 2. Growing banks refers to banks that are typically between one and five years post authorisation without restrictions. These banks often share many of these characteristics: rapid growth; loss making; reliant on regular capital injections; significant and rapid changes in strategy and business model; and immature controls.
  • 3. Non-systemic banks are those which are not designated as systemically important through the O-SIIs (other systemically important institutions) Identification process. These banks are mainly category 2-4 UK incorporated deposit takers, whose size, interconnectedness, complexity, and business type give them the capacity to cause some (category 2), minor (category 3) and almost no capacity individually (category 4) to cause disruption to the UK financial system by failing, or by carrying on their business in an unsafe manner, but where difficulties across a whole sector or subsector have the potential to generate disruption.
  • 4. https://www.bankofengland.co.uk/prudential-regulation/authorisations/which-firms-does-the-pra-regulate.
  • 5. UK bank means of a UK undertaking that has permission under Part 4A of the Financial Services and Markets Act 2000 (FSMA) to carry on the regulated activity of accepting deposits and is a credit institution, but is not a credit union, friendly society or a building society.
  • 01/10/2025

1.2

This SS is primarily relevant to new and growing non-systemic UK banks, though not all, as some banks in this category will have sufficient experience and resources to be able to move quickly to the standard expected of most established banks. This determination will depend on a number of factors, notably on whether the bank is; (i) part of an established domestic or international banking group; (ii) the size and complexity of its activities; and (iii) the extent of its available financial and non-financial resources. The PRA would consider each case on its merits and apply supervisory judgement to ensure that the policy is applied appropriately. See Box 1 ‘Supervision of UK bank subsidiaries of international groups’ for relevant examples.

  • 15/04/2021

1.3

This SS is relevant to the following types of banks:

  • banks in their first few years of being authorised by the PRA as a deposit-taker (typically less than five years post-authorisation); and
  • prospective banks interested in and currently applying for authorisation as a deposit-taker (UK applicant banks).
  • 15/04/2021

1.4

Chapter 6 of the SS is relevant to non-systemic UK banks that are ‘established’ (typically beyond five years post–authorisation, and in the ‘without restrictions’ stage of their lifecycle).

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1.5

There are a number of types of banks and other PRA-authorised firms that are not covered in this SS. These include:

  • banks incorporated outside of the UK authorised to accept deposits through a branch in the UK;[6]
  • systemically important firms, referring to firms that are designated under the other systemically important institutions (O-SII) identification process;[7] [8]
  • building societies;[9]
  • credit unions; and
  • UK designated investment firms.
  • 6. June 2019: CP25/18 ‘The Bank of England’s approach to amending financial services legislation under the European Union (Withdrawal) Act 2018’ (October 2018) with near final policy in PS 5/19 of the same name.
  • 7. PRA SoP ‘The PRA’s approach to identifying other systemically important institutions (O-SIIs)’, December 2020: https://www.bankofengland.co.uk/prudential-regulation/publication/2016/the-pras-approach-to-identifying-other-systemically-important-institutions-o-siis-sop
  • 8. The most significant deposit-takers or designated investment firms whose size, interconnectedness, complexity, and business type give them the capacity to cause very significant disruption to the UK financial system (and through that to economic activity more widely) by failing, or by carrying on their business in an unsafe manner (Approach document page 12)
  • 9. Building societies are subject to different legislation. However, the authorisation of new building societies would include the option of mobilisation, and the expectation for solvent exit planning would apply.
  • 01/10/2025

1.6

While this SS is not directly relevant to these firms it may be of interest to them. This SS also does not propose changes to the change in control process for buying an existing bank.[10] Firms are encouraged to speak with their normal supervisory contact if further clarity is required.

  • 15/04/2021

1.7

This SS should be read in conjunction with:

  • the PRA’s approach to banking supervision;[11]
  • the following joint Bank / Financial Services Authority (FSA)[12] publications: ‘A review of requirements for banks entering into or expanding in the banking sector (the 2013 report)’;[13] and ‘A review of requirements for banks entering into or banks expanding in the banking sector: one year on (the 2013 report plus one year)’;[14]
  • SS31/15‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’;[15]
  • the Pillar 2 Statement of Policy (SoP) ‘The PRA’s methodologies for setting Pillar 2 capital’;[16] and
  • SS2/24 – ‘Solvent exit planning for non-systemic banks and building societies’.[17]
  • 01/10/2025

1.8

The SS additionally draws upon previous publications from the Bank and the PRA on new bank authorisation,[18] various SSs and SoPs (see Table 1), and the Bank's approach to resolution.[19]

  • 01/10/2025

1.9

The Financial Conduct Authority (FCA) is the conduct regulator for all firms operating in the UK. The policy in this SS does not affect the application of the FCA’s rules or requirements.

  • 15/04/2021

Table 1: Non-exhaustive list of materials[20] to be read alongside SS3/21 ‘Non-systemic UK banks: the Prudential Regulation Authority’s approach to new and growing banks’

General approach
The PRA’s approach to banking supervision[21]
Fundamental Rules[22]
A review of requirements for banks entering into or expanding in the banking sector[23]
A review of requirements for banks entering into or banks expanding in the banking sector: one year on[24]
Governance and risk management
The General Organisational Requirements Part of the PRA Rulebook
The Senior Management Functions Part of the PRA Rulebook
The Skills, Knowledge and Expertise Part of the PRA Rulebook
The Fitness and Propriety Part of the PRA Rulebook
The Risk Control Part of the PRA Rulebook
The Allocation of Responsibilities Part of the PRA Rulebook
The Market Risk Part of the PRA Rulebook
The Group Risk Systems Part of the PRA Rulebook

SS5/16 ‘Corporate Governance: Board responsibilities’[25]
SS21/15 ‘Internal governance’[26]
EBA Guidelines on Internal Governance (EBA Governance Guidelines)[27]
SS28/15 ‘Strengthening individual accountability in banking’[28]
Operational Continuity Part of the Rulebook
The Outsourcing Part of the PRA Rulebook
SS2/21 ‘Outsourcing and third party risk management’[29]
Operational Resilience Part of the PRA Rulebook
SS1/21 ‘Operational resilience: Impact tolerances for important business services’[30]
SS9/16 ‘Ensuring operational continuity in resolution’[31]
Capital
The Internal Capital Adequacy Assessment Part of the PRA Rulebook
The Definition of Capital Part of the PRA Rulebook
The Capital Buffers Part of the PRA Rulebook
SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’[32]
Statement of Policy ‘The PRA’s methodologies for setting Pillar 2 capital’[33]
Liquidity
The Internal Liquidity Adequacy Assessment Part of the PRA Rulebook 
SS24/15 ‘The PRA’s approach to supervising liquidity and funding risks’[34]
Recovery and resolution planning
SS9/17 ‘Recovery Planning’[35]
SS2/24 – ‘Solvent exit planning for non-systemic banks and building societies’[36]
SS4/19 ‘Resolution assessment and public disclosure by firms on Recovery Planning’[37]
The Bank of England’s Resolvability Assessment Framework[38]
The Bank of England’s Approach to Resolution[39]
The Resolution Assessment Part of the PRA Rulebook
The Recovery Plans Part of the PRA Rulebook
The Depositor Protection Part of the PRA Rulebook
SS 18/15 ‘Depositor and dormant account protection’[40]
Disclosure
The Regulatory Reporting Part of the PRA Rulebook
 
The Disclosure Part of the PRA Rulebook
  • 01/10/2025