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Prudential Regulation Authority’s views sought on ‘Strong and Simple’ Framework concerns

10 August 2022

The Treasury Sub-Committee on Financial Services Regulations has written to the Bank of England’s Prudential Regulation Authority (PRA) amid concerns over the PRA’s proposed ‘Strong and Simple Framework’.

The Framework aims to reduce the burden of complexity for smaller firms currently required to conform to the same prudential requirements as larger organisations, while at the same time maintaining resilience in the sector. 

Following an evidence session with experts and industry representatives on the proposals and the prospect of further reform, the Sub-Committee has written to the PRA seeking its views on concerns raised by witnesses. 

The Sub-Committee heard during the session that, of 35 new banks formed in the UK since the 2008 financial crisis, none have yet scaled up to a point where they can compete with the larger players.  

MPs were told that increasing the proposed £15bn balance sheet ceiling for smaller firms to qualify for a simpler regime to at least £25bn could allow medium-size firms to compete with high street banks. 

The Sub-Committee has therefore requested the PRA’s views on increasing the proposed threshold. It has also drawn attention to the risk that thresholds and cliff-edges can create barriers to growth, and it has asked the PRA for its views on how firms would transition between layers within the Framework.

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