Key observations on PRA’s Strong and Simple policy statement (PS15/23)

The Policy Statement (PS 15/23) is the long-awaited, finalised version of the criteria for entry, disclosure and liquidity requirements for the Strong and Simple regime. We have outlined the key points from this policy statement for firms.

Simpler regime firms have been renamed to small domestic deposit takers (SDDTs). Eligibility criteria for SDDTs are the same as CP16/22 for "simpler regime firms". All of the SDDT criteria, including the size criterion, will be reviewed by 2028. This could allow the opportunity for any necessary rebasing.
Disclosure and the rules relating to the definition of an SDDT take effect on 1 January 2024. Given most firms’ financial year end is either 31 December or 30 June, this should give most eligible SDDTs six months to implement the new requirements.
Liquidity rules take effect on 1 July 2024. The PRA has separately considered whether the Retail Deposit Ratio (RDR) proposal should be amended in light of Silicon Valley Bank and other market turbulence in spring 2023, in particular with regard to the stability of uninsured retail deposits. The PRA is considering conducting a review for the wider banking sector and has left the door open for further changes in the medium term.
Pillar 2 and buffer requirements (capital) consultation paper will be released in Q2 2024. We expect that the capital requirements will come into place in H1 2025. SDDT firms waiting for the capital proposals to be finalised can opt into the full regime (including Disclosure and Liquidity elements) at a later date.
PS15/23 maintains a consistent approach towards foreign banks operating within the UK with CP5/22. These banks must ensure that their UK operations, as part of their broader group, comply with the same set of eligibility criteria for domestic SDDTs. Foreign banks will need to apply to the regime through a modification via application to the regulator.

What does this mean for firms?

For eligible firms who are undecided about whether to follow Basel 3.1 or the Strong and Simple regime, it is advisable to wait until the PRA publishes concrete capital guidance for SDDTs before making a final decision. The PRA has stated that SDDT firms that want to wait for the capital proposals to be finalised can opt-in later, allowing them this degree of flexibility.

If you require any assistance, or have any questions, about responding to requirements with the Strong and Simple Regime, please get in contact with the individuals below.

Small Domestic Deposit Takers (SDDT) Regime

The PRA is introducing a more proportionate prudential regime for less systemically important banks and building societies. This will be known as the ‘Small Domestic Deposit Takers’ regime.

Strong and Simple – Does this apply to your firm?

The Strong and Simple regime could present potential advantages to firms, including cost reductions and increased competitiveness due to more proportionate regulatory requirements. This article aims to provide a clear understanding of which firms could be eligible for the new regime following PRA consultation (as of Q2 2023).