This year’s business plan for the PRA reflects the evolution of our priorities. Alongside our continual focus on advancing our objectives of safety and soundness, policyholder protection, and competition, this year’s plan in particular reflects the work we are doing to deliver our new secondary objective on competitiveness and growth.

We have already completed some significant work on competitiveness and growth. For example, when designing the UK rules to implement the Basel 3.1 standard, we made important adjustments to capital requirements to support SME and infrastructure lending, and trade finance. We implemented Solvency UK for insurers, including a wide range of measures to make the regime more efficient and encourage investment. We removed the EU rule applying a ‘bonus cap’ to bankers’ pay in order to tackle the undesirable effect it had of inflating bankers’ fixed salaries which was damaging for competitiveness. And together with colleagues at HM Treasury and the FCA we reviewed the Senior Managers and Certification and Ring-fencing regimes and are working on changes. We have also improved handling of authorisation applications, which are now running consistently in line with service standards.

We also have a broad range of work underway in relation to competitiveness and growth over this coming year. For banks, I would particularly highlight our work to simplify capital requirements for small banks to enhance competition and competitiveness, without making the sector more fragile. We are already consulting on another major amendment to our remuneration requirements for banks, reducing the period for which bonuses must be deferred. And we plan to consult on initial proposals to simplify regulatory data reporting for banks, following steps we have already taken to cut reporting requirements for insurers. For insurers, we plan to consult shortly on a Matching Adjustment Investment Accelerator to reduce barriers to investment and support growth. We also expect to finalise measures to simplify and accelerate Insurance Special Purpose Vehicle authorisations. And across both sectors we are working with the FCA to assess the current landscape for mutuals and how we might further address issues these firms face.

These initiatives come on top of our broader work to embed competitiveness and growth within the organisation as explained in our recently published Approach to Policy document. Additionally, we are supporting HMT on the delivery of aspects of its regulatory Action Plan. The plan is intended to enable a regulatory system that supports innovation and economic growth. Taken together, these measures will support competitiveness and growth by helping ensure our regulatory requirements are proportionate, efficient and evolve with changing market practices, and by enabling innovation and greater competition in the financial sector.

All of this work is taking place alongside continuing efforts to deliver our primary objectives of safety and soundness and protecting policyholders.

This year we plan to run stress tests for both the banking and life insurance sectors, alongside the more business-as-usual work of supervision looking at the quality of assets, reserving practices, risk management and governance within firms. We will carry on with preparations for the implementation of the Basel 3.1 standards, and ensure that our new Solvency UK regime continues to function as intended. And we will shortly finalise our updated approach to supervising the UK subsidiaries and branches of international banks, where we remain fully committed to the principle of responsible openness towards international business.

Operational and cyber resilience will also be a focus for us this year. As part of delivering our strategy to identify new and emerging risks, we will work on firms’ operational risks, including by testing firms’ resilience to rapidly-evolving cyber threats through threat-led penetration testing. By 2025 H1 banks and insurers are required to show that they can remain within tolerance (or have contingency procedures) for the important business services they provide through severe but plausible disruptions. Alongside this, we intend to consult in 2025 on policy relating to the management of Information and Communication Technology (ICT), including risks arising from transformations of ICT infrastructure and the sector’s resilience in the event of ICT and cyber incidents. We will also publish thematic findings from our Cyber Stress Test. Finally, we will continue to take forward work on our new regime for Critical Third Parties, in line with legislative requirements.

Looking at our own processes and procedures, we will keep a strong focus on maintaining our recent performance on timeliness of authorisation applications. More broadly, we will also take further steps to increase our efficiency and productivity in order to ensure that the costs of the PRA, which are ultimately paid for by the users of financial services in the UK, are tightly managed.

I am very much looking forward to the challenges the next year will bring, and to collaborating with a team of very committed colleagues at the PRA to deliver on this business plan.

Sam Woods

Source - https://www.bankofengland.co.uk/prudential-regulat...