PS26/25 – Discontinuing SS20/15: Supervising building societies’ treasury and lending activities

1: Overview

1.1 This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses the PRA received to consultation paper (CP) 11/25 – Discontinuing SS20/15: Supervising building societies’ treasury and lending activities.

1.2 This PS sets out the PRA’s final policy: to delete supervisory statement (SS) 20/15 – Supervising building societies’ treasury and lending activities in its entirety and without replacement.

1.3 In addition, this PS makes consequential amendments to SS31/15 – The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP), which is appended to this PS, arising from the deletion of SS20/15.

1.4 This PS is relevant to building societies and credit unions.

Background

1.5 In CP11/25 the PRA proposed to withdraw SS20/15 in its entirety. Following a review of the SS, the PRA considered that:

• The expectations set out in SS20/15 are no longer consistent with the PRA’s broader policy approach.
• SS20/15 represents a potential level-playing field issue as it imposes prescriptive expectations on building societies that banks are not subject to.
• Risk management in the building societies sector has become more sophisticated since SS20/15 was introduced, and the PRA has a number of requirements and tools against which it can supervise firms’ risk management.

1.6 On this basis, the PRA considered that it would be able to ensure the safety and soundness of building societies, while withdrawing expectations that potentially limit societies’ ability to compete and grow.

1.7 In determining its final policy, the PRA considers representations received in response to consultation, publishing an account of them and the PRA’s response (‘feedback’). Details of any significant changes are also published. In this PS, the ‘Summary of responses’ contains a general account of the representations made in response to the CP and the ‘Feedback to responses’ chapter contains the PRA’s feedback.

1.8 In carrying out its policy making functions, the PRA is required to have regard to various matters. In CP11/25 the PRA explained how it had regard to the most relevant of these matters in relation to the proposed policy. The ‘Changes to draft policy’ section of this chapter refers to that explanation, taking into account consultation responses where relevant.

Summary of responses

1.9 The PRA received seven responses to the CP. The names of respondents to the CP who consented to their names being published are set out at Appendix 1. As well as those who consented, the PRA also received two responses from respondents who did not consent to us publishing their names.

1.10 Four respondents supported the PRA’s proposal to withdraw SS20/15.

1.11 One respondent was neutral in their overall position, noting that the withdrawal of SS20/15 would have a greater impact on smaller societies than on larger ones.

1.12 Two respondents opposed the PRA’s proposal to withdraw SS20/15, setting out several challenges to the PRA’s proposal. The PRA has considered these responses and set out further detail in Chapter 2.

1.13 Three respondents requested that the PRA bring forward the proposed implementation date from 1 January 2026 to an earlier date, with one respondent recommending the PRA implement its proposal to withdraw the SS in October 2025.

1.14 Three respondents asked the PRA to provide further clarification on some aspects of its proposed policy including the PRA’s expectations of building societies’ risk management going forwards. The PRA has set out further clarifying detail in Chapter 2.

Changes to draft policy

1.15 This PS takes account of how the policy advances the PRA objectives and of significant matters that the PRA had regard to. These are as set out in CP11/25, and the PRA has set out its response to feedback on its objectives and have regards analysis in Chapter 2.

1.16 The final policy, as presented in the CP, remains unchanged.

1.17 In addition, the PRA is making a consequential amendment to SS31/15 arising from the deletion of SS20/15. SS31/15 cross-refers to SS20/15, noting that societies should manage interest rate risk with reference to SS20/15. The PRA has deleted paragraph 2.12A as set out in the appended SS. The PRA has not deleted this cross-reference in near-final version of SS4/25 – The Internal Capital Adequacy Assessment Process (ICAAP) and Supervisory Review and Evaluation Process (SREP) for Small Domestic Deposit Takers (SDDTs), and intends to remove the paragraph that refers to SS20/15 when it publishes final policy and rule instruments on the SDDT capital regime during 2026.

Implementation

1.18 In view of the feedback the PRA has received, the PRA has decided to bring forward the implementation date. This policy will take effect on publication of this PS on Friday 5 December 2025.

2: Feedback to responses

2.1 The PRA must consider representations that are made to it in accordance with its duty to consult on its general policies and practices and must publish, in such manner as it thinks fit, responses to the representations.^{footnote [1]}

2.2 The PRA has considered the representations received in response to the CP. This chapter sets out the PRA’s feedback to those responses, and its final decisions.

2.3 The responses have been grouped as follows:

• withdrawal of SS20/15;
• ongoing PRA expectations of societies’ risk management;
• objectives and ‘have regards’ analysis;
• general comments; and
• implementation date.

Withdrawal of SS20/15

2.4 Four respondents strongly supported the PRA’s proposal to withdraw SS20/15. Two of these respondents agreed with the PRA’s analysis that risk management in the sector has improved since SS20/15 was introduced, and another highlighted the existence of other expectations, such as those in SS28/15 – Strengthening individual accountability in banking, which act as a safeguard to ensure sound risk management in the absence of SS20/15. One respondent noted that withdrawing SS20/15 would allow societies to make more agile business decisions in an increasingly dynamic market.

2.5 One respondent did not provide support either for or against the removal of SS20/15 noting that while the proposal would not have a significant impact on larger firms with a more mature risk management approach, its removal would have a greater impact on smaller societies.

2.6 The PRA received two responses challenging the PRA’s proposal to withdraw SS20/15. These respondents raised the following concerns and our position is provided alongside each issue:

• Both respondents argued that SS20/15 is a driver for the increased sophistication of societies’ risk management processes.

While SS20/15 may have contributed to the increased sophistication of societies’ risk management, it is one part of an evolving set of expectations and documents on risk management. Key aspects of SS20/15 such as the approach framework existed prior to the introduction of SS20/15 (see paragraphs 2.32-2.34) and since SS20/15 was published, the PRA has introduced further detailed expectations on various aspects of risk management, which the PRA has set out in paragraph 2.16. The PRA considers that on this basis, withdrawing SS20/15 will not cause societies to reduce the sophistication of their risk management processes but will instead enable societies to better tailor these processes to their business model.

• One respondent argued that deleting SS20/15 implies that the PRA considers it to be acceptable for risk appetite and risk capability to be out of alignment.

The PRA does not consider it to be acceptable for risk appetite and risk capability to be out of alignment. SS5/16 – Corporate governance: Board responsibilities contains an expectation that boards ensure their firm’s risk control framework aligns with the board’s risk appetite.

• One respondent suggested that without the expectation that societies pre-notify the PRA about changes to their business models, the PRA would not be able to spot issues and intervene in a timely manner. The respondent recommended making improvements to this process rather than removing it.

The PRA considers that supervisors have adequate tools to supervise building societies’ risk management and intervene in a timely manner in the absence of SS20/15. Furthermore, the PRA considers that societies should notify their supervisors about significant diversifications in their business model as part of their compliance with Fundamental Rule 7.^{footnote [2]}

• One respondent suggested that without SS20/15, societies would lose detailed expectations on the following risks: interest rate in the banking book (IRRBB), funding risk, and pricing risk. The respondent argued that societies do not understand these risks as well as credit risk. The other respondent also noted that CP11/25 had focused more on credit risk than liquidity and funding risks, and that other expectations on risk management only partially cover the areas that SS20/15 does.

The PRA acknowledges that some detailed guidance on certain risks will be deleted when SS20/15 is discontinued, noting the respondent’s comments about societies’ understanding of IRRBB, funding, and pricing risks. Furthermore, detailed expectations on how all deposit takers (including societies) should manage specific risks will remain in other supervisory statements. With respect to IRRBB, funding, and pricing risks, detailed expectations can be found in SS31/15 and SS24/15 – The PRA’s approach to supervising liquidity and funding risks. The PRA has also set out further detail in paragraph 2.16 on other supervisory expectations relevant to societies.

2.7 Having considered these responses, the PRA has decided to proceed with the withdrawal of SS20/15 as consulted in CP11/25.

Ongoing PRA expectations of societies’ risk management

2.8 In CP11/25, the PRA proposed to withdraw SS20/15 and did not propose to introduce any new expectations in replacement.

2.9 Two respondents recommended that the PRA reconsider deleting SS20/15 and proposed the following alternatives: retaining SS20/15 in part or entirely, incrementally improving it, or extending the scope to include small domestic deposit takers (SDDT) eligible banks. These respondents requested clarification on what expectations the PRA will apply on risk management going forwards.

2.10 One respondent agreed with the proposal not to replace SS20/15 with new guidance or expectations. Two respondents recommended that the PRA should not continue to use the indicative thresholds or apply the expectations set out in SS20/15 as a ‘shadow sourcebook’ after the withdrawal of SS20/15.

2.11 The PRA did consider a range of alternative options (see paragraph 2.3 of CP11/25), including updating SS20/15, withdrawing certain parts of the SS such as the indicative thresholds, maintaining SS20/15 and extending the scope to include all eligible firms. However, the PRA considered that none of these options adequately addressed the challenges the PRA identified in CP11/25.

2.12 The PRA has also considered a combined approach of updating, improving, and extending the scope of SS20/15. While feasible, this approach would require the ongoing commitment of resources to update the SS on a more regular basis. Since the PRA already sets out and updates supervisory expectations relevant to deposit takers’ risk management on an ongoing basis, it considers this approach would not be an efficient use of PRA resources. On this basis, the PRA decided to consult on discontinuing SS20/15 entirely.

2.13 In addition, the PRA has a public law duty to consult where it would be fair to do so and considers that it would need to reconsult on any proposals to extend the scope of SS20/15 to include SDDTs.

2.14 On this basis, the PRA has decided to proceed with its proposals as consulted in CP11/25.

2.15 The PRA does not intend to continue to apply SS20/15 as internal or unpublished expectations in future and considers that it will be possible to rely on existing expectations on risk management. The PRA considers that applying expectations in SS20/15 as a ‘shadow sourcebook’ would not be a transparent approach. The PRA considers that in the absence of SS20/15, the risk management expectations for building societies will be the same as those for banks, which the PRA considers sufficient to ensure building societies have robust risk management.

2.16 The PRA has set out expectations on governance, risk control, board responsibilities, and the treatment of financial risks that are relevant to banks and building societies. The following list is not an exhaustive list of expectations, but includes many supervisory statements with which building societies will be familiar:

• LSS1/13 – Asset and liability management: suggestions for greater effectiveness;
• SS21/15 – Internal governance | Bank of England;^{footnote [3]}
• SS24/15 – The PRA’s approach to supervising liquidity and funding risks;
• SS28/15 – Strengthening individual accountability in banking;
• SS31/15 – The Internal Capital Adequacy Assessment Process and the Supervisory Review and Evaluation Process;
• SS5/16 – Corporate Governance: Board Responsibilities;
• SS9/17 – Recovery planning;
• SS1/21 – Operational resilience: impact tolerances for important business services;
• SS2/21 – Outsourcing and third-party risk management; and
• SS4/21 – Ensuring operational continuity in resolution.^{footnote [4]}

Objectives and ‘Have Regards’ analysis

2.17 In CP11/25, the PRA set out analysis of how the policy advances the PRA objectives. The PRA also set out how it had regard to the Financial Services and Markets Act 2000, the Legislative and Regulatory Reform Act 2006, the Equality Act 2010 and the November 2024 HMT recommendations letter to PRC.

2.18 One respondent noted that it is inconsistent and disproportionate to apply expectations in SS20/15 to building societies but not to banks, and that introducing new guidance or expectations to replace SS20/15 would be similarly disproportionate. Another respondent noted that withdrawing SS20/15 would enable societies to be on a more level-playing field with banks.

2.19 However, as part of their responses opposing the PRA’s proposal to withdraw SS20/15, two respondents challenged the PRA’s objectives and have regards analysis.

• One respondent referred to PS34/16 – Supervising building societies’ treasury and lending activities and (CP12/16 – Supervising building societies’ treasury and lending activities) in which the PRA stated that it did not consider that building societies would be disadvantaged by having a supervisory statement addressed to them but not their competitors. The respondent argued that withdrawing SS20/15 would only boost societies’ ability to compete if societies cut corners on risk management and suggested that by withdrawing SS20/15, the PRA is trading off its primary safety and soundness objective in favour of growth. The respondent asked what had changed between PS34/16 and CP11/25, and asked why the PRA considers SS20/15 is no longer consistent with its broader policy approach.
• The other respondent argued that not retaining the guidance undermines safety and soundness as without it, firms may take on uncontrolled risks, and that SS20/15 does not impede competition as it contains guidance rather than limits. The respondent also argued that clear guidance enhances supervisory efficiency and transparency, and without SS20/15, societies will have to iteratively understand what the PRA’s expectations on risk management are.
• Both respondents argued that SS20/15 is proportionate in its approach across the building societies sector and displays how building societies of different sizes and complexities could approach risk management.

2.20 The PRA does not consider that withdrawing SS20/15 reduces safety and soundness, or that it is trading off its primary objective of safety and soundness in favour of competitiveness and growth. Instead, the PRA considers that existing supervisory expectations (as set out in paragraph 2.16), which apply to all deposit takers, ensure that societies have sufficiently robust risk management processes and do not take on uncontrolled risks. Therefore, the PRA considers that it is possible to withdraw SS20/15 while continuing to advance its safety and soundness objective.

2.21 The PRA has considered the withdrawal of SS20/15 contemporaneously and through the lens of its functions, remit, and objectives.^{footnote [5]} One key change that has occurred since PS34/16 is the introduction of the PRA’s secondary objective on competitiveness and growth (SCGO)., and further detail on competitiveness and growth can be found in Competitiveness and growth: the PRA’s second report. More information on the PRA’s general approach to policy can be found in PS3/25 – The Prudential Regulation Authority’s approach to policy, and further detail on competitiveness and growth can be found in Competitiveness and growth: the PRA’s second report.

2.22 The PRA does consider that withdrawing SS20/15 will enhance societies’ ability to grow. In Competitiveness and growth: the PRA’s second report, the PRA stated that adopting effective regulatory processes and engagement is a key foundation of its approach to the SCGO.

2.23 By withdrawing SS20/15, the PRA is removing the expectation that societies pre-notify and seek the PRA’s approval to move between treasury or lending approaches, and when seeking an extension to the society’s current approach. The PRA considers that this process can be resource intensive for societies and for PRA supervisors,^{footnote [6]} and that removing it aligns with Foundation 2 of its approach to the SCGO, and therefore advances its competitiveness and growth objective without encouraging societies to cut corners as suggested by one respondent.

2.24 Since there is no approach framework or similar pre-notification and approval expectation for banks, the PRA considers that its removal also enhances societies’ ability to compete and advances the PRA’s secondary competition objective.

2.25 The PRA acknowledges respondents feedback that clear guidance can enhance regulatory efficiency, and that the approach framework as set out in SS20/15 is a good example of proportionality as far as it demonstrates how expectations can apply differently to firms of different sizes and complexity. However, the PRA notes that it has granted extensions to 34 of the 42 building societies subject to SS20/15. Of the remaining 8 societies, 3 are already on the most complex approaches.^{footnote [7]} Since many societies are operating outside the thresholds or limits^{footnote [8]} associated with their treasury or lending approach, the PRA considers that the application and rationale for these approaches and the underlying limits are often unclear to societies, and that removing them boosts transparency for societies.

2.26 With respect to proportionality, the PRA is not only considering proportionality across building societies, but across all deposit takers. The PRA considers societies have adequate risk management expectations, in addition to restrictions on their business model as set out in the Building Societies Act 1986. It considers that withdrawing SS20/15 removes an additional layer of expectations that apply only to building societies, which represents a more proportionate approach for all deposit takers.

General comments

2.27 One respondent asked whether the PRA means to encourage the use of derivatives amongst firms that are not on the matched approach to treasury risk.

2.28 The PRA notes that under the Building Societies Act 1986,^{footnote [9]} societies may only use derivatives for risk management purposes, and while the PRA considers that derivatives can be a useful tool for societies’ risk management, the PRA is not encouraging societies to use derivatives where they do not have the expertise to do so. However, as set out in paragraph 2.25, many societies already have extensions beyond their treasury risk approach, therefore the PRA does not expect a large increase in societies’ use of derivatives following the withdrawal of SS20/15.

2.29 The same respondent challenged the PRA’s characterisation of the limits in SS20/15, arguing that the PRA does not understand its own guidance, and that the limits are solely indicative and not prescriptive.

2.30 The PRA highlighted in paragraph 2.1 of CP11/25 that the limits set out in SS2015 are indicative. However, the PRA considers that the combination of this process and the underlying limits do restrict societies’ ability to dynamically tailor their risk management to a changing market, and that removing both the process and the limits will enable societies to be more agile in doing so. The PRA also considers that this could remove a significant financial cost to societies associated with seeking external advice on compliance with SS20/15. On this basis, the PRA considers its assessment in CP11/25 remains valid.^{footnote [10]}

2.31 The same respondent also noted that the PRA had not addressed the origins of SS20/15 as ‘The Building Societies Sourcebook’ or BSOCs, a document published alongside Financial Services Authority (FSA) PS10/05 – A specialist sourcebook for building societies. The respondent stressed the importance of BSOCs as a post-crisis document that incorporated lessons learned from the global financial crisis.

2.32 The PRA is aware of the origins of SS20/15, and notes that many of the expectations in SS20/15 had existed prior to the introduction of BSOCs. Following the Building Societies Act 1986 guidance on complying with the Act was provided through the issuance of prudential notes. After the Building Societies Act was amended in 1997, prudential notes were revised including Prudential Note 1998/4.^{footnote [11]} This set out detailed expectations for financial risk management and Treasury operations and expanded the original three Treasury Approaches to five. This prudential note then formed the basis of the Building Societies Sourcebook including the five Treasury Approaches.

2.33 The PRA considers it is appropriate, in reviewing SS20/15, to limit its review to the role and impact of the SS as a PRA document with reference to the PRA‘s objectives, instead of opining on the analysis, standards, supervisory expectations, or other regulatory material published by the former building societies regulators.

2.34 However, the PRA notes that expectations in SS20/15 have existed in various forms since 1998, prior to the global financial crisis. Having reviewed SS20/15 in its current format alongside other supervisory expectations that the PRA applies to banks and building societies (see paragraph 2.16) and, having considered feedback not only from the sector but also from individual respondents, the PRA has decided to withdraw SS20/15.

2.35 One respondent requested clarification about whether Boards will continue to be expected to approve lending policies following the withdrawal of SS20/15.

2.36 The PRA considers that setting risk appetite and ensuring effective risk capability and controls is the responsibility of the Board. As set out in SS5/16, it is the responsibility of the board to ensure that the effectiveness of the risk control framework is kept actively under review, that it remains aligned with the board’s risk appetite, and that the board has the management information it needs. Societies will still be required, under the General Organisational Requirements Part of the PRA Rulebook, to have robust governance arrangements which include a clear organisational structure with well defined, transparent, and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks it is or might be exposed to, and internal control mechanisms including sound administrative and accounting procedures and effective control and safeguard arrangements for information processing systems. Boards will need to determine the appropriate risk management process in the absence of expectations that societies have a board-approved lending policy.

2.37 Two respondents noted cross-references to SS20/15 in SS2/23 – Supervising credit unions. One respondent noted that these cross-references in SS2/23 should be removed. Another respondent argued that the guidance in SS20/15 should be maintained for credit unions.

2.38 The PRA consulted on consequential amendments to SS2/23 as a result of the deletion of SS20/15 in CP13/25 – Credit Union Service Organisations. The consultation window for CP13/25 closed on 24 October 2025, and cross-references to SS2/23 will be resolved as part of this consultation process.

2.39 Two respondents challenged the PRA’s cost benefit analysis. One argued that smaller firms are likely to have to seek external help from consultants in the absence of SS20/15, which can be costly. The other argued that costs may arise from societies having to discover what the PRA’s expectations are in the absence of SS20/15.

2.40 The PRA’s expectations are set out in other documents (as set out above) and the PRA considers that it has several channels through which it can provide transparency and clarity to firms, such as regular engagement between firms and supervisors, PSM letters, priority letters, SREP cycles, stress testing and PRA communications such as the regulatory digest. As outlined in the CP, the PRA does not anticipate additional costs for building societies arising from the deletion of SS20/15 and this has not been raised by the societies or trade associations as an issue. Additionally, firms may alternatively seek resources and support from relevant trade associations.

Implementation date

2.41 Three respondents requested that the PRA bring forward its implementation timeline, with one of these respondents recommending the PRA implement the final policy in October 2025.

2.42 Having considered this feedback, the PRA has decided to bring forward the implementation date. The PRA considers that bringing forward the implementation of this policy would not reduce safety and soundness and considers it can deliver the benefits of withdrawing SS20/15 sooner than consulted in CP11/25. This new policy will take effect on publication of this PS on 5 December 2025. In bringing forward the implementation date the PRA reminds firms that existing expectations and rules relating to governance and risk management continue to apply and changes to firms' risk management processes should be notified to the PRA in accordance with Fundamental Rule 7.