Competitiveness and growth: the PRA’s second report

Foreword by the Chief Executive

Sam Woods
Deputy Governor, Prudential Regulation
Chief Executive of the PRA

This is the PRA’s second report setting out how we have advanced our secondary competitiveness and growth objective (SCGO), alongside our secondary competition objective (SCO). Since the last report, published in July 2024, we have continued to make tangible progress in advancing both objectives, and in particular the SCGO which is a more recent addition to our remit.

The SCGO has already made a very significant difference to our policymaking. For example, on the banking side, building on the removal of the ‘bonus-cap’ we consulted on remuneration reforms that will substantially reduce the period over which senior bankers’ bonuses are deferred, making the regime more proportionate and competitive internationally. We also proposed significant simplifications to the prudential regime for small banks, to enhance competition and competitiveness in the UK’s banking sector. Finalisation of that framework is dependent on the final implementation of the Basel 3.1 standards, on which we are liaising closely with HM Treasury. On the insurance side, building on our Solvency UK work to simplify overly complex requirements, we have consulted on establishing a ‘Matching Adjustment Investment Accelerator’ to help firms play a bigger role in investment by speeding up their ability to take decisions. In addition, we have consulted on improving the UK framework for Insurance Special Purpose Vehicles (ISPVs), including simplifying and accelerating the ISPV authorisation process. The collective effect of these actions on competitiveness and growth will continue to build through time.

Last year, the Bank of England’s Independent Evaluation Office (IEO) reviewed the PRA’s progress in setting itself up for success with respect to the SCGO and found a number of positives including the PRA’s approach to training policy staff, the secondary objective gaining traction at all levels of the organisation, and the establishment of rigorous processes to embed the objective in policy-making. The report also provided recommendations for further improvement, and we have taken these on board, accelerating adoption of the SCGO through the organisation. For example, we improved and expanded our training on the SCGO for all staff, we ensured our decision-making committees keep receiving the appropriate support to make SCGO-related decisions, and we reviewed and streamlined some of our regulatory processes to make them more efficient.

In December 2024 the Prime Minister wrote to me to reiterate that growth is the defining mission of the Government and highlight the expectation that the PRA (alongside other regulators) should play a full part in delivering it. In my response, I welcomed the chance to outline the actions the PRA has already taken to facilitate competitiveness and growth, and further actions we could take – including a ‘concierge service’ to assist foreign firms when thinking about locating in the UK and simplifying regulatory data reporting requirements from banks. In June, the House of Lords’ Financial Services Regulation Committee (FSRC) published a report following their inquiry into the PRA and FCA’s SCGO. I welcome the committee’s report, and we will respond in due course.

I am proud of the efforts of PRA staff to deliver our secondary objectives, as set out in this and the previous report. We have gathered feedback from industry, government, and other stakeholders and thought hard about how we can adapt our regulatory framework to the evolving needs of the UK market. We will keep learning from experience, and I look forward to working with my colleagues on these issues in the year ahead.

26 June 2025

1: Introduction

The Financial Services and Markets Act 2023 (FSMA 2023), which received Royal Assent on 29 June 2023, made significant changes to the UK’s regulatory framework for financial services. Among those changes was a new secondary objective for the PRA. The new secondary objective requires the PRA, when discharging its general functions in a way that advances its primary objectives, to act, so far as reasonably possible, in a way that facilitates the international competitiveness of the UK economy (including in particular, the financial services sector through the contribution of PRA-authorised persons) and its growth over the medium to long term. This is subject to aligning with relevant international standards.

Section 26 of FSMA 2023 requires the PRA to make two reports to His Majesty’s Treasury (HMT) explaining the action taken to embed the secondary competitiveness and growth objective (SCGO) in its operations, processes and decision-making and how any PRA rules and guidance advance the SCGO. The first report was published by the PRA in July 2024. The second report is required to be made to HMT before 29 August 2025 and HMT must lay this before Parliament pursuant to section 26(5) of FSMA 2023.

This is the PRA’s second report documenting its action on the SCGO. It covers actions to advance the SCGO made during the period from July 2024 to June 2025, rather than the PRA’s forward-looking plans. Information on these plans is available in the PRA Business Plan 2025/26. The Business Plan sets out upcoming work such as the simplification of banking data reporting, the implementation of international standards on cryptoasset exposures and the review of the current mutuals landscape in the UK. Some of these initiatives have also been described in the letter that PRA CEO Sam Woods wrote to the Prime Minister in January 2025.

Over the past two years the PRA has proactively sought and identified opportunities to advance the SCGO. It has also placed a strong emphasis on embedding the objective in its operations, decision-making and processes. This work has ensured that significant progress has been made in embedding the SCGO in the organisation. The PRA has benefited from the review of the Bank of England’s Independent Evaluation Office (IEO) on the SCGO. This second annual report showcases the action the PRA has taken over the last year to further advance the SCGO and how it has refined its approach in light of the IEO’s recommendations. The report also reflects the approach to policymaking that the PRA finalised with PS3/25 – The Prudential Regulation Authority’s approach to policy (Policy Approach PS), published in February 2025.

The PRA’s SCGO sits within a broader framework of long-standing statutory objectives (as well as regulatory principles and ‘have regards’). The PRA’s other objectives were unchanged by FSMA 2023. When discharging its general functions, the PRA has a primary objective to, so far as reasonably possible, act in a way that promotes the safety and soundness of PRA-authorised persons, and a further primary objective specific to the regulation of insurers to, so far as reasonably possible, contribute to the securing of an appropriate degree of protection for those who are or may become policyholders (the primary objectives). The PRA also has another pre-existing secondary objective, when discharging its general functions in a way that advances its primary objectives, to facilitate effective competition in the markets for services provided by PRA-authorised firms in carrying on regulated activities (the SCO).

The primary objectives rank above the secondary objectives. However, there is a complementary relationship between the primary objectives, the SCO and the SCGO. The PRA’s approach to pursuing its primary objectives is grounded in the role a safe and sound financial sector plays in maintaining a strong and dynamic UK economy. Effective competition, by supporting the efficient delivery of vital services, is an important part of this. Additionally, a resilient and dynamic financial services sector can reinforce medium-term growth and contribute towards a competitive UK economy. In a speech in February 2025, Governor Andrew Bailey stressed that ‘there is not a fundamental trade-off between growth and financial stability. We must always assess the best choices to make in terms of the tools that we use, but the financial crisis demonstrated that there is no sustainable growth without financial stability’.

The PRA’s two secondary objectives, despite being complementary, are also distinct – and therefore merit assessment separately. Therefore, like the first report a year ago, this report covers the impacts of the PRA’s activities on both the SCGO and the SCO.

The report is structured as follows:

• Section 2 provides a detailed assessment of how the PRA’s rules and policy initiatives have advanced the SCGO and SCO during the period within the scope of the report.
• Section 3 explains how the PRA is embedding the SCGO in its internal operations, processes and decision-making, and how it is communicating with external stakeholders to provide clarity and insight into its activities. It also details the PRA’s actions to implement recommendations made by the IEO.
• Appendix 1 provides a summary of actions the PRA has taken to implement recommendations made by the IEO.
• Appendix 2 provides both quantitative and qualitative metrics to help stakeholders understand how the PRA has advanced its SCGO. The list of metrics the PRA reports on was agreed with HMT in 2023.^{footnote [1]} This section shows how each metric has changed since the first report and, for transparency, it includes revisions of some inaccuracies in the metrics previously published.

2: Application of the SCGO and SCO in the work of the PRA

Over the last year, the PRA has made significant progress on ongoing policy reforms, and it has initiated new policy reforms which have a material impact on both its secondary objectives. These initiatives are anchored in the PRA’s three regulatory foundations of prudential policymaking. These are unchanged from the first SCGO and SCO report a year ago:

• Maintaining trust among domestic and foreign firms in the PRA and the UK prudential framework;
• Adopting effective regulatory processes and engagement; and
• Taking a responsive and responsibly open approach to UK risks and opportunities.

These foundations are the main areas of direct action the PRA can take to activate the three transmission channels through which the PRA can facilitate competitiveness and growth. The channels are:

• capital allocation;
• ability to sell; and
• ability to attract.

Box 1 presents further details around foundations and channels.

The PRA has finalised a number of key prudential reforms to maintain trust in the UK financial system. These initiatives help to maintain a credible regulatory framework, which remains a vital precondition for hosting a global financial centre and for protecting UK financial stability, which was described by the International Monetary Fund (IMF) as a global public good. One example is the near-final Basel 3.1 rules, technical standards and policies^{footnote [2]} that enhance resilience of the banking sector and are appropriately tailored to the UK market.^{footnote [3]} Another example is the PRA’s work on proportionate new requirements for critical third parties (CTP), which aim to manage systemic risks to facilitate the safe adoption of technology and thus promoting technological innovation and growth. Throughout the period, the PRA has aimed to maintain trust by ensuring the PRA’s prudential framework is aligned with internationally agreed standards, and that the UK banking system is well capitalised and has high levels of liquidity.

In the past year, the PRA has continued to improve its regulatory processes with the aim to lower regulatory costs for firms. These changes should improve the ease of doing business in the UK, and therefore its competitiveness and growth in the medium to long term. In March 2025, the Prime Minister committed to a government wide target of reducing the administrative cost of regulation to firms by 25%. Some of the past PRA initiatives have been reducing administrative costs. For example, the PRA has introduced simplifications to the liquidity reporting framework for SDDTs, streamlined significantly the Solvency II tests and standards for Internal Models (IM) approvals and reduced insurance reporting by one third. Firms are already benefiting from these changes.

In line with industry feedback, the PRA also proposed key reforms to the UK Insurance Special Purpose Vehicles (UK ISPV) regime to streamline the application process, including expediting the authorisations process for catastrophe bond applications. Moreover, the PRA continues its efforts to reduce regulatory burden for firms through updates to its approach to stress testing. On the insurance side, the PRA has advanced cooperation with the Society of Lloyd’s, including making the process for authorising Managing Agents quicker, and coordinating more to ensure effective and efficient oversight of Managing Agents.

A key way in which the PRA can facilitate competitiveness and growth is by tailoring its regime to account for the needs of the UK financial sector. The PRA has continued to build the Strong and Simple Framework,^{footnote [4]} to develop rules more appropriate for smaller firms and enhance competition and competitiveness without making the sector more fragile. When finalising the Basel 3.1 reforms, the PRA made important adjustments in response to consultation feedback and evidence, notably in relation to small and medium enterprises (SME) and infrastructure lending. The PRA is also tailoring securitisation capital requirements to be relatively more sensitive than Basel standards and has introduced further reforms to remuneration rules in the banking sector to ensure the UK continues to attract and retain talent. The PRA has also proposed to indefinitely exempt single-stock equity options and index options from bilateral margining requirements, ensuring the UK remains competitive with other jurisdictions where this activity could otherwise move to, if relative costs increased in the UK. This signals clearly the PRA’s commitment to maintaining the UK as a leading global financial services centre, without compromising resilience.

Another way in which the PRA can facilitate competitiveness and growth is by supporting industry innovation safely. The PRA continues to encourage the entry of firms with innovative business models through its bank and insurer start-up units and mobilisation regime for insurers. Moreover, the PRA provides support to other areas of the Bank of England in reviewing the evolving risk landscape to ensure that the UK regulatory framework remains suited to support innovation. Recent examples include the Bank of England and FCA’s joint survey of artificial intelligence and machine learning and the establishment of a Bank of England Artificial Intelligence Consortium. In addition, the PRA has consulted to establish a Matching Adjustment Investment Accelerator (MAIA), that would allow MA firms, subject to satisfaction of the MA eligibility criteria, to invest in assets that would support innovation, more easily than under the current framework.

Finally, both the financial services sector and the wider economy benefit from the openness of the UK. Attracting foreign capital and businesses to the UK maintains its status as a global financial centre, which is positive for competitiveness and growth. In addition, PRA initiatives that have contributed to the responsible openness of the UK include the updates to its approach to recognised exchanges and the updates to its approach to third country branches and subsidiaries. The PRA also continues to be actively involved in international standard-setting bodies including the Basel Committee on Banking Supervision (BCBS) and the International Association of Insurance Supervisors (IAIS) to keep influencing prudential policy decisions that directly impact the attractiveness of the UK and help ensure international standards reflect UK financial sector needs. The PRA has also supported HMT’s financial dialogues with key jurisdictions, for example dialogue with China and Japan.

In the last SCGO report, the PRA made clear that there is a complementary relationship between its secondary objectives in relation to competitiveness and growth and competition. Effective competition, by supporting a strong and dynamic UK financial sector, can reinforce the medium to long-term growth of the UK economy. Therefore, many of the reforms that advance the SCO also advance the SCGO. For example, the PRA is continuing to build a simpler but equally resilient prudential framework for small, domestic-focused banks and building societies (Strong and Simple Framework). The Framework aims to support the robustness of these firms while making them more competitive and thus better able to support the economy and its growth.

This section describes in detail the most material and relevant initiatives that have advanced the SCGO and SCO between July 2024 and June 2025.

Implementation of the Basel 3.1 standards

In September 2024, the PRA published the second near-final policy statement PS9/24 – Implementation of the Basel 3.1 standards near-final part 2 covering the elements of Basel 3.1 that had not been included in the first PS (PS17/23) including credit risk, the output floor, and Pillar 3 disclosure and reporting requirements.^{footnote [5]}

The SCGO does not formally apply to the near-final policies, technical standards and rules set out in PS9/24 which were originally consulted on in CP16/22. Nevertheless, the considerations of competitiveness and growth and alignment with international standards applied when making these rules and policies.^{footnote [6]} These factors, alongside the standing of the UK as a place for internationally active firms to operate, were fully considered by the PRA in developing its near-final policy, technical standards and rules on the Basel 3.1 standards.

By maintaining confidence in the safety and soundness of PRA-regulated firms through setting risk weights that are neither too low nor too high, the Basel 3.1 reforms aim to promote stable and reliable financing to the UK real economy, thereby supporting UK growth. Through aligning with internationally agreed standards, the PRA rules play an important role in facilitating competitiveness and growth and promoting confidence in the UK as a global financial centre through consistently strong regulatory standards.

In PS9/24, there were a number of areas in which the PRA considered it appropriate to make adjustments to international standards to better tailor Basel 3.1 to the UK context and to facilitate growth and competitiveness. For example, the introduction of the SME and infrastructure lending adjustments, so that the removal of the infrastructure and SME support factors do not result in an increase in overall capital requirements for infrastructure and SME lending. PS9/24 also included lower capital requirements for certain trade finance-related activities, maintaining the level of the existing UK capital requirements regulations (CRR), benefiting the UK’s international competitiveness.

In addition to maintaining appropriately strong standards and facilitating growth and competitiveness, these reforms will enhance effective competition by:

increasing risk-sensitivity under the credit risk standardised approach which will significantly narrow the gap between the standardised and modelled approaches for determining risk weights, thus supporting competition between larger and smaller firms;

requiring more robust and prudent modelling practices within the credit risk modelled approach thereby reducing the potential competitive advantage that firms using internal models currently have over firms that are not; and promoting a more consistent and level playing field by introducing an output floor, which ensures risk weights for firms using internal models do not fall below a defined percentage of risk weights calculated using standardised approaches.

Strong and Simple

In September 2024, the PRA published CP7/24 – The Strong and Simple Framework: The simplified capital regime for small domestic deposit takers (SDDT). CP7/24 set out proposals for simplifying the capital regime for SDDTs without weakening their overall resilience. CP7/24 builds on the final policy definition of an SDDT and the simplifications to liquidity and disclosure requirements^{footnote [7]} published in December 2023.

The main aim of the Strong and Simple Framework is to enhance effective competition (advancing the SCO) by enabling a dynamic and diverse banking sector in the UK, without making the sector more fragile, thereby increasing the sector’s efficiency and productivity. Through supporting effective competition, the framework should reduce the cost of financial intermediation and improve access to financial services, and by continuing to be risk sensitive the framework should support efficient allocation of capital. The framework is also intended to advance the SCGO as by lowering costs for smaller firms the framework potentially increases incentives for overseas firms to establish banks in the UK and there is evidence that this increased competition can support underserved sectors of the economy, thereby directly improving productivity.

CP7/24 covers the whole ‘capital stack’^{footnote [8]} and proposes simplifications to Pillar 1 requirements as well as material simplifications to Pillar 2A requirements and the capital buffer framework for SDDTs. It also includes simplifications to the definition of regulatory capital, simplifications to the Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP), and to capital reporting requirements. The consultation closed in December 2024.

As of 30 April 2025, there are 52 SDDTs, and firms are already benefiting from the simplifications to liquidity and disclosure requirements that were implemented during 2024.

New Bank and New Insurer Start-up Units

The PRA is continuing to support new entrants to the UK banking and insurance markets, including those with novel uses of technology and innovative business models, through the PRA’s New Bank Start-up and New Insurer Start-Up units.^{footnote [9]} This support includes an optional pre-application stage (comprised of three meetings: initial, feedback and technical challenge) where firms engage with the PRA early on in order to develop their propositions and prepare their applications to set up a new bank or insurer.

In addition to its current mobilisation regime for banks,^{footnote [10]} the PRA has introduced a new mobilisation regime which will facilitate entry and expansion for new insurers. The new regime (effective from 31 December 2024) facilitates entry and expansion for new insurers into the UK market. Newly authorised insurers in mobilisation are offered a period up of 12 months to finish building out their business, including securing additional funding, if required, while operating with business restrictions, proportionate regulatory requirements, and using lower minimum capital requirements.

The PRA considers that its approach to new banks and insurer start-ups advances both the SCGO and the SCO because it encourages the entry of firms with innovative business models, making the UK a dynamic place to do business and contributing to its medium to long-term growth.

Remuneration reforms

In November 2024, the PRA and FCA published CP16/24 – Remuneration reform. The changes proposed in the CP are intended to simplify the UK remuneration regime and make it more proportionate, enhancing firms’ ability to attract and retain talent. The proposals complement previous reforms, including the removal of the bonus cap and include: the reduction of the 7-year bonus deferral period currently applicable to some senior staff to 5 years, reducing the number of staff subject to remuneration rules, and enhancing the link between accountability and remuneration.

These proposals aim to advance the SCGO by maintaining alignment with international principles and standards while adjusting them to the UK context. For example, the deferral changes bring the UK closer in line with other jurisdictions, enhancing firms’ ability to attract talent.

These proposals also aim to advance the SCO by reducing the potential high compliance costs associated with the current regime and therefore reducing the barriers to entry across the sector.

Leverage ratio treatment of omnibus account reserves

In July 2024, the PRA published PS14/24 – Leverage ratio treatment of omnibus account reserves and minor amendments to the leverage ratio framework. This followed CP28/23 which proposed to treat reserves held on omnibus accounts^{footnote [11]} the same as reserves held under more traditional arrangements.

The PRA considers its conditions are proportionate, as they are tailored to the risks identified. Omnibus account reserves being treated consistently with traditional individually-held reserves under the leverage ratio removes a potential impediment to the use of omnibus accounts and so may facilitate their adoption.

The new measures advance the SCGO since they facilitate firms’ access to the benefits omnibus accounts are expected to deliver, among which are reduced credit risk and improved flexibility to manage intraday liquidity. This may improve the attractiveness of the UK regulatory framework. The PRA considers that the final rules also advance the SCO, as facilitating adoption of omnibus accounts may enhance effective competition among wholesale payment systems, with downstream benefits for firms that use those services (and potentially their customers).

Approach to thresholds in the banking system

The PRA has reviewed some of the thresholds in its regulatory system to ensure they remain proportionate to the needs of the UK banking system to support the sector’s competition, competitiveness and growth.

In March 2025, the PRA published CP2/25 – Leverage Ratio: changes to the retail deposits threshold for application of the requirement. The CP outlines proposals to increase the retail deposit threshold for application of requirements to £70 billion in retail deposits, as opposed to the current threshold of £50 billion. The proposals could have a positive impact on competition and competitiveness and growth. For example, smaller UK firms would have more scope to grow before becoming subject to the requirement, and lower requirements might translate into additional lending.

In November 2024, the PRA contributed to the publication of the Bank of England’s approach to stress testing the UK banking system which sets out the Bank’s approach from 2025 onwards, including a move to a biennial frequency. The approach also includes updated thresholds for participation. These are:

• 5% of aggregate lending to UK households and businesses; or
• systemic importance designation - inclusion decisions are on a case-by-case basis.

The change in frequency and the new thresholds are aimed at reducing the burden placed on participating banks and bring efficiency gains and as a result the PRA assess this will help support the UK banking sector’s competitiveness and growth.

Securitisation capital requirements

In October 2024, the PRA published CP13/24 – Remainder of CRR: Restatement of assimilated law which included PRA proposals for securitisation capital requirements. This CP built on the feedback received on DP3/23 – Securitisation: capital requirements where stakeholders signalled a preference for policy choices tailored to be relatively more risk-sensitive than Basel standards.

These measures are based on the international Basel standards. However, the PRA proposed focused and limited amendments where necessary to achieve a proportionate implementation that advances the SCGO. For example, the adjustments made to the p-factor^{footnote [12]} put UK firms on a similar standing to the EU and US, closing an existing disadvantage and driving UK competitiveness. The PRA also assesses the more risk sensitive p-factor could have a beneficial impact on growth, through making securitisations more favourable and supporting lending to the real economy.

The proposals further advance the SCGO and the SCO by outlining adjustments that reduce the disparity in treatment of securitisations by smaller and larger firms. For example, they propose to bring the SEC-SA^{footnote [13]} capital requirements closer to the SEC-IRBA.^{footnote [14]} This can make securitisation an economically viable mechanism of risk transfer for a wider range of firms.

Insurance Special Purpose Vehicles (ISPV)

In November 2024, the PRA published CP15/24 – Proposed changes to the UK Insurance Special Purpose Vehicles (UK ISPV) regulatory framework.

Specifically, the PRA’s proposed reforms would allow for a wider range of transaction structures in the UK regime, would improve the application process and would also reduce costs for applicants. For example, the proposals include a new accelerated pathway for certain UK ISPV complete applications (eg some types of catastrophe bonds) which meet the criteria set out in the PRA’s proposed new statement of policy – The PRA’s approach to authorising and supervising UK insurance special purpose vehicles. Under the accelerated pathway, in collaboration with the FCA, the PRA proposes to consider applications and, where satisfied they meet the requirements, issue approvals within 10 working days (rather than the current 4-6 week process) of an application being submitted to the PRA and deemed complete.

These proposals advance the SCGO by making the UK ISPV regulatory framework more attractive globally and therefore making it more desirable to establish UK ISPVs and providing diversification and additional sources of capital and reinsurance capacity.

Additionally, these proposals advance the SCO because they facilitate and promote the establishment of UK ISPVs, by making it simpler for UK ISPV sponsors to apply for authorisation. This helps to create a more level playing field for UK ISPVs within the international Insurance Linked Security (ILS) market.

Solvency UK: streamlined reforms, Matching Adjustment and the investment accelerator

In November 2024, the PRA published PS15/24 – Review of Solvency II: Restatement of assimilated law which marked the conclusion of the PRA’s phased consultation approach to the Solvency II Review and builds on prior PRA publications.^{footnote [15]} Those reforms and restatement of assimilated law provide a new regulatory framework for advancing the PRA’s primary objectives, and one that is more tailored to the UK insurance market, for example through allowing firms to add assets with highly predictable cashflows into their MA portfolios and streamlining of internal model tests. They advance the SCGO by providing a more simplified, streamlined, and flexible regulatory regime, which will encourage entry into the UK insurance market.  

In June 2024 the PRA published reforms to the Matching Adjustment (MA) in PS10/24 – Review of Solvency II: Reform of the Matching Adjustment. The MA reforms advance the PRA’s SCGO by widening the potential range of assets that firms can invest in within an MA portfolio, and will allow broader and quicker investment by firms. They also improve industry responsiveness to risk and enhance firms’ responsibility for risk management, within the government’s legislative framework on the MA. The PRA is starting to see firms taking advantage of these reforms and is processing firms’ MA applications in line with its updated review approach, including streamlining reviews where possible. In line with the Chancellor’s Mansion House speech in November 2024, the PRA is also working with the National Wealth Fund (NWF) and HMT to help crowd in insurers’ investment in UK productive assets.

In April 2025, the PRA outlined proposals for a new Matching Adjustment Investment Accelerator (MAIA) in CP7/25 – Matching Adjustment Investment Accelerator. This builds on the PRA’s engagement with industry during the development of PS10/24. The proposed MAIA framework would enable firms to hold a limited quantity of MA eligible assets in an MA portfolio for a 24-month period prior to submitting an application to the PRA. The PRA expects this proposal to advance the SCGO by allowing insurers to expedite certain investments, and thereby make a greater contribution to the medium and long-term growth of the UK economy.

Working effectively with Society of Lloyd’s

The PRA and the Society of Lloyd’s (Lloyd’s) have an important role in regulating the Lloyd’s market, and work closely together supported by a public Cooperation Agreement. Lloyd’s managing agents are PRA-authorised firms, and the PRA supervises the Lloyd’s market to the same standards as regulated firms in the insurance market outside Lloyd’s. Lloyd’s also provides oversight over Managing Agents and, in recent years, has implemented its Principles Based Oversight framework.

The PRA has considered carefully how it can advance its current cooperation with Lloyd’s in line with its general approach to risk-based supervision and to reflect changes in Lloyd’s oversight. For example, the PRA is working with Lloyd’s and the FCA on how it can make the process for authorising Managing Agents quicker, and how it can coordinate more with Lloyd’s to leverage their work and ensure oversight of Managing Agents is effective and efficient. To support this, the PRA has modified its approach to the impact categorisation of Managing Agents.

These changes advance the SCGO as they aim to enhance effective engagement mechanisms, reduce duplication and regulatory costs for the Lloyd’s Market, without compromising prudential standards.

Recognised exchanges

In March 2025, the PRA published CP3/25 – Recognised exchanges policy and transfer of main indices which outlines the PRA’s proposals to identify recognised exchanges or assets traded on such exchanges.

The UK CRR^{footnote [16]} permits a preferential prudential treatment for certain exposures traded on recognised exchanges. The PRA is being granted powers by HMT to define ‘recognised exchanges’, and the PRA proposes to set out criteria for firms to identify them, subject to consultation. The PRA is proposing a risk-sensitive approach for the identification of an asset being held or traded on a recognised exchange beyond the current levels.

The proposal is expected to increase the availability of a risk-sensitive prudential treatment associated with an asset being traded on a recognised exchange beyond the current levels, which should facilitate international competitiveness and the relative standing of the UK financial sector by contributing to levelling the international playing field. In addition, the proposal may result in a greater proportion of equity exposures receiving the lower 250% risk weight under the SA than would be the case under its near-final rules published alongside PS9/24. This proposed amendment is more closely aligned to the approaches taken in other major jurisdictions.

Indefinite exemption for equity options

In March 2025, the PRA and FCA published CP5/25 – Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251 proposing to amend Binding Technical Standards (BTS) 2016/2251 to implement an indefinite exemption for single-stock equity options and index options from the UK bilateral margining requirements. A temporary exemption of equity options from the bilateral margining requirements is currently in place and set to expire in January 2026.

The proposal is consistent with the approach taken by a number of jurisdictions internationally. It advances the SCGO because allowing the exemption to expire could lead to an increase in costs for trading and a shift in activity to other, lower regulated jurisdictions, thus reducing the standing of the UK as a global financial centre.

Operational resilience: critical third parties

In November 2024, the PRA published PS16/24 – Operational resilience: Critical third parties to the UK financial sector which provides feedback to responses received to the preceding consultation paper CP26/23 and also contains the final policy for critical third parties (CTPs).

The overall objective of the PS is to manage risks to the stability of, or confidence in, the UK financial system that may arise due to a failure or disruption in the services that a CTP provides to firms. Failure to manage these risks could have significant consequences for the UK financial system, and therefore economic growth.

The use of CTPs can provide substantial benefits including cost reduction, efficiency and overall resilience. Firms and financial market infrastructures increasingly rely on a small number of third parties to support aspects of their operations, and this system-wide concentration could create risks to financial stability. The PRA, working jointly with the Bank of England, FCA, and HMT, has introduced proportionate new requirements and expectations to mitigate these systemic risks.

By improving cooperation among CTPs, firms and the regulators and strengthening the operational resilience of the financial system, these requirements and expectations should facilitate the safe adoption of technology and other third-party services by firms. This advances the SCGO as it can have positive effects on technological innovation.

Collaboration with the wider Bank on innovation

The PRA is committed to support the safe adoption of technological innovations by industry. For example in July 2024, the PRA held a pilot roundtable on innovation in order to gather views from firms regarding the interaction between innovation and prudential regulation in insurance and banking.

In addition to this, the PRA collaborates on a regular basis with the rest of the Bank on innovation topics and this helps the PRA to keep under active review innovations and changing risks to make sure they are covered by the regulatory regime, increasing confidence and supporting growth. There have been a number of initiatives in this area:

• In November 2024, the Bank of England and the FCA published the third survey of artificial intelligence and machine learning in UK financial services which aims to further the Bank and FCA’s understanding of AI in financial services.
• The Bank of England is also establishing an Artificial Intelligence Consortium which will act as a platform for public-private engagement to gather input from stakeholders on the capabilities, development and use of AI in UK financial services. One of the key aims of this Consortium is to inform the Bank’s approach to addressing risks and challenges, and promoting the safe adoption of AI.
• In July 2024, the Bank of England published a discussion paper on its approach to innovation in money and payments which present risks and opportunities for central banks’ monetary and financial stability objectives. The paper considered the payments landscape in the round including: retail and wholesale payments; central bank, commercial bank and other privately issued money; and domestic and international contexts.

Third country branches and subsidiaries

In July 2024, the PRA published CP11/24 – International firms: Updates to SS5/21 and branch reporting which set out updates to the PRA’s approach to supervising international banks with activities in the UK, in line with its principle of responsible openness towards international business. The PRA’s openness to international business is a vital ingredient underpinning competitiveness and growth, attracting foreign capital to the UK.

In May 2025, the PRA published an updated version of SS5/21 with an accompanying policy statement (PS6/25 – International firms: Updates to SS5/21 and branch reporting) and reporting rule changes. The PRA has made updates to its approach and expectations for branches operating in the UK to address gaps in the framework revealed by events surrounding Silicon Valley Bank UK (SVB UK), calibrated in a way which limits impacts on the PRA’s existing branch population.

The targeted and proportionate approach taken supports the SCGO, by continuing to allow firms to rely on their global affiliates and resources and giving firms flexibility in how they structure their UK operations. The PRA has also taken steps to simplify elements of branch reporting in response to industry feedback on burdens and increased two of the existing key thresholds related to FSCS covered deposits to take account of inflation since these were originally set. This provides scope for branches operating in the UK to accept increased deposits and grow their business accordingly.

In addition, the PRA’s booking proposals, published alongside the branch risk appetite work in SS5/21, advances responsible openness and UK competitiveness for wholesale banking through acceptance of a range of booking structures and allowing firms to use their international resources.

International engagement

Memoranda of Understanding

The PRA enters into Memoranda of Understanding (MoUs) with third country (and sub-national) regulatory authorities to facilitate supervisory cooperation and therefore the ability of financial services firms to branch into the UK. This contributes to the responsible openness of the UK and therefore it advances the SCGO. A prerequisite for these supervisory cooperation MoUs is an assessment of the other party’s legal protections for confidential information. MoUs accordingly allow for the exchange of supervisory relevant information for third country branches and subsidiaries based in the UK as well as UK branches and subsidiaries in other countries.

The PRA currently has 80 international MoUs across 50 countries, including those with EU and EEA Member States, institutions (ECB, EBA, EIOPA), and as a signatory to the IAIS multilateral MoU for insurance. The PRA continues to make progress in seeking to establish new MoUs, having concluded a number of assessments of prospective counterparties’ legal protections for confidential information. The PRA also cooperates closely on a bilateral basis with supervisors in other jurisdictions. For example, the PRA meets with counterparts from the Single Supervisory Mechanism (SSM) in the ECB and the Federal Reserve (US) monthly, to discuss supervisory cooperation and topics of mutual interest including market developments and those firms who operate in multiple jurisdictions, and attaches significant importance to these relationships. The PRA’s supervisory engagement involves participation in supervisory colleges and establishing cooperation agreements which facilitate day-to-day supervision.

Collaboration with HMT on international matters

The PRA continues to support HMT’s financial dialogues with key jurisdictions, for example including those with China and Japan. Along with colleagues from the Bank of England, the PRA is supporting HMT on the Berne Financial Services Agreement and remains ready to input into other assessments of jurisdictions’ regulatory frameworks. The PRA is also providing ongoing technical assistance to HMT on the financial services elements of the Free Trade Agreements (FTAs) the UK is pursuing. These initiatives link directly to the PRA’s SCGO, for example through contributing to responsible openness, through facilitating a global level playing field and positioning the UK as a global financial centre.

Influencing international regulatory standards

As set out in the PRC’s response to HMT’s November 2024 PRC recommendations letter, the PRA continues to play a leading role in influencing international regulatory standards, and participates actively in global standard-setting bodies such as the BCBS, the IAIS and the Financial Stability Board (FSB).

Taking part in the work of international standard-setting bodies enables the PRA to take an active role in shaping international prudential standards. Besides enhancing global financial stability, aligned standards also help internationally active firms reduce the expense of having to adapt to a patchwork of local standards, and contributes to the SCGO.

During 2024/25, the PRA attended and contributed to meetings of the Basel Committee on Banking Supervision (BCBS) and International Association of Insurance Supervisors (IAIS). Over this period, the BCBS and IAIS covered a wide range of issues. The PRA’s work with the BCBS contributed to the publication of guidelines for counterparty credit risk management, cryptoasset standards and principles for the sound management of third-party risk. The PRA’s work with the IAIS has helped shape the development of Insurance Core Principles (ICPs) for all insurers, and the Insurance Capital Standard (ICS) for internationally active insurance groups, and collaboration with these bodies has helped advance the PRA’s broader strategy to address the risks arising from firms’ use of funded reinsurance. Senior PRA officials also engaged in other international fora, such as the Financial Stability Board (FSB), and in regular bilateral exchanges and regulatory dialogues with their counterparts in other jurisdictions.

3: Implementing and embedding the SCGO

Since the first report on the SCGO, the PRA has taken further, significant steps to implement and embed the SCGO internally and to communicate its approach to stakeholders. This section sets out the work the PRA has undertaken, including in response to recommendations made by the IEO.^{footnote [19]} The SCGO sits alongside the SCO, which was introduced in 2014. The two secondary objectives have equal standing. As the PRA has previously described the way the SCO has been implemented in its past Annual Competition Reports, this section focuses solely on the more recently established SCGO.

External communication of the PRA’s approach to the SCGO

Since the last report, the PRA has taken further action to provide external stakeholders with clarity on its approach to the SCGO (See Box 1 for a summary of the PRA’s approach to the SCGO). The PRA has communicated the developments in its approach primarily through the publication of the Policy Approach PS, which clarified points of ambiguity highlighted by the IEO.^{footnote [20]}

For example, the Policy Approach PS clarified how the PRA defines its proactive approach to the SCGO. This means that the PRA actively looks for opportunities to facilitate the UK’s competitiveness and growth in its regulatory framework. Where there is opportunity to do so, subject to advancing its primary objectives, the PRA will: i) prioritise additional work to pursue the SCGO, ii) maintain thought leadership on competitiveness and growth issues, including by investing in research, industry engagement and internal analysis; and iii) engage in international fora, to influence international policymaking and the setting of international standards.

Further, the Policy Approach PS clarifies that the PRA can still take policy action to advance its secondary objectives, even where the impact of the policy reduces or raises prudential standards, or has a neutral impact, provided the new or updated policy advances the PRA’s primary objectives overall. The PRA is expected to ensure, as far as is reasonably possible, that the new or amended policy advances the safety and soundness of regulated firms and (where relevant) contributes to securing an appropriate degree of protection of insurance policyholders.

The PRA has also continued to share its approach externally through published letters outlining its work on the SCGO.

PRA recommendation letter response – the Governor of the Bank of England, Andrew Bailey, responded to the Chancellor of the Exchequer’s recommendations letter to the Prudential Regulation Committee (PRC) in December 2024. The response recognised the important role the PRA has to play in supporting growth, and set out a range of initiatives it is undertaking in support of that goal.

PRA response to the Prime Minister’s letter on growth – In January 2025, PRA CEO Sam Woods wrote to the Prime Minister setting out actions the PRA has recently taken to advance competitiveness and growth. The letter also sets out further actions the PRA intends to take to support competitiveness and growth. A detailed description of these initiatives can be found in the PRA Business Plan 2025/26. The letter also outlined less developed initiatives that the PRA could take forward to support growth, subject to discussions with HMT and the Department for Business and Trade. Proposals included a ‘concierge service’ for new inbound foreign firms, rationalising the number of ‘have regards’ for UK financial service regulators, and looking for potential overlaps between the reporting requirements of the PRA and other regulators.

The PRA has provided external stakeholders with updates on its SCGO work through speeches made by senior leaders of the PRA. For example, PRA CEO Sam Woods addressed the Annual City Banquet at the Mansion House in October 2024 with a speech entitled ‘Competing for growth’. The speech stressed that the PRA has been rewired internally to successfully implement the SCGO.

Additionally, two speeches that outlined work we had completed to enhance competitiveness and growth in the banking sector were delivered over the past year. David Bailey, Executive Director of Prudential Policy, gave a speech explaining how the Strong & Simple regime will deliver targeted and proportionate changes to simplify the capital regime for small banks and building societies. The Director of Prudential Policy, Phil Evans, gave a speech on a balanced approach to finishing Basel 3.1 in the UK, which explained why the package of reforms is needed and the substantive changes made in the near-final policy compared with the original consultation paper.

On insurance, Gareth Truran, Executive Director for Insurance Supervision, spoke on reforms to Solvency II, in particular the Matching Adjustment (MA) reforms which have significant benefits for facilitating investment in productive assets and sustainable growth. Shoib Khan, Director of Insurance Supervision, provided further detail on how the PRA is delivering the SCGO in the insurance sector, explaining that the PRA is taking a differentiated approach to different segments of the insurance market.

Embedding and culture

In the first year the SCGO was in force, the PRA undertook significant internal changes to embed the SCGO into its ways of working.^{footnote [21]} These changes aimed to ensure that all relevant staff understand the PRA’s approach to the SCGO, and that the correct mechanisms are in place to ensure that competitiveness and growth issues are routinely and consistently considered at working and senior levels. In the second year, the PRA has been focused on consolidating and building on the internal changes made, in line with IEO recommendations.

The PRA rolled out updated training for policy staff to clarify outstanding ambiguities highlighted by the IEO, and support decision-makers. The updated training clarified the scope of application of secondary objectives and provided practical case studies to help explain how the SCGO relates to: (i) primary objectives; (ii) relevant international standards; and (iii) existing standards.

The PRA has also rolled out tailored training for non-policy staff, including supervision directorates and authorisations, to provide clarity on their role in supporting and advancing the SCGO. The training focused on recognising cases in which the SCGO applies (those cases where the PRA exercises its general functions), as well as reinforcing the importance of intelligence sharing within the PRA on SCGO-related issues.

In line with recommendations made by the IEO, the PRA has been focusing on ensuring consistent and confident understanding of its approach to the SCGO amongst its decision-making committees. In October 2024, the PRA surveyed members of PRC and SRPC to see whether they feel appropriately supported when making SCGO judgements. The PRA also committed, in line with IEO recommendations, to report to PRC twice a year on work that is underway with respect to advancing the SCGO.

A key way in which the PRA can advance competitiveness and growth is through being an efficient regulator and ensuring effective regulatory processes. As such, the PRA has undertaken a review of its key supervisory decision-making frameworks to increase its operational effectiveness. Changes implemented following the review include lowering the level of seniority at which certain decisions can be made and allowing greater discretion for some decisions on authorisation cases. These changes allow the PRA to respond and react to regulated firms more quickly.

Stakeholder engagement on the SCGO

The PRA values engagement with stakeholders and has been refining its ability to gather industry perspectives to inform policymaking. The PRA has extensive mechanisms for industry to provide feedback and inform the PRA’s approach and policy, including a dedicated email address^{footnote [22]} for stakeholders to provide continuous feedback. The PRA utilises regular supervisory engagement and events, such as roundtables, with groups of firms and trade associations to gather their input on a range of issues. This includes feedback on how the PRA can further its work on the SCGO.

The PRA has held a number of events to engage stakeholders on a variety of topics to inform its approach. Some examples of the PRA’s engagement with stakeholders include:

Pilot roundtable on innovation – In July 2024, the PRA held a roundtable to gather industry views regarding the interaction between innovation and prudential regulation. It also gathered feedback on how the PRA can best work with industry to facilitate innovation for the benefit of the wider UK economy.

Subject Expert Groups (SEGs) – The PRA has established SEGs to collect feedback on policy development in different areas, such as insurance Matching Adjustments (MA). The outcomes of the SEG led the PRA to consider a ‘MA Investment Accelerator’ for policy development, which the PRA launched its consultation on in April 2025.

Basel 3.1 roundtables – The PRA held several engagements with key stakeholders as it finalised its policy and rules to implement the Basel 3.1 standards. This included a joint PRA and HM Treasury roundtable, on the day of publication of the near final Basel 3.1 rules in September 2024, with the UK’s largest deposit-takers to discuss the banking reforms and some of the changes the PRA made to the original proposals in light of the feedback received. The PRA also held a number of other roundtables hosted by trade associations to answer firm queries.

New Bank Start-up and New Insurer Start-up Unit roundtables – In November 2024, the PRA held an industry event on our New Insurer Start-up Unit, which highlighted how it can support prospective new insurers during the authorisations process.

Internal Ratings Based (IRB) roundtables – In July 2024 the PRA held a roundtable on the IRB approach for wholesale exposure, and another roundtable on the IRB approach for mortgage exposure in September 2024. The PRA provided clarifications on specific topics as requested by the industry and presented on common cross-firm modelling issues.

• PRA innovation week – In November 2024, the PRA hosted a flagship conference to inform staff about technological developments in industry, leveraging industry insights. The conference included six events, five panels of industry leaders and a keynote speech, discussing the impact of technological advances and initiatives across the financial sector, including AI, fintech and payments innovation.

In line with the IEO recommendations, the PRA has developed internal aggregation mechanisms to allow SCGO-related feedback coming from external stakeholders to flow effectively from supervisory areas to policy areas and feed into the policy pipeline.

Research agenda

The PRA has used research to inform its understanding of how prudential regulation can support competitiveness and growth. In line with IEO recommendations, the PRA is committed to support further research to deepen its understanding in this area.

The PRA previously signalled its intent to fill research gaps in the literature and has recently launched a number of initiatives to stimulate research on competitiveness and growth-related topics. Specifically, growth and competitiveness have been made priority topics in the Bank of England Agenda for Research 2025/28 and the Bank has ringfenced resources for projects related to the intersection between regulation and competitiveness and growth.

The Bank currently has a number of ongoing research projects at various stages of development. This includes a Bank Staff Working Paper published in December 2024 on regulatory stringency as a competitive tool for financial centres which used a game-theoretic model to show that when two financial regulators – both with stability and growth objectives – compete to attract banks, some competitive deregulation can arise when the relatively stability-focused regulator becomes more growth focused or more banks become internationally mobile, but not a race-to-the-bottom if the cost of bank failure is deemed large (see Box 2).

As committed to in response to the IEO’s recommendations, the PRA has developed a ‘research incubator’ for a network of academics interested in competitiveness and growth. This has been developed by a specialist senior advisor who is dedicated to providing support, challenge and advice on SCGO (and SCO) issues. The new senior advisor brings external experience from academia and regulation. The first research incubator event will be held in October in conjunction with the London School of Economics Growth Co-Lab and Economics Conservatory. It will engage leading academics and experts in the field of competitiveness and growth, encourage discussion with PRA economists on conceptual themes related to the SCGO, and provide opportunities for collaborative research.

Appendix 1: Progress on implementing IEO recommendations

Appendix 2: Accountability of the PRA for delivery of the SCGO

The PRA is committed to being transparent and accountable for its actions to advance its secondary objectives, and reporting against appropriately selected metrics is an important part of this.

This section presents both quantitative and qualitative metrics that help monitor the PRA's performance against its SCGO. As the second SCGO report published by the PRA, it reflects the progress made over the past year in embedding its new objective. Metrics are grouped under the three regulatory foundations outlined in Section 2. It is important to bear in mind that the metrics, while covering a very important part of the PRA’s performance under the SCGO, do not cover all of the PRA’s achievements.

The PRA outlined its approach to accountability in relation to the SCGO in CP27/23 – The Prudential Regulation Authority’s approach to policy and presented a list of SCGO metrics in Appendix 2 of the CP including metrics that have been agreed with HMT.^{footnote [24]} It takes into account the stakeholder feedback received through HMT’s Financial Services Regulation: Measuring Success – Call for Proposals, which was focused exclusively on the newly established SCGO. Therefore, this section focuses solely on SCGO and not the SCO.^{footnote [25]}

The table below summarises the quantitative element of all metrics presented in this Appendix. The rest of the Appendix sets out a comprehensive qualitative description of each metric and a comparison with last year’s numbers (2023/24 numbers).

The PRA produced this set of metrics last year for the first time. Throughout the course of the year, it has assessed the metrics and the data used to produce them, including through a review carried out by its internal audit function, and found areas for improvement. The methodology for producing some of the metrics has therefore been refined. This led to updates to some of the 2023/24 numbers, which are set out in the relevant footnotes on pages 52 and 71-76.

Foundation 1 – Maintaining trust among domestic and foreign firms in the PRA and UK prudential framework

Metrics under foundation 1 measure whether standards are appropriately calibrated, and their degree of alignment with international standards.

Appropriately calibrated standards and alignment with international standards^{footnote [40]}

Financial Sector Assessment Program (FSAP) assessment

The International Monetary Fund (IMF) delivered its five-yearly FSAP of the UK in February 2022. The PRA responded to the IMF’s assessment in its 2022 Annual Report. The assessment covers a range of sectors and responsibilities falling under the PRA and Bank’s remit, including whether the PRA’s prudential framework is aligned with internationally agreed standards.

The FSAP assessment outlines that the UK regulatory framework meets internationally agreed standards. The assessment recognises that in the banking sector ‘the post Brexit challenge will include streamlining the prudential framework while continuing to meet internationally agreed standards’. The assessment also includes a ‘Detailed assessment of the IAIS Insurance Core Principles (ICPs)’. The outcome of this detailed assessment is that ‘the United Kingdom has a highly developed framework for insurance supervision implemented by highly sophisticated regulators’: 17 ICPs were found to have been observed, six largely observed, and only one partly observed. Also, in the insurance sector, the IMF recommends that, post-Brexit, the UK should not reduce these high standards.

The PRA is implementing, where it deems appropriate, the recommendations made by the IMF as part of its review. Any actions taken by the PRA in response will be assessed as part of the IMF’s next review UK FSAP assessment, which is expected in 2026/27.

An update on the PRA’s progress against the recommendations was published by the IMF in July 2024.

Regulatory Consistency Assessment Programme (RCAP) assessment

The BCBS evaluates the consistency and completeness of adopted standards through jurisdictional assessments. The latest RCAP jurisdictional assessments on compliance for the UK were undertaken when the UK was an EU member state (and is therefore out of date). The compliance of the UK regulatory framework with Basel standards for Net Stable Funding Ratio and large exposures will be assessed in 2025 H2.

In addition to the RCAP assessment, the BCBS carries out periodic monitoring of the timeliness of implementation of Basel standards. The most recent monitoring exercise was carried out in 2024 Q3 and was based on information from member jurisdictions. At that point, the UK had fully adopted 30 out of 31 Basel standards, with work to implement the Basel crypto standards (due to commence in 2026) at a similar stage of development to other jurisdictions. The timeliness of UK implementation of Basel standards is consistent with other comparable jurisdictions such as the EU, Canada, Hong Kong, Singapore, and Switzerland.^{footnote [41]}

Banking resilience

The PRA maintains strong prudential standards to help ensure that the UK banking system is well capitalised and has sufficient levels of liquidity to withstand periods of stress. The resilience of the UK banking sector is a key component of the trust that domestic and foreign firms have in the PRA and UK prudential framework.

The table below reports information on banking resilience sourced from the Financial Stability Reports (FSRs) and other relevant FPC publications like The countercyclical capital buffer (CCyB) indicators.^{footnote [42]} The FSRs set out the Financial Policy Committee’s (FPC) view on the stability of the UK financial system.

In November 2024, the FPC assessed that the UK banking system is well capitalised, with an aggregate Common Equity Tier 1 CET1 capital ratio of 14.8% for major UK banks and 18.1% for small and medium-sized UK banks, as of 2024 Q2. As of 2024 Q3, the ratio for the major UK banks had increased to 15.0%.^{footnote [43]} The FPC also assessed that the UK banking system has maintained high levels of liquidity, with the aggregate three-month moving average Liquidity Coverage Ratio (LCR) for major UK banks, and small and medium-sized UK banks at 151% and 269%, respectively, as of 2024 Q3.

Insurance resilience

Similarly, the PRA maintains strong prudential standards in the UK insurance sector to help ensure its resilience and thereby maintain trust in the PRA and UK prudential framework. The PRA aims to ensure that the UK life and non-life insurance sectors are well capitalised, as measured by aggregate Solvency Capital Requirement (SCR) coverage ratios and the percentage of total capital that is Tier 1.

The table below reports information on insurance resilience sourced from the Bank’s and the PRA’s Insurance aggregate data quarterly report. As of 2024 Q3, the average SCR coverage ratios in the life and non-life insurance sectors measured 215.4% and 217.2%, respectively. In the same period, Tier 1 capital formed 92.2% and 88.5% in the life and non-life sectors, respectively.

Qualitative summary of impacts of cost-benefit analyses (CBAs)

The PRA aims to undertake high-quality CBAs to inform its policy initiatives. Between 1 March 2024 and 28 February 2025, the PRA published 16 CPs (26 in the previous financial year), of which 14 (22^{footnote [49]} in the previous financial year) included a section on CBA. 2 CPs were exempt from including a section on CBA.^{footnote [50]}

Since publishing the first report on SCGO in July 2024, the PRA established the CBA Panel as required by section 138JA of the Financial Services and Markets Act 2000. The Panel supports increased transparency and scrutiny of the PRA’s and the Bank’s policymaking by providing regular, independent input into CBAs. The Panel may also provide recommendations for how the PRA and Bank can improve their overall methodology and approach to CBA. The Panel will publish its Annual Report alongside this report and the PRA Annual Report. The Panel’s Annual Report outlines its first-year activities, including its consideration of the PRA’s and Bank’s overall CBA approaches as well as the individual CBAs prepared by the PRA and the Bank.

All 14 CBAs published in the 2024/25 financial year included a qualitative analysis of the costs together with the benefits that are expected to arise under the proposed rules. In addition, in 43% of cases, where it was reasonable and practicable to do so, CBAs included some level of quantification (ie monetary estimates) of costs and/or benefits (41% last year). Of this latter group, 3 CBAs included a quantification of both costs and benefits (6 last year). They are reported in the table below.

Prudential framework fostering trust in regulated firms

The PRA runs an annual firm feedback survey on the effectiveness and quality of its supervisory framework and approach. The 2024 firm feedback survey, which ran from August – September 2024, was sent to a significantly higher number of PRA-regulated firms than in 2023. The number of firms that responded (302) was around twice the number in 2023. Results from the 2024 survey included a new question that aimed to understand firms’ trust in the regulatory framework. The full 2024 survey results will be made available on the Bank’s website in due course.

Figure 1 presents the results to question 16: ‘The PRA’s regulatory framework fosters trust in PRA-regulated firms.’

Figure 1: Responses to Q16 of the 2024 PRA firm feedback survey

The PRA aims for its regulatory framework to foster trust in the firms it regulates. The results show that:

• 93.7% of respondents either agreed or strongly agreed, that the PRA’s regulatory framework fosters trust in PRA regulated firms.

Foundation 2 – Adopting effective regulatory processes and engagement

Metrics under foundation 2 measure PRA operational efficiency, the accessibility and efficiency of the Rulebook, the efficiency of regulatory requests and the effectiveness of stakeholder engagement with firms.

PRA operational efficiency

The PRA Authorisations Performance Report is a quarterly publication of performance metrics on authorisation activity, including data on the average time to determination of outcome. The tables below report information published in the PRA Authorisations Performance Report Q4 2024/25, covering the year-to-date figures for the 2024/25 financial year. The PRA aims to close at least 98% of cases within relevant statutory service standards.

The PRA also monitors the number of determinations, refusals, withdrawals, and entries/exits from the UK market.^{footnote [51]} This is not a 100% aim, as there are some cases which are complex or subject to unique circumstances where it would not be helpful to enforce the statutory timeline. For case types where volumes are very small, this can on occasion result in individual cases over the deadline resulting in a breach of the 98% target. Between 1 March 2024 and 28 February 2025, across all transaction types, 99.7% of cases were completed on time.

The PRA does not set aims for other measures related to authorisations such as number of determinations, refusals, withdrawals and entry/exit from the UK market, given these are not within the PRA’s control and are highly dependent on external factors.

Time taken to complete authorisations

PRA FTE headcount, by area:

The table below shows the average BAU FTE headcount for each area of the PRA for the 2024/25 financial year and the 2023/24 financial year.

The PRA also draws on wider services, for example, from the Technology Directorate and the Legal Directorate, that are shared with other parts of the Bank of England. The Enforcement and Litigation Division within the Legal Directorate leads on the enforcement of PRA’s statutory powers. In the 2024/25 financial year, there were 30 FTEs working on the enforcement of PRA’s statutory powers (compared to 28 in the 2023/24 year).

Accessibility and efficiency of the PRA Rulebook

Satisfaction of firms with accessibility of prudential policy, rules, and requirements

The results from the 2024 annual firm feedback survey (mentioned previously) also includes questions that are helpful to understand the satisfaction of firms with accessibility of prudential policy, rules, and requirements.

Figure 2 presents the results to question 13: ‘The relevant rules that apply to my firm are accessible and clear.’

Figure 2: Responses to Q13 of the 2024 PRA firm feedback survey

The PRA aims to have firms largely satisfied with the accessibility of the PRA Rulebook. The latest results show that:

• 87.4% of respondents either agreed, or strongly agreed, that the rules that apply to their firm are accessible and clear in 2024. This is down slightly from 87.7% in 2023.

Satisfaction on proportionality, effectiveness, and how regulator actions affect attractiveness of the UK

The 2024 results included a new question that aimed to understand the satisfaction of firms regarding proportionality, effectiveness of the regulatory framework and how regulator action affect attractiveness of the UK.^{footnote [56]}

Figure 3 presents the results to the following survey questions:

• Question 14: ‘The PRA is clear in its reasons for new and revised policy’.
• Question 17: ‘The PRA’s action, effectiveness and approach to proportionality make the UK an attractive place to do business’.

Figure 3: Responses to Q14 and Q17 of the 2024 PRA firm feedback survey

The PRA aims to have firms broadly satisfied with their interactions with the PRA. The results show that:

• 90.4% of respondents either agreed, or strongly agreed, that the PRA is clear in its reasons for new and revised policy. This is up from 89.3% in 2023.
• 57.3% of respondents either agree, or strongly agree that the PRA’s actions, effectiveness, and approach to proportionality, make the UK a more attractive place to do business.

‘Dashboard’ showing at which stage of consultation or implementation initiatives are at

This information can be found in the Regulatory Initiatives Grid. The Grid is a publication that sets out the regulatory pipeline to help stakeholders plan for initiatives that may have a significant operational impact on them. It is published by the Financial Services Regulatory Initiatives Forum, which comprises several UK authorities, including the Bank/PRA and FCA, with HMT attending as an observer member. The Grid is normally published on a biannual basis where possible.

Efficiency of regulatory requests

The data the PRA requests from firms to support policy development not only facilitates responsive and dynamic policymaking but is also necessary for the PRA to meet its accountability requirements. The PRA aims to modernise regulatory reporting to reduce unnecessary burden on firms by, for example, better aligning data collection with the needs of day-to-day PRA activities; better integrating and streamlining PRA data collection (including by looking to cut unused collections, standardising definitions across collections, and removing duplicative data requests); and ensuring the PRA has the data needed to carry out any future policymaking responsibilities.

The PRA gathers data from firms through the regular reporting requirements set out in the Rulebook and through ad hoc data requests. To provide transparency on the efficiency of these requests, this section reports how much data has been streamlined as part of PRA initiatives and the number of data requests (both regular reporting and ad hoc requests) and the time given to respond across deposit-takers and insurers.^{footnote [57]}

Data streamlined as part of PRA initiatives

In the first report, the PRA detailed data streamlined as part of the Solvency II review (PS2/24) which included a net removal of 107 templates, around one third of the required templates. In the last year, the PRA has been focused on the successful implementation of this policy. This can be seen in Table 14 of this report, which presents the number of templates collected in a year for insurance firms.

In the past year, the PRA has been developing other policy packages that are enabling it to reduce regulatory reporting costs for firms. For example, in September 2024, the PRA consulted on proposals for a simplified capital regime for Small Domestic Deposit Takers (SDDTs) as part of its Strong and Simple initiative, including proposals to descope SDDTs from having to report a number of templates, and simplifying a number of reporting templates for them. These proposals build on simplifications already in place for SDDTs for liquidity and disclosure, including reduced liquidity reporting for these firms.

Looking forward, the PRA has committed to reviewing how it can further streamline reporting requirements in the banking sector. It intends to consult on proposals for the deletion of certain underused or duplicative whole templates later this year. The PRA will also work closely with industry to deliver improvements to the relevance, quality and timeliness of data collected to fulfil its primary objectives to promote the safety and soundness of banks while also delivering tangible cost reductions, in line with the SCGO.

Regular reporting data requests

The tables below present information on data requests to regulated firms prescribed by the PRA Rulebook. They reflect the position of the PRA Rulebook as of 31 December 2024 and the comparison with the year before. The tables below present, for different types of regulated firms, the number of templates requested, and the business days given to respond to requests. The PRA Rulebook sets fixed submission timelines by which each template must be submitted.^{footnote [58]}

Ad hoc data requests

The tables below present information on ad hoc data requests made by the PRA to regulated firms in the 2024/25 financial year and the comparison with the year before.^{footnote [68]} These are requests that fall outside of the scope of regular reporting. The tables below present, for different types of regulated firms, the total number of requests, their split by nature of request, and the approximate timings given to respond.

Effective stakeholder engagement with firms

Satisfaction of firms based on interactions with the regulators

The results from the 2024 annual firm feedback survey (mentioned previously) also includes questions that are helpful to understand the satisfaction of firms based on interactions with the regulators.

Figure 4 presents the results to the following survey questions:

• Question 5: ‘My firm has an effective relationship with the PRA’.
• Question 6: ‘My firm has adequate access to the right people at the PRA’.
• Question 7: ‘Communication from PRA supervisors is clear, timely and appropriate for my firm’.

Figure 4: Responses to Q5, Q6, Q7 of the 2024 PRA firm feedback survey

The PRA aims to have firms broadly satisfied with their interactions with the PRA. The results show that:

• 98.3% of respondents either agreed, or strongly agreed, that their firm has an effective relationship with the PRA. This is up significantly from 94.2% in 2023.
• 95.3% of respondents either agreed, or strongly agreed, that their firm has adequate access to the right people at the PRA. This is up from 93.5% in 2023.
• 94.4% of respondents either agreed, or strongly agreed, that communication from PRA supervisors is clear, timely and appropriate for their firm. This is up from 90.2% in 2023.

Foundation 3 – Taking a responsive and responsibly open approach to UK risks and opportunities

Metrics under foundation 3 measure the extent to which the PRA facilitates innovation, and its responsible openness.

Innovation

Regulatory initiatives that are designed to facilitate innovation

The PRA prudential framework aims to facilitate safe innovation. The PRA considers that not all financial innovation is beneficial. Some of the complex products developed in the run-up to the 2007/08 financial crisis are an example of the instances where financial innovation has been harmful to the UK’s financial stability. However, safe innovation is an important driver for productivity improvements. This type of innovation must be industry-led and cannot be driven by regulators alone. But the PRA will seek to create a regulatory environment that stimulates and supports innovation and is responsive to the specifics of the UK environment.^{footnote [77]}

The PRA has published a consultation paper for policy initiative designed to facilitate innovation in 2024/25. In April the PRA published CP7/25 – Matching Adjustment Investment Accelerator (MAIA). The MAIA would allow permitted insurers to include a limited exposure to assets in their Matching Adjustment (MA) portfolios on a self-certification basis, before receiving regulatory permission for those asset features. This will enable insurers to invest more quickly in new asset features including productive assets.

The PRA has also consulted on proposed changes to the UK Insurance Special Purpose Vehicle (UK ISPV) regulatory framework. These changes will support and facilitate innovation in the Insurance Linked Securities (ILS) market by introducing a new accelerated pathway for certain UK ISPV applications (eg some types of catastrophe bonds, a form of ILS) which meet the criteria set out in CP15/24 – Proposed changes to the UK Insurance Special Purpose Vehicles (UK ISPV) regulatory framework. Additionally, the proposals intend to make it easier for a wider range of global market practices to be undertaken in the UK while also streamlining and speeding up the standard application and approval processes, making authorisation of UK ISPV’s faster and easier. These proposals enhance the safety and soundness of the insurance sector by making more diversified reinsurance capital available while also furthering the PRA’s secondary competitiveness and growth objective by making authorisation of UK ISPV’s faster and easier.

Additionally, the PRA has taken forward two initiatives to engage with industry over innovations shaping growth and competitiveness in the financial services industry with:

• PRA Innovation Week 2024 – A multi-day innovation-focussed event for PRA colleagues to support learning and increase awareness about the impact of technological advances and initiatives across the financial sector.
• PRA Pilot roundtable on innovation – The PRA hosted a pilot roundtable on innovation with PRA-regulated banks, insurers, and wider stakeholders.

The PRA has also supported the work of other areas of the Bank of England on:

• A joint survey with the Financial Conduct Authority of artificial intelligence and machine learning in UK financial services.
• A discussion paper on the Bank’s approach to innovation in money and payments.
• The establishing of an Artificial Intelligence Consortium which will act as a platform for public-private engagement to gather input from stakeholders on the capabilities, development and use of AI in UK financial services with the aim of identifying how AI could be used in financial services.

Responsible openness

UK banks’ exposure to foreign jurisdictions

One of the pillars of the PRA’s responsibly open approach is hosting cross-border business in the UK, provided that it is resilient and appropriately controlled and governed, and that the PRA has sufficient visibility of and influence over the necessary supervisory outcomes.^{footnote [78]} Responsible openness is essential to the UK’s success because it is one of the world’s most connected financial centres.^{footnote [79]} In a speech in May 2024, Managing Director of the IMF, Kristalina Georgieva, assessed that the UK’s financial stability is a ‘global public good’. This underlines the PRA’s duty to safeguard it.

The Bankstats tables datasets provide detailed breakdowns of data published in the Bank’s statistical releases, alongside other statistics the Bank compiles. Table B1.4 provides datasets on monetary financial institutions’ (excluding central bank) balance sheets. Using these, the PRA calculated the exposure of UK banks’ assets and liabilities to foreign jurisdictions, which can be used as a proxy for openness.