The Financial Services and Markets Act (2000), as amended by the Financial Services Act (2012), contains the provisions for the Prudential Regulation Authority (PRA) to make rules to raise fees, in order to allow the PRA to fulfil its statutory objectives.
The PRA prudentially regulates six categories of firms, or “fee blocks”: deposit acceptors; general insurers; life insurers; managing agents at Lloyd’s; the Society of Lloyd’s; and firms dealing as principal.
The amount payable by each fee block depends on the budgeted cost of prudentially regulating that category of firms. Within each category, the fee payable by an individual firm depends on the size of that firm’s business. Size is based on a specific measure for each category of firms (see table). Firms that could cause the greatest harm to the stability of the UK financial system will be the main contributors to the PRA’s funding needs.
Categories of prudentially regulated firms with relevant fee bases
||Modified eligible liabilities|
|Insurers – general
||Gross premium income/gross technical liabilities|
|Insurers – life
||Adjusted gross premium income/mathematical reserves|
|Managing agents at Lloyd's
|The Society of Lloyd's
||Fee based on budgeted cost of regulating the Society|
|Firms dealing as principal
||Number of traders|
The payment of fees is enforced through PRA rules, which are published in the PRA Handbook - see External Links. Any changes to the rules are subject to an industry consultation before becoming final.
The Financial Conduct Authority (FCA) collects fees payable to the PRA on the PRA’s behalf.