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Home > Prudential Regulation Authority > New Bank Start-up Unit > New Bank Start-up Unit - Early stages

New Bank Start-up Unit - Early stages

Thinking about becoming a new bank? - Early stages
This page includes questions to ask yourself if you’re thinking about becoming a new bank, and next steps.

Is setting up a new bank right for you?

Depending on your business plan or the activities you want to undertake, setting up a bank may not be the only, or in some cases, the most appropriate option.  There are a number of alternatives to becoming a bank which allow you to provide some of the services that banks offer at a potentially lower cost than setting up a bank.

For example, if you want to take deposits and lend money on a not-for-profit basis to individuals who reside in a specific part of the country or work in the same industry, a credit union may be more appropriate.  If you want to lend to local small businesses or non-profit organisations, setting up a community development finance institution may be an alternative.

While there are varying degrees of legal restrictions placed on the scope or size of some of these alternative options, bear in mind that these are matched by differing levels of regulation.

What is a bank?

A bank is an entity that carries out deposit-taking business.  More specifically the PRA Rulebook defines a ‘bank’ as:
  1. a firm with a Part 4A Permission to carry on the regulated activity of accepting deposits and is a credit institution, but is not a credit union, friendly society or a building society; or
  2. an EEA bank (EAA banks are in general subject to their home regulatory regime and are therefore excluded from the definition).

In addition, the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 sets out the definition of the regulated activity of accepting deposits (see Chapter II Accepting Deposits). This definition clearly stipulates that money received by way of deposit is lent to others.  You should consider whether your business plans fall within this definition.

What are the alternatives?

You can use our Should I become a bank? factsheet to see whether you might be a bank, or if an alternative might be more appropriate for what you want to do. Also, see our Alternatives to being a bank factsheet which includes more information about each of the alternatives.​

(this icon opens a PDF document)
(this icon opens a PDF document)

 Things to consider if you decide setting up a bank is right for you

If you have considered the alternatives and have concluded that setting up a bank is the right route, there are some important things to consider before contacting us to start the authorisation process. Questions include:

Do you need to go through the authorisation process?

Depending on where your new bank will be based and whether you are currently operating as a bank elsewhere you may or may not need to go through the new bank authorisation process:

  • if your new bank will be headquartered in the UK you will need to go through the new bank authorisation process and be authorised by the PRA and regulated by the PRA and the FCA.
  • if you are already authorised as a bank elsewhere in the European Economic Area (EEA) then you can ‘passport’ into the UK directly, without applying to the UK regulators – further details on passporting can be found here.  However, if you want to open a subsidiary in the UK, you will need to go through the new bank authorisation process and be authorised by the PRA and regulated by the PRA and the FCA.
  • international banks headquartered outside the EEA may operate in the UK through a branch, a subsidiary or both.  You will need to go through the new bank authorisation process for either approach and will then, if successful, be authorised by the PRA and regulated by the PRA and the FCA.  Please see the 'International banks' factsheet for further details.

What if your firm is already authorised?

If your firm is already authorised you will need to apply to vary your permissions to add deposit-taking.  While this is a different type of authorisations transaction, you will need to follow the same process as a new bank and you should start pre-application activities with us as normal.

What will your bank do and how will it do it?

Before contacting us you should consider the following key areas, as these are things we will initially want to focus on:

  • Business plan
  • Senior management, the board and governance
  • Financial resources
  • IT strategy
  • Outsourcing

We would encourage all applicants to read 'A review of requirements for firms entering into or expanding in the bank sector' and the subsequent progress review which are both available here.  Although these were published in 2013 and 2014 respectively, they are still very relevant and include some material not available elsewhere, particularly the information in both documents on the PRA’s approach to setting capital and liquidity requirements for new banks.

Do you need to undertake any other regulated activities?

Depending on your business plan and the products you plan to offer, you will also need to consider any other regulated activities that your bank will undertake.  For example, if you plan to offer any of the following you will need to be authorised by us:

  • mortgages;
  • consumer credit; and/or
  • insurance mediation.

What is the new bank authorisation process?

Setting up a new bank requires agreement from both regulators.  While the PRA make the final decision on an application, the PRA can only authorise a new bank with the FCA’s consent.  If the FCA concludes that it cannot provide its consent, the PRA will be unable to authorise a new bank.

Authorisation is a structured process which is made up of the following distinct stages:
  • pre-application – working with us to prepare your application to become a new bank;.
  • application - submitting your application for us to consider and use to decide whether to authorise your new bank; and
  • mobilisation – an optional stage where the new bank, once authorised, completes its set up before starting to trade fully.

When can I call myself a bank?

Not yet.  The use of certain sensitive words such as ‘bank’ and ’banking’ in registered company names is controlled by legislation in order to prevent the public from being misled.  A firm cannot call itself a bank until it has been authorised.

You may begin the application process as ‘Example Ltd’ but only when you are authorised can you call yourself ‘Example Bank Ltd’.

Website domain names and email addresses are controlled in a similar way and you should seek the FCA’s consent before purchasing domain names that use sensitive words including ‘bank’ and ‘banking’.

There is further information on sensitive business names here.

How can you access payment systems?

A payment system, put simply, is a means of moving money.  All newly authorised banks will need access to payment systems.

You should consider your options for accessing payment systems as early as possible in order to be able to adequately reflect these in your plans. Firms can access a payment system through either direct access (where they have a direct relationship with the payment system operator (PSP)) or indirect access (where a direct PSP acts as their sponsor).  Further information about direct and indirect access can be found on the Payment Systems Regulator and Payments UK websites.

What are the next steps?

When you are ready to start the process, you should contact us and we will arrange an initial pre-application meeting with you.

Didn't find the information you were looking for on this page? Email us.

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