In March 2014, the PRA gained a new statutory requirement in relation to competition — the Secondary Competition Objective (SCO). The SCO requires that when making policy in pursuit of its primary objectives of safety and soundness and insurance policyholder protection, the PRA does so in a way that facilitates effective competition, as far as reasonably possible. This new statutory duty necessitated a material change of gear.
In February 2015, Court commissioned the IEO to evaluate whether the requisite change was taking place.
Overall, the IEO’s work found numerous positives. The PRA has invested in its approach to the Secondary Competition Objective (SCO), with positive results for the flow of new policies; the PRA also delivered substantive reforms to authorisations policy to address potential barriers to entry into banking ahead of the SCO coming into effect. Competition issues appear to be receiving airtime, and gaining traction, at all levels of the organisation, including via regular discussion at the PRA’s policy committees. Most key aspects of the SCO are well understood across policy staff, and the PRA’s approach supports the consistent treatment of competition issues in different types of policy initiative, as well as a broadly appropriate degree of prioritisation. The IEO also found evidence of proactivity.
Nevertheless, the IEO also found residual misgivings in some parts of the institution about the compatibility of the competition objective with the PRA’s primary objectives; this may have slowed the PRA’s progress in embedding and communicating on the SCO to a degree. The IEO’s work suggests that articulating the PRA’s framework and intended approach more fully is one way in which any undue misgivings about the compatibility of the SCO with the PRA’s primary objectives could be usefully addressed. More generally, the IEO found scope to embed the SCO more firmly into PRA processes, thereby helping to maintain a consistent and appropriately proactive approach to the objective throughout the organisation. The IEO additionally identified opportunities to ensure that competition is sufficiently influential by strengthening governance and demonstrating consistent compliance with the SCO, as well as to refresh the PRA’s strategy on external liaison and communication on competition issues.