Regulatory business plan

Key points

• The RBP is the key document describing a firm’s business proposition including how their business model will achieve viability and sustainability.
• The RBP should include details on the financial projections and route to profitability, and on the governance and risk management arrangements.
• In addition, the RBP should also capture the customer journey, details on operational resilience, policies and procedures.
• The RBP should be subject to independent review and challenge. It should be consistent with other documents (such as the ICAAP and ILAAP).
• The RBP should consider conduct risk and the Consumer Duty requirements throughout the document.

What is an RBP important?

The RBP is a key document describing a firm’s business proposition. It contains details on what the firm plans to do, how their prospective bank will be set up and how their business model will achieve viability in the short term and sustainability in the medium to longer term. In addition, the RBP explains the risks that their business model poses and how these will be mitigated.

RBPs are essential for firms. They help firms focus on how they want to direct their activities and organise their resources. RBPs should also demonstrate that all material risks inherent in the proposed business models have been identified, assessed and mitigated. RBPs are also useful for communicating the firm’s business plans to other stakeholders, such as their prospective investors.

The RBP is the core document that will support a firm’s pre-authorisation engagement with us and is one of the key documents required to be submitted as part of both our pre-application engagement and as part of a new bank application. Based on the information provided, we will assess whether or not a firm will meet (and is likely to continue to meet) the minimum requirements for a bank.

Overall, a clear, concise and well thought out RBP will give comfort to both us and the firm that they will have a safe and sound business that is well governed and controlled. We expect there to be one RBP which is used for all stakeholders (rather than separate documents provided to us compared to investors for example).

What should an RBP include?

Below we have set out some of the key points to be covered in an RBP. However, this is not an exhaustive list and will vary by firm. As such, it is up to the firms to ensure that their RBP provides a comprehensive and detailed picture of their business proposition and that they read as holistic documents.

What are the common challenges with RBPs?

Our review of the RBP is a key part of a firm’s assessment – both during our pre-application engagement and as part of our assessment of a new bank application. It is therefore important that they are well-considered. We encourage firms to consider how they will ensure that their RBPs sufficiently address the below points.

• Independent review and challenge – This is important, as what makes sense to the author may not be clear to another reader. An independent review by someone other than the author (for example a board member) of the RBP will help to ensure the following:

• Readability – The RPB is clear and easy to read, highlighting what core assumptions have been used and why these are considered to be realistic and appropriate;
• Feedback – The RPB adequately addresses all feedback previously provided, both in terms of granular and overall holistic messages; and,
• Practical length – The content and amount of detail in the RBP will depend on the scale and complexity of the business model and the risks that it poses, but we would emphasise quality over quantity, which minimises repetition and only contains what is needed.

• The information within the RBP should be consistent within the document and with other documents as well – The RBP needs to be comprehensive, coherent, and consistent throughout, so that changes made to one part of the document are reflected elsewhere. It also needs to align with other relevant documents, (for example the capital and liquidity documents). Ensuring that the RBP has been subject to the necessary internal governance including independent review and challenge will significantly help with this.
• Conduct risks and the Consumer Duty requirements need to be considered and reflected throughout the document – We recognise that a firm’s consideration of conduct risk and customer harm will evolve as the business grows, but it is important that the RBP provides evidence that conduct risk and customer outcomes have been considered from the outset and not just as an afterthought or as a standalone section.