The way we prudentially supervise firms is based on policies that ensure judgements about risks to our objectives are made within a clear and coherent framework.
How we make prudential policy
We aim to establish and maintain published policy material that is consistent with our objectives, clear in intent, straightforward in presentation and as concise as possible. Taken as a whole, the set of published policy material is intended to set out clearly and concisely what outcomes we expect, so that firms can meet these expectations through their actions.
The policy framework for our supervision is to a large extent agreed internationally, both at a global level and within the EU. Relevant EU Regulations, including binding technical standards that apply directly to UK firms, will not be reproduced in the PRA Rulebook but will be part of our requirements of firms. Firms are also subject to guidance by the European supervisory authorities.
Where we issue rules in areas not covered by EU law, we aim to do so in a manner that is clear about the intended outcome, straightforward to understand and as concise as possible. We set out these rules in the PRA Rulebook, which contains direct requirements for firms. Our policy framework also includes non-rule material, which is contained in supervisory statements.
We expect firms to engage directly with policy materials, including rules in the PRA Rulebook, supervisory statements and EU materials, and determine - bearing in mind the overarching principle of safety and soundness - whether they are meeting the expectations set out in them.
More information about how we make policy is available in our approach documents:
Types of PRA policy publication
There are several different types of PRA policy publication:
Discussion paper (DP)
Discussion papers are used to stimulate debate on issues about which we are considering making rules or setting out expectations. We use the responses we receive to DPs to help formulate our policy. Once we establish a preferred position, we will draft rules and supervisory statements and the formal consultation process, by way of a consultation paper, will commence.
Consultation paper (CP)
Consultation papers are the formal document by which we set out draft proposals and invite comments on them from the public. CPs normally deal with one discrete issue of significance. If there are a number of small and/or uncontroversial topics, they are normally dealt with in Occasional CPs instead.
Policy statement (PS)
Policy statements set out our feedback on consultation responses, together with our policy line. We only issue feedback when there have been extensive comments by the public and industry.
Supervisory statement (SS)
Supervisory statements set flexible frameworks for firms, incorporating new and existing expectations. They focus on our expectations and are aimed at facilitating firm and supervisory judgement in determining whether they meet those expectations. They do not set absolute requirements – these are contained in rules.
Statement of policy (SoP)
Statements of policy are the formal document in which we detail our policy on a particular matter. Statements of policy usually set out our approach to exercising powers conferred by the Financial Services and Markets Act 2000. They do not contain our expectations, which are set out in supervisory statements.