Prudential Regulation Authority Business Plan 2020/21

The Prudential Regulation Authority (PRA) Business Plan sets out the PRA’s strategy, workplan, and budget for 2020/21.
Published on 09 April 2020

Overview

Our 2020/21 Business Plan sets out the workplan for each of our strategic goals to support the delivery of the PRA’s strategy, together with an overview of the PRA’s budget for the period 1 March 2020 – 28 February 2021. It also details some of our highest-level actions to mitigate the impact of Covid-19 on the firms we regulate, and on the UK economy.

The PRA’s strategy

Our strategy for 2020/21 will be delivered through our strategic goals, extracts of which are below. For the full detail of our workplan against each strategic goal, see pages 7-18 in the Business Plan

Group of three people

Robust prudential standards and supervision

Have in place robust prudential standards and hold regulated firms, and those who run them, accountable for meeting these standards

  • We maintain our commitment to effective supervision and robust prudential standards. Following the UK’s withdrawal from the EU on 31 January 2020, we will continue our work to ensure that we have an effective regulatory and supervisory framework at the end of the transition period. In 2020/21 we will focus on maintaining robust prudential standards and support the Financial Policy Committee’s (FPC) commitment to uphold the same level of resilience, to ensure continuity in the supply of vital financial services to the real economy throughout the cycle.

Adapt to market changes and horizon scanning

Continue to adapt to changes in the markets in which we are involved and pre-empt and mitigate risks to our objectives

  • We will seek to maintain the dynamic resilience of the regulatory framework by: scanning the horizon for emerging and evolving risks; evaluating the functioning of the framework for unintended consequences; and, where appropriate, intervening to make adjustments in response to these while ensuring that we do not weaken the level of resilience we have built so far. We will continue to work closely with firms and other regulatory authorities to identify aspects of regulation which may lead to unintended outcomes, and will gather intelligence from across the Bank on how firms are responding to regulation.

hand holding money bag

Financial resilience

Ensure that firms are adequately capitalised, and have sufficient liquidity, for the risks they are running or planning to take

  • In the coming year, we will assess the adequacy of capital and liquidity resources of firms in the banking sector through a range of measures. We will continue to assess credit risk and asset quality, and to consider the level and drivers of risk-weighted assets. Technical risk reviews including firm’s internal models, liquidity and capital assessments and scrutiny of regulatory returns and other data will remain core parts of our work to ensure that firms are adequately capitalised and have sufficient liquidity.

Shield

Operational resilience

Develop our supervision of operational resilience in order to mitigate the risk of disruption to the provision of important business services

  • Operational disruption can impact financial stability, threaten the viability of individual firms and Financial Market Intermediaries (FMIs), or cause harm to consumers, policyholders and other parts of the financial system. Therefore operational resilience continues to be a strategic priority for us and other areas of the Bank, as well as the Financial Conduct Authority (FCA).

Recovery and resolution

Ensure that banks and insurers have credible plans in place to enable them to recover from stress events, and that firms work to remove barriers to their resolvability to support the management of failure – proportionate to the firm’s size and systemic importance – in an orderly manner

  • We will continue to progress the work to end ‘too big to fail’, supporting the Bank of England as the resolution authority. Recovery and resolution are core components of the regulatory reform agenda and help ensure that no firm is ‘too big to fail’ without disrupting financial stability. As part of our supervisory approach, we recognise that firms can face periods of financial stress. To ensure an efficient, competitive banking system that supports growth, firms should be allowed to fail; this means accepting that we do not operate a zero-failure regime. 

    Read our workplan for recovery and resolution
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Competition

Facilitate effective competition by actively considering the proportionality of our approach as it contributes to the safety and soundness of the UK financial system

  • Our secondary competition objective states that ‘when discharging its general functions in a way that advances its objectives, the PRA must so far as is reasonably possible act in a way which, as a secondary objective, facilitates effective competition in the markets for services provided by PRA-authorised persons in carrying on regulated activities’.

    Read our workplan for competition
United Kingdom and European Union flags

EU withdrawal

Deliver a smooth transition to a sustainable and resilient UK financial regulatory framework following the UK’s exit from the European Union

  • On 31 January 2020 the UK formally withdrew from the EU and agreed to a transition period until December 2020, to allow both sides to adapt to the new situation. Until the end of the transition period, UK firms can continue to operate in the EU, and EU firms will continue to operate in the UK under the European Economic Area (EEA) passporting regime.

    Read our workplan for EU withdrawal
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Efficiency and effectiveness

Operate effectively and efficiently by ensuring that resources are allocated to work that best advances our strategy and reduces the greatest risks to the delivery of our statutory objectives, and by providing an inclusive working environment in which all staff can perform to their potential

  • Despite the impacts of Covid-19, we are committed to continuing to improve the way we work. As a follow-up to the PRA strategy 2019/20, in February 2020 we started a review of our strategy and Target Operating Model. In 2020 we will strive to maintain the level of financial resilience of the banking and insurance sectors to be at least as high as it is today, and work closely with those sectors to support their resilience while measures to prevent the spread of Coronavirus affect their business. We will also endeavour to maintain a risk-aware, post-crisis culture in the firms we regulate, whilst embracing new technologies to improve our efficiency and effectiveness as a regulator and delivering greater benefits to financial services firms and the real economy.

    Read our workplan for efficiency and effectiveness

Related publications

Alongside the PRA Business Plan we also published CP4/20 ‘Regulated fees and levies: Rates proposals 2020/21’ which explains how we propose to fund our budget.

Later this year we will also publish the PRA Annual Report 2019/20, which will demonstrate how we progressed on activities set out in last year’s Business Plan. Previous editions of our business plans and annual reports are available on our dedicated webpage. Please note that prior to 2018, our business plans were published within each year’s Annual Report and Accounts.

You may find it helpful to subscribe to email notifications, which also include our PRA Regulatory Digest that highlights key regulatory news and publications delivered each month.

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