PS4/24 – PRA statement on the review of rules

Policy statement 4/24
Published on 22 February 2024

1: Overview

1.1 This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses to the consultation paper (CP) 11/23 – PRA statement on the review of rules. This PS also contains the PRA’s final statement on the review of rules (see Appendix), which the PRA is required to publish under section 3RB of the Financial Services and Markets Act 2000 (FSMA).

1.2 The feedback to the responses to CP11/23 in this PS is relevant to any firm that is or may be subject of a PRA rule, which includes all PRA-authorised persons – banks, building societies, credit unions, insurers and designated investment firms – as well as other persons that are subject to PRA rules such as the parent entities of these.


1.3 FSMA, as amended by the Financial Services and Markets Act 2023, introduced a statutory requirement for the PRA to keep its rules under review and to prepare and publish a statement of its policy relating to its review of rules.

1.4 The review of PRA rules and supervisory statements (‘rule review’) is already a familiar part of the PRA’s existing approach to policymaking. The PRA reviews existing rules to assess if they are operating effectively and delivering their intended impact. In CP11/23, the PRA sets out its proposed approach to reviewing its rules. Specifically, it:

  • described the PRA’s framework for undertaking rule reviews;
  • set out how the PRA communicated its rule review work to the public;
  • explained how stakeholders could engage with the PRA on rule reviews; and
  • explained how the PRA intended to co-ordinate with other public bodies on rule reviews covering areas of shared responsibility.

1.5 In CP11/23, the PRA also invited responses to the following questions:

Q1: What type of information should the PRA be collecting to inform its reviews?

Q2: Do you have any views on how the PRA prioritises and selects rules to review?

Q3: Do you have views on how the PRA selects review methods?

Q4. Do you have views on the channels for stakeholders to engage with the PRA on rule reviews?

Q5: Do you have views on the way the PRA communicates its ongoing reviews and outcomes of past reviews?

Summary of responses

1.6 The PRA received 13 responses to the five questions included in CP11/23. Overall, the responses did not raise major concerns with the PRA’s rule review framework. However, respondents shared ideas about how aspects of the PRA statement could be changed. For example, they suggested further ways for stakeholders to engage with the PRA. Moreover, they proposed additional information on rule reviews that the PRA could publish, such as the outcomes of reviews. Some respondents also made suggestions on how the PRA prioritises and selects rules for review, highlighting the importance of the PRA’s secondary objectives. Finally, respondents welcomed the framework’s flexibility that comes with a mix of quantitative and qualitative methods, which can be used depending on the context of a review and the availability of data.

1.7 In this PS, the PRA explains how it addresses the responses, and its reasoning behind the changes made in the framework where appropriate.

Changes to draft policy

1.8 After considering these responses, the PRA has made several changes to the draft statement on the review of rules. These include:

  • section 1.3 – the PRA added additional text to further clarify how stakeholder representations (including those made by statutory panels) are considered in the rule review process;
  • section 1.2 – the PRA changed the labelling of the selection criterion ‘learning potential’ to ‘Implications for the effectiveness of PRA Rulemaking’ to clarify that the core purpose is ultimately to improve the effectiveness of the PRA’s rulemaking process, rather than to just fill potential knowledge gaps in the PRA; and
  • section 1.2 – the PRA also added a reference to sections 3RA and 3RB of FSMA, which require the PRA to keep its rules under review and to publish this statement with respect to its review of rules.

1.9 The Annex to this PS includes the PRA’s final statement on the review of rules where changes, compared to the version that the PRA consulted on in CP11/23.

Implementation and next steps

1.10 The PRA published the final version of its statement on the review of rules alongside this PS. The implementation date is 21 February 2024.

2: Feedback to responses

2.1 The PRA must consider representations that are made to it in accordance with its duty to consult on its general policies and practices and must publish, in such manner as it thinks fit, responses to the representations.

2.2 The PRA has considered the responses received to CP11/23. This chapter sets out the PRA’s feedback to those responses, and its final decisions.

2.3 The sections below have been structured broadly along the same lines as the chapters of the Appendix to CP11/23, with some areas rearranged to better respond to related issues. The responses have been grouped as follows:

  • framework for rule review;
  • stakeholder engagement on rule review;
  • communication on rule review; and
  • co-ordination with other public bodies.

Framework for rule review


2.4 Respondents did not raise fundamental concerns with the proposed process of monitoring PRA rules. However, they suggested additional sources of information to support the monitoring exercise. Specifically, two respondents suggested the PRA should consider input from relevant professional advisers, trade associations or new market entrants. Moreover, one respondent suggested collecting information that allows for comparison of PRA rules with other international regulatory bodies. In addition, two respondents suggested collecting information pertaining to the PRA’s new secondary competitiveness and growth objective (SCGO). Finally, one respondent suggested the information required for each rule review should be considered on a case-by-case basis.

2.5 The PRA welcomes these suggestions to complement existing sources of indications that a rule, or a set of rules, may warrant review. It confirms that its rule review framework ensures that input from a wide range of external stakeholders will be considered when monitoring rules. This includes feedback from relevant professional advisers, trade associations or new market entrants.

2.6 The PRA clarifies that it already considers how its rules compare to other jurisdictions. For example, it accounts for the Basel Committee on Banking Supervision’s Regulatory Consistency Assessment Programme (RCAP) that monitors and assesses the adoption and implementation of the regulatory standards for banks. The PRA also collects a range of data that allows it to better understand potential impacts of its rules on international competitiveness and growth.


2.7 Respondents broadly supported the proposed process for selecting rules for review. Six respondents suggested, however, that priority should be given to the new SCGO as a criterion for selecting rules for review. They argued that the impact of existing PRA rules on competitiveness and growth should be explored as a matter of priority because these rules predate the SCGO. Moreover, one respondent suggested that the PRA should take into account the impact of a policy on the efficiency of the financial industry when selecting rules to review. Additionally, four respondents suggested industry feedback should play a particularly important role in selecting rules. Finally, one respondent suggested the PRA should not use ‘learning potential’ as a criterion for selecting rules for review, arguing that reviews should be informed mainly by their potential to improve the PRA’s rulemaking.

2.8 Having considered this feedback, the PRA confirms that the SCGO and the possibility that costs on firms outweigh the benefits of the rules are important considerations for the selection of rules for review. When selecting and conducting rule reviews, the PRA will balance these considerations against other selection criteria. The PRA considers that it would not be appropriate for any single consideration to receive any special treatment in comparison to other selection criteria. The PRA’s statement on the review of its rules has been adjusted to clarify that all PRA objectives are relevant for the process of rule review.

2.9 The PRA confirms that industry feedback will be considered alongside other sources of feedback but clarifies that it prioritises reviews where there is good evidence to support a case for rule review, as described in the ‘Selection’ section of its statement on the review of rules. Such evidence-based feedback can come from a variety of sources, including industry, the PRA’s statutory panels, PRA supervisors and market intelligence.

2.10 The PRA has changed the labelling of the ‘learning potential’ criterion to ‘Implications for the effectiveness of PRA rulemaking’ in its statement on the review of rules. This criterion aims at improving the effectiveness of the PRA’s rulemaking process. For example, in the review process, learning about the impact of a rule on primary or secondary objectives might allow the PRA to design similar rules more effectively in the future.

2.11 Three respondents suggested that work to repeal EU law and the rule review process should be aligned where possible. The justification is that there are commonalities between the rule review process and the repeal of EU law, which could lead to more appropriately tailored policy for the UK.

2.12 As assimilated lawfootnote [1] containing prudential requirements is revoked and PRA rules are made to replace it, the PRA may also consider making amendments to this policy material where there is regulatory justification. This programme for the repeal and replace of assimilated law is not formally part of the rule review framework.

2.13 Other suggestions on the selection of rules for review ranged from reviewing older rules and setting specific time limits to review rules and seeking views of the Cost Benefit Analysis (CBA) Panel and PRA Practitioner Panel.

2.14 The time passed since the implementation of a rule is one of several selection criteria set out in the PRA’s rule review framework. The framework does not prescribe a time period that automatically triggers the review of a rule. The timing of a review varies on a case-by-case basis.

2.15 The rule review framework ensures that representations made by the PRA’s statutory panels will be considered as input in the rule review process. The PRA has updated section 1.3 of its statement on the review of rules to clarify how stakeholder representations (including those made by statutory panels) are considered.

2.16 Additionally, respondents suggested considering rule complexity and proportionality in the way a rule achieves its purpose, and one respondent requested that the PRA provided clarity on the meaning of ‘unintended effects’.

2.17 The PRA reiterates that rule complexity and proportionality are important considerations. As one of the selection criteria is the impact on the PRA’s secondary objectives (including the SCGO), the rule review framework enables the consideration of factors such as the scope for rule simplification and easing unnecessary burden on firms. Additionally, the framework also states that the PRA prioritises reviews where there is a good evidence base to support the possibility that the costs outweigh the benefits of the rule under consideration. Finally, the PRA clarifies that unintended effects constitute any benefits or costs that were not expected when the policy was designed, and that arise from the rule and are observed only after the rule becomes effective. The PRA’s statement on the review of rules has been adjusted to provide an example of unintended consequences in its initial discussion of conditions that could lead to rule reviews.

Methods and implementation

2.18 Respondents welcomed the PRA’s proposal of rule review methods and implementation procedures. Comments mostly focused on minor suggestions relating to methodology. Specifically, one respondent requested that methods should be communicated in advance to allow for stakeholder feedback and to obtain further evidence. The PRA welcomes these comments about the rule review methods, which the proposed framework accommodates. Moreover, the PRA will announce the review of rules whose methodology requires major engagement with stakeholders as early as possible. For example, it will announce reviews that will ask for stakeholders’ input through surveys. One respondent suggested that surveys should be anonymised in certain contexts. The framework has been adjusted to outline that surveys can be anonymised depending on the circumstances.

2.19 Another respondent asked for clarification of the circumstances under which the PRA would consider appointing an independent individual to perform a rule review, claiming such appointments are justified to avoid conflicts of interest. The PRA clarifies that, whenever appropriate, rule reviews can make use of external stakeholders, such as market participants and academics, as stated in the ‘Execution’ section of the framework. Appointments of independent reviewers will be judged on a case-by-case basis, and the PRA will consider the expertise required to perform the review.

Stakeholder engagement on rule review

2.20 Four respondents provided suggestions on further channels for stakeholders to engage with the PRA on rule reviews. Specifically, one respondent recommended adapting the PRA’s annual firm feedback survey to serve as an additional vehicle through which feedback on rule review can be submitted. Moreover, three respondents proposed an interactive function for the PRA Rulebook to enable stakeholders to provide direct feedback online. Additionally, two respondents proposed regular roundtable-style discussions between the PRA and its stakeholders.

2.21 The PRA considers stakeholder engagement to be a key element of the PRA’s approach to rule reviews as it enables input from those affected by the existing rules, and facilitates suggestions on possible changes. It, therefore, welcomes respondents’ suggestions for more effective engagement. The use of a single source of information in the form of the dedicated mailbox, as proposed by the rule review framework, will ensure that the PRA monitors stakeholder feedback on the functioning of its rules in an efficient way. It will also allow firms to feed into the rule review process efficiently and on a regular basis.

2.22 One respondent suggested more formal mechanisms for making a representation to the regulator. They suggested that the PRA Practitioner Panel and Insurance Practitioner Panel should be provided with a formal ‘review or explain’ mechanism. Furthermore, respondents proposed that the PRA should be required to publicly state its reasoning if it does not agree to carry out the review requested by the Panel.

2.23 The PRA agrees that its statutory panels have an important role in the rule review process. While FSMA does not provide the legal basis for a ‘review or explain’ mechanism, the PRA takes feedback from its statutory panels seriously. The PRA statement on the review of rules has been adjusted to clearly state how it ensures that these panels’ representations are considered.

2.24 The creation of a dedicated email address for engagement regarding rule reviews was welcomed by respondents. Moreover, one responded suggested the PRA makes use of technology, such as Artificial Intelligence (AI) tools, to effectively manage email traffic.

2.25 The PRA will consider using new technology where suitable, and its priority is to ensure the evidence provided by stakeholders is considered appropriately.

Communication on rule review

2.26 Respondents welcomed the PRA’s existing communication with its stakeholders, and the proposal to create a webpage on the Bank website dedicated to rule reviews. Seven respondents made the following suggestions about the type of information the PRA should share throughout the rule review process:

  • the pipeline of future reviews and the input required from stakeholders;
  • the timeline and methodology of future reviews (published via the Regulatory Initiatives Grid, PRA Business Plan or discussion papers including information on PRA capacity);
  • evidence for selection of a rule to review and any rules that have been considered for review but not selected;
  • the progress of any rule review and likely timings for completion; and
  • the outcomes of reviews, metrics such as the number of reviews undertaken in a given year and next steps of any reviews in all cases.

2.27 The PRA conducts a wide range of policy analyses to deliver on its objectives. Some analyses will crystallise into rule reviews while other analyses might be followed by new policy development work, or they will not be taken forward. The PRA acknowledges the importance of transparency about its rule review work for effective engagement with its stakeholders. To this end, the PRA will use its rule review website to:

  • highlight rule reviews that require major engagement with its stakeholders;
  • provide updates on ongoing reviews that help stakeholders better understand the review work that the PRA is undertaking at any given point in time; and
  • publish outcomes of past reviews on a case-by-case basis.

2.28 Whenever the PRA publishes a report on the outcome of a review, it would include the reasoning for selecting the rule for review.

2.29 By publishing information on its planned, ongoing, and past reviews, the PRA will provide its stakeholders with relevant information needed to effectively engage with the PRA on the review process. The PRA will not provide information on which rules have been considered but not selected for review, since this information does not provide any signal about future decisions by the PRA on which rules to review.

2.30 Four respondents asked for clarification on how the PRA manages stakeholder feedback. Of them, two respondents proposed that the PRA presents a summary of feedback received and the actions taken by the PRA, for example in the PRA Annual Report.

2.31 Accountability is important to the PRA, and its Annual Report will describe how stakeholder feedback has fed into its rule review work.

2.32 Two respondents suggested that stakeholders should be able to request clarification about specific rules to which the PRA would publish responses, similar to the Q&A process by the European Banking Authority.

2.33 The PRA is keen to understand the areas where stakeholders do not understand rules. There are existing mechanisms for the PRA to clarify its policy to stakeholders, eg through supervisory statements and statements of policy.

2.34 One respondent asked how the PRA would take account of the outcomes of rule reviews in its approach to contributing to the development and implementation of international standards.

2.35 The PRA contributes to work done by international bodies, such as the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors (IAIS) or the Financial Stability Board (FSB). By publishing outcomes of its reviews and sharing them with international counterparts, the PRA ensures that they will be considered in the development and implementation of international standards.

Co-ordination with other public bodies

2.36 Two respondents suggested that the PRA and Financial Conduct Authority (FCA) should more closely coordinate their rule review frameworks to ensure that there is no material difference, highlighting the existence of rules which are in areas of shared responsibility. A few respondents also pointed out differences between the proposed frameworks, with one respondent illustrating how the FCA defines success criteria for rules in advance of implementing them. Such criteria set an objective measure by which to monitor the impact of those rules.

2.37 The PRA clarifies that it coordinated the development of its rule review framework with the FCA. Similar to the FCA, the PRA assesses whether its rules achieve their purpose in a proportionate way. Whenever the PRA decides to review a rule, it revisits the reasoning for introducing the rule, how it advances its objectives, and the costs and benefits of the rule, as set out at the consultation stage. Moreover, the PRA framework seeks to ensure consistent regulatory outcomes for regulated firms in areas of joint responsibility. It plans to achieve this by coordinating reviews in these areas with the FCA, as originally outlined in the draft statement of the review of rules.

2.38 Five respondents suggested that the PRA and FCA should consult each other on rule reviews, ensuring that they are ‘joined up’. Specifically, there was a suggestion for the PRA and FCA to publish more detailed plans on joint areas like operational resilience suggesting alignment of rule review plans would be beneficial.

2.39 The PRA confirms that it will coordinate with other regulators, including the FCA, on the review of rules that are in shared areas of responsibility. In particular, when regulators conduct rule reviews in similar areas (eg between the PRA and FCA on operational resilience), the PRA will seek to align those reviews where possible.

  1. Under the Retained EU Law (Revocation and Reform) Act 2023, retained EU law that had not been revoked by the end of 2023 has become known as ‘assimilated law’.

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