CP14/25 – Amendments to Resolution Assessment threshold and Recovery Plans review frequency

Privacy statement

By responding to this consultation, you provide personal data to the Bank of England (the Bank, which includes the Prudential Regulation Authority (PRA)). This may include your name, contact details (including, if provided, details of the organisation you work for), and opinions or details offered in the response itself.

The response will be assessed to inform our work as a regulator and central bank, both in the public interest and in the exercise of our official authority. We may use your details to contact you to clarify any aspects of your response.

The consultation paper will explain if responses will be shared with other organisations (for example, the Financial Conduct Authority). If this is the case, the other organisation will also review the responses and may also contact you to clarify aspects of your response. We will retain all responses for the period that is relevant to supporting ongoing regulatory policy developments and reviews. However, all personal data will be redacted from the responses within five years of receipt. To find out more about how we deal with your personal data, your rights, or to get in touch please visit Privacy and the Bank of England.

Information provided in response to this consultation, including personal information, may be subject to publication or disclosure to other parties in accordance with access to information regimes including under the Freedom of Information Act 2000 or data protection legislation, or as otherwise required by law or in discharge of the Bank’s functions.

Please indicate if you regard all, or some of, the information you provide as confidential. If the Bank receives a request for disclosure of this information, we will take your indication(s) into account but cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system on emails will not, of itself, be regarded as binding on the Bank.

Responses are requested by Friday 31 October 2025.

Consent to publication

In the policy statement for this consultation, the PRA will publish an account, in general terms, of the representations made as part of this consultation and its response to them. In the policy statement, the PRA is also required to publish a list of respondents to its consultations, where respondents have consented to such publication.

When you respond to this consultation paper, please tell us in your response if you agree to the publication of your name, or the name of the organisation you are responding on behalf of, in the PRA’s feedback response to this consultation.

Please make it clear if you are responding as an individual or on behalf of an organisation.

Where your name comprises ‘personal data’ within the meaning of data protection law, please see the Bank’s Privacy Notice above, about how your personal data will be processed.

Please note that you do not have to give your consent to the publication of your name. If you do not give consent to your name being published in the PRA’s feedback response to this consultation, please make this clear with your response.

If you do not give consent, the PRA may still collect, record and store it in accordance with the information provided above.

You have the right to withdraw, amend or revoke your consent at any time. If you would like to do this, please contact the PRA using the contact details set out below.

Responses can be sent by email to: CP14_25@bankofengland.co.uk.

Alternatively, please address any comments or enquiries to:
Recovery, Resolution and Resilience Team
Prudential Regulation Authority
20 Moorgate
London
EC2R 6DA

1: Overview

1.1 Recovery and resolution frameworks are key regulatory reforms that were introduced after the 2007-2008 financial crisis. Under these frameworks firms are required to make preparations in advance so that they are better able to respond to a financial stress, and to help ensure the effective execution of their resolution in an orderly manner with minimum disruption if they cannot recover. More recently, the resolution events of March 2023 involving Silicon Valley Bank and Credit Suisse and the speed at which they unfolded demonstrate the continued need for firms to prepare for resolution.^{footnote [1]}

1.2 Recovery and resolution form a continuum. Firms must maintain recovery plans so that in periods of stress they can stabilise their financial position and recover from losses. In the event that a firm is unable to recover, the resolution regime exists to help manage the failure of the firm in an orderly way and protect the financial stability of the UK. The aim is to avoid the need for firms to be ‘bailed out’ by public funds, as happened in 2007-2008, and ensure that firms, shareholders and creditors are first in line to bear losses. Firms must prepare for resolution so that they can be resolved with minimal disruption to the services that they provide to customers and the economy.

1.3 The PRA keeps relevant requirements under review to ensure that they remain proportionate and fit-for-purpose, based on the PRA’s and the Bank’s experience of operating the framework and wider developments. The policy changes proposed in this consultation paper (CP) reflect that experience and seek to ensure that the frameworks remain calibrated appropriately for the risks they address and that the burden on firms is proportionate.^{footnote [2]}

1.4 The policy proposals are to:

• raise the threshold at which firms come into scope of the Resolution Assessment Part of the PRA Rulebook (the Rulebook) on reporting and disclosure from £50 billion to £100 billion in retail deposits ensuring only the very largest firms are subject to the full suite of requirements, commensurate with the risks their failure would pose; and
• reduce the required frequency for Small Domestic Deposit Takers (SDDTs)^{footnote [3]} and SDDT consolidation entities^{footnote [4]} to review their recovery plans from at least annually to at least every two years, reducing burden and supporting better quality planning.

1.5 Both proposals advance the PRA’s primary objective of firms’ safety and soundness in relation to recovery and resolution by maintaining robust requirements, while applying these frameworks in a proportionate way. These proposals advance the PRA's secondary objectives of competition as well as competitiveness and growth by enabling firms to use their resources more effectively.

1.6 Two reporting and disclosure cycles under the Resolution Assessment Part of the Rulebook have been completed in 2022 and 2024. In addition to assessing the resolvability of ’major UK firms’, the Bank has also carried out assessments of ‘mid-tier firms’ on a proportionate basis, consistent with their size and complexity.^{footnote [5]} Lessons from assessing the resolvability of both firm populations have informed the PRA’s proposal to update the Resolution Assessment threshold by more than would be implied by indexation. This proposed change in the framework would maintain comparable peer groups in each cohort and would ensure the burden on the relatively smaller and simpler firms is proportionate. This proposal is being published after changes to the frequency of reporting and disclosure cycles were published in PRA policy statement (PS) 1/25 – Resolution assessments: Amendments to reporting and disclosure dates, and alongside other changes to the resolution regime by the PRA and the Bank as set out in Maintaining a fit for purpose resolution regime.

1.7 On recovery, internal assessments and industry feedback^{footnote [6]} have informed the PRA’s decision to consider ways it can proportionately reduce the regulatory burden on SDDTs. The PRA considers reducing the minimum frequency of recovery planning reviews for SDDTs to be a proportionate approach in imposing requirements, whilst still meeting its primary objective of safety and soundness.

1.8 Both proposals in this CP are relevant to PRA-authorised UK banks and building societies. In particular, the recovery planning proposal is relevant to SDDTs and SDDT consolidation entities. This CP is not relevant to credit unions.

1.9 The proposals in this CP would result in changes to the Resolution Assessment Part (Appendix 1) and the Recovery Plans Part (Appendix 2) of the Rulebook, as well as supervisory statement (SS) 9/17 – Recovery planning (Appendix 3).

1.10 The PRA has a statutory duty to consult when changing rules (Financial Services and Markets Act 2000 (FSMA) section 138J), or new standards instruments (FSMA section 138S). When not making rules, the PRA has a public law duty to consult widely where it would be fair to do so. 

1.11 As these proposals do not create additional costs for individual firms, the industry, the PRA or other stakeholders, the PRA is not legally required to publish a cost benefit analysis in line with the exemption provided for in FSMA section 138L(3). The PRA has not consulted the Cost Benefit Analysis Panel but has included quantitative estimates and qualitative assessments of the benefits of each proposal for transparency. The PRA has consulted the Practitioner Panel about the approach to updating the Resolution Assessment Part and the approach to future reviews.

1.12 In carrying out its policymaking functions, the PRA is required to comply with several legal obligations. The analysis in this CP explains how the proposals have had regard to the most significant matters, including an explanation of the ways in which having regard to these matters has affected the proposals.

Implementation

1.13 The PRA proposes that the implementation date for the changes resulting from the proposals in this CP would be 2026 H1. This will be confirmed in a PRA PS following the end of the consultation period. For firms already in scope of the Resolution Assessment Part, the PRA has previously published expected reporting and disclosure dates under rule 3.1 and rule 4.1 in the Resolution Assessment Part of the Rulebook respectively.

Responses and next steps

1.14 This consultation closes on Friday 31 October 2025. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP14_25@bankofengland.co.uk.

1.15 When providing your response please tell us whether or not you consent to the PRA publishing your name, and/or the name of your organisation, as a respondent to this CP.

1.16 Please also indicate in your response if you believe any of the proposals in this consultation paper are likely to impact persons who share protected characteristics under the Equality Act 2010, and if so, please explain which groups and what the impact on such groups might be.

1.17 References related to the UK’s membership of the EU in the rules and SS covered by this CP have been updated as part of these proposals to reflect the UK’s withdrawal from the EU. Unless otherwise stated, any remaining references to EU or assimilated legislation refer to the version of that legislation which forms part of assimilated EU law.^{footnote [7]}

2: Proposal 1 – increasing the Resolution Assessment threshold

2.1 The PRA proposes to amend the Resolution Assessment Part of the Rulebook so that it applies to UK banks and building societies with ‘retail deposits equal to or greater than £100 billion’, up from the current £50 billion. The PRA is of the view that increasing the threshold at which firms come into scope will help to ensure that the burden on firms is proportionate. The PRA also considers that raising the threshold will allow the PRA, in conjunction with the Bank, to assess the resolvability of firms above and below the threshold effectively and efficiently.

Background: Resolution Assessment Framework

2.2 The Resolvability Assessment Framework (RAF)^{footnote [8]} consists of three elements:

• how the Bank as the UK’s resolution authority assesses in-scope firms’ resolvability, as set out in the Bank’s Approach to Assessing Resolvability;
• requirements for each of the firms subject to the Resolution Assessment Part to carry out an assessment of its preparations for resolution and, on a periodic basis, to submit a report summarising its assessment to the PRA and then publish a disclosure summarising its report; and
• the Bank’s publication of a public statement on the resolvability of each firm in scope of the Resolution Assessment Part, at the same time as the firms publish their disclosures.^{footnote [9]}

2.3 For the purpose of this CP, the below terms are defined for ease of reference. These terms may be defined and used differently in other contexts:

• ‘Mid-tier firm’: a firm with a bail-in or transfer preferred resolution strategy, but which does not have retail deposits large enough to be subject to the Resolution Assessment Part (meaning the firm is in scope of the first element of the RAF only).
• ‘Major UK firm’: a firm that is subject to the Resolution Assessment Part (meaning the firm is in scope of all three elements of the RAF).

2.4 In parallel to this CP, the PRA has published two other CPs under the resolution framework in relation to minimum requirement for own funds and eligible liabilities (MREL) (CP15/25 – Resolution planning: Amendments to MREL reporting and CP16/25 – Disclosure: resolvability resources, capital distribution constraints and the basis for firm Pillar 3 disclosure), alongside the Bank’s publication of its revised Statement of Policy on MREL. Together, these publications seek to ensure the resolution regime is calibrated appropriately and reflects the experience of the Bank and PRA in operating it as well as market, regulatory and legislative developments.

The PRA’s review of the Resolution Assessment Part

2.5 The purpose of the Resolution Assessment Part is to contribute to ensuring the resolvability of the firms that pose the greatest risk to UK financial stability; to increase these firms’ accountability for, and ownership of, their resolvability; and to increase transparency so that market participants and firms’ stakeholders are informed of these firms’ preparations for resolution. The requirements support PRA Fundamental Rule 8, which requires firms to be resolvable on an ongoing basis.

2.6 Maintaining a credible and effective resolution framework is a continuous process. The PRA keeps under review relevant requirements to ensure that they remain proportionate and fit-for-purpose, based on the PRA’s and the Bank’s experience of operating the framework and wider developments. For instance, the PRA has recently amended rules to provide greater flexibility to firms, the PRA and the Bank, over the timing of a firm’s obligation to report and disclose, as per PS1/25 – Resolution assessments: Amendments to reporting and disclosure dates.^{footnote [10]} The proposal in this chapter follows the PRA’s confirmation in PS1/25 that it would undertake a review of the Resolution Assessment threshold.

2.7 The proposal reflects the experience of the PRA and the Bank in operating the RAF in the two reporting and disclosure cycles to date (in 2022 and 2024) and the Bank’s intention to undertake further, more detailed assessment of resolvability in future reporting and disclosure cycles.

2.8 The PRA has also considered the role of the Resolution Assessment threshold within the RAF. The threshold does not affect the underlying requirements on firms to prepare for resolution. Rather, the rules enable additional assurance and transparency by requiring the very largest and most complex firms to assess, report and disclose their preparations for resolution (the second element of the RAF). In addition, the Bank makes a public statement on the resolvability of these firms (the third element of the RAF). Although not in scope of the second and third elements of the RAF, mid-tier firms are still required to prepare for resolution so they can be resolved in an orderly manner, in accordance with Fundamental Rule 8 and other PRA and Bank RAF policies. The PRA therefore expects mid-tier firms to continue to maintain and improve their resolvability capabilities, so that they are fit for purpose and ready for use if needed.

2.9 The review has also been informed by the Bank’s and the PRA’s assessments of the resolvability of mid-tier firms. These firms are expected to meet the resolvability outcomes and develop and maintain capabilities commensurate with their size, complexity and business model. The Bank and PRA assess mid-tier firms’ resolvability, but these firms are not required by the Resolution Assessment Part to periodically submit reports^{footnote [11]} or publish disclosures about their preparations for resolution. Additionally, the Bank does not make public statements on these firms’ resolvability. Given the size and complexity of such firms, the PRA considers that the current approach remains proportionate and effective in managing their resolvability. The approach also enables better firm assessments and peer group analysis by being able to focus on risks and considerations specific to this firm population.

The use of the retail deposits metric

2.10 The PRA considers that retail deposits continues to be the most appropriate reference metric to achieve the purpose of the rules as described in paragraph 2.5 of this CP, compared to other options (see ‘Other options considered’ below for details). The metric reflects the relative importance of liabilities on a firm’s balance sheet, including retail deposits, for the uninterrupted continuity of banking services to customers during resolution. The focus on continuity is closely aligned to PRA Fundamental Rule 8, which states that ‘a firm must prepare for resolution so, if the need arises, it can be resolved in an orderly manner with a minimum disruption of critical services’.

2.11 While the impact of a firm’s failure on financial stability is not solely determined by the size of a firm or its deposit base, the retail deposits metric indicates the potential disruption that such a firm’s failure could cause to depositors and the real economy, and thus UK financial stability as a whole.

2.12 The PRA therefore proposes to continue using retail deposits as the metric in the Resolution Assessment Part. The PRA proposes refreshing the legal definitions of the underlying terms ‘deposit’ and ‘retail deposit’ to reflect the UK’s withdrawal from the EU. These legal drafting changes are not intended to alter the effect of the rules.^{footnote [12]}

Updating the retail deposits threshold

2.13 The PRA proposes to amend the Resolution Assessment Part so that the rules apply to UK banks or building societies with ‘retail deposits equal to or greater than £100 billion’. The PRA considers that this increase to the threshold is appropriate to achieve the purpose of the rules as described in paragraph 2.5 of this CP, compared to other options like indexing (see ‘Other options considered’ below for details). Considering experience in operating the RAF in the two reporting and disclosure cycles to date, the PRA is of the view that the proposed increase would identify the appropriate firm population to be subject to the periodic reporting and disclosure requirements. The proposed £100 billion threshold would cover only the very largest firms – whose size and complexity mean their failure could pose greatest risk to UK financial stability – and should therefore be subject to more extensive reporting and disclosure requirements on their resolvability.

2.14 The PRA considers that the proposal would ensure that the RAF continues to operate efficiently and proportionately for different cohorts of firms. The PRA considers that the current approach to mid-tier firms, as noted in paragraph 2.9 above, has been effective in managing their resolvability without also imposing periodic reporting and disclosure requirements on them.

2.15 The proposed increase to £100 billion maintains, other things being equal, the current population of in-scope firms for the foreseeable future. This helps provide predictability for firms in the medium term. This also benefits the wider operation and effectiveness of the RAF in achieving its policy purposes, as it helps the PRA and the Bank to establish distinct cohorts of comparable firms to facilitate effective peer group analysis and more tailored assessment with each cohort.

Other options considered

2.16 When reviewing the Resolution Assessment Part, the PRA has been mindful of recent changes to other thresholds, including the approaches to determining participation in the Bank Capital Stress Test, the leverage ratio requirement, MREL thresholds and the other systemically important institution buffer framework.

2.17 For the Resolution Assessment threshold, the PRA considers that a single numerical threshold – compared to using several factors – remains appropriate. The PRA has considered changing the metric to total assets or real economy lending. However, the PRA is of the view that retail deposits remain the most appropriate metric to achieve the policy purposes under the resolution framework, given the importance of liabilities for continuity of banking services in resolution.

2.18 The PRA has also considered indexing the Resolution Assessment threshold based on changes in nominal gross domestic product. However, the PRA is of the view that a larger increase than that implied by indexation is warranted in this case as explained in paragraph 2.13 of this CP. This is to ensure comparable peer groups for the assessment of firms above the threshold (major UK firms) and below the threshold (mid-tier firms). Maintaining these cohorts could facilitate the design of more tailored testing scenarios and more effective analysis within a coherent peer group.

2.19 Another option considered was to define the scope of the rules in more generic terms, supplemented by the PRA publishing indicative guidance regarding when a firm would be expected to be in scope. However, the PRA considers that this would be less transparent for firms and less beneficial in supporting firms with their forward planning.

2.20 The PRA also considered aligning the level of the threshold for the Resolution Assessment Part with the retail deposits threshold used under the leverage ratio requirement or another policy. However, there is no direct link between the Resolution Assessment threshold and retail deposits thresholds in other PRA policies, which serve different policy purposes. The PRA also considers that some staggering of thresholds can be beneficial, to avoid a firm coming into scope of multiple requirements at the same time when it crosses a threshold (the ‘cliff-edge’ effect) which could disincentivise growth by mid-tier firms.

2.21 Adopting some of the alternative options discussed in paragraphs 2.17–2.20 of this CP might also broaden the population of firms subject to the Resolution Assessment Part of the Rulebook. The PRA considers requiring smaller and less complex firms to meet the same reporting and disclosure standards as the very largest and most complex firms is not currently warranted by the benefits. The PRA notes that the Bank already assesses mid-tier firms’ resolvability under the RAF, employing a targeted approach to engage firms by considering the findings of previous assessments, market and other developments and supervisory priorities. The PRA considers this approach to resolvability engagement to be proportionate to achieve the RAF resolvability outcomes for the mid-tier firms.

Approach to future reviews

2.22 The PRA intends to review the level of threshold in the Resolution Assessment Part periodically and ensure that the rules continue to serve the policy purpose. For instance, the PRA may review the threshold as part of the regular lessons learnt at the end of each reporting and disclosure cycle. The PRA may also review the level of the threshold if there are significant changes to other PRA and Bank thresholds.

2.23 The PRA has considered the potential frequency of future reviews of the threshold. The PRA’s view is that the multi-year nature of the reporting and disclosure cycle under the RAF means that very frequent reviews would not be efficient, and the lack of predictability would undermine firms’ forward planning.

PRA objectives analysis

2.24 The proposal helps advance the PRA’s primary objective of firms’ safety and soundness. Firms are still required to prepare for resolution and maintain appropriate resolvability capabilities in line with Fundamental Rule 8. The proposal enables firms to meet the resolvability outcomes proportionately by subjecting only the very largest firms to the additional reporting and disclosure obligations.

2.25 Moreover, the proposal enables more tailored supervision of firms’ resolvability which supports the safety and soundness of firms. As the proposal keeps a clear distinction between the major UK firms and mid-tier firms, it enables the PRA to better target its regulatory approach to each cohort, taking account of their differences in size and complexity. It also maintains each cohort as a distinct peer group. This enables tailored design of activities to test firms’ resolvability, based on cohort-specific risks and considerations. Furthermore, it enables more focused analysis and assessment within each cohort and facilitates identification of thematic findings and best practice for firms to improve their resolvability.

2.26 The proposal advances the PRA’s secondary competition objective. It imposes proportionate requirements on firms, differentiating between mid-tier firms and the very largest firms, whose failure would pose the greatest risk to UK financial stability. This could facilitate effective competition in the UK financial sector. It avoids applying a disproportionate burden of reporting and disclosure on mid-tier firms. The proposed threshold is also set at a level that does not exacerbate cliff-edge effects, as noted in paragraph 2.20 of this CP, and avoids a potential barrier to growth to mid-tier firms.

2.27 The proposal advances the PRA’s secondary competitiveness and growth objective. The proposal does not alter the underlying requirements and expectations for firms to prepare for resolution, ensuring that the PRA continues to maintain a trusted regulatory regime. The proposal maintains a proportionate approach to resolvability reporting and disclosure requirements relative to the size of a firm’s retail deposits, allowing firms below the threshold more headroom to grow and ensuring that the UK remains competitive and attractive as a place to do business.

‘Have regards’ analysis

2.28 In developing this proposal, the PRA has had regard to the FSMA regulatory principles, and the aspects of the Government’s economic policy as set out in the HMT recommendation letter from November 2024. The following factors, to which the PRA is required to have regard, were significant in the PRA’s analysis of the proposal:

• The principle that a burden or restriction which is imposed on a person should be proportionate to the benefits which are expected to result from the imposition of that burden (FSMA regulatory principle): The proposal seeks to ensure that only firms that pose the greatest risk to UK financial stability will be subject to the requirements for assessment, reporting and disclosure of their preparations for resolution, in addition to the underlying requirement of being resolvable. It ensures that mid-tier firms will continue to be subject to Fundamental Rule 8.
• Efficient and economic use of PRA resources (FSMA regulatory principle): The proposal would ensure that PRA supervisors are able to allocate their time and resources efficiently. The proposal helps maintain meaningful peer groups for supervisory engagement and assessment of firms’ resolvability.
• Recognition of differences between businesses (FSMA regulatory principle): The proposal applies the Resolution Assessment Part to the very largest UK firms only. This enables comparable peer group analysis and more tailored resolvability assessment for major UK firms and, separately, for the relatively smaller and less complex mid-tier firms, recognising the differences between each group.

2.29 The PRA has had regard to other factors as required. Where analysis has not been provided against a ‘have regard’, it is because the PRA considers that ‘have regard’ not to be a significant factor for this proposal.

3: Proposal 2 – reducing Recovery Plans review frequency

3.1 The PRA proposes to amend the Recovery Plans Part of the Rulebook to reduce the required frequency of an SDDT’s review of its recovery plan from at least annually to at least every two years. This proposal applies to any SDDT for its recovery plan, and to any SDDT consolidation entity for its group recovery plan. SDDTs will continue to be required to update their recovery plans promptly, in the event of a change which could have a material effect on their recovery plans (eg business model change).

3.2 An SDDT should continue to review and improve the quality of its recovery plan to demonstrate that the arrangements in the recovery plan are credible. A recovery plan should contain measures to maintain or restore the viability and financial position of the firm, avoiding to the maximum extent possible any significant adverse effect on the financial system. Additionally, the PRA will still have the ability to request a firm to produce an updated recovery plan as necessary.

Rationale

3.3 SDDTs are non-systemic and relatively less complex businesses that hold no more than £20 billion in total assets (on average calculated over a 36-month period) and must be domestic-focused. The PRA has observed that the recovery plans of established SDDTs do not tend to change regularly or materially on a yearly basis, and as a result the current annual review frequency required does not often lead to meaningful updates. Therefore, the PRA proposes to reduce the frequency at which SDDTs are required to review their recovery plans from at least annually to at least every two years.

3.4 The PRA anticipates that SDDTs which are ‘new and growing banks’^{footnote [13]} will likely need to review and update their recovery plans more regularly than the proposed minimum two-year frequency. Such firms often undergo frequent and material business model changes compared to other SDDTs. These are likely to constitute material changes which necessitate updating their recovery plans, as required by Recovery Plans rules 4.2(2) and 4.3(2).

3.5 With the proposed longer period between reviews, the PRA anticipates that SDDTs will be able to invest additional time and effort to produce higher quality recovery plans, at the lower frequency. This would improve the SDDTs’ preparedness in managing and recovering from financial stress. The PRA considers that firms producing more credible recovery plans less frequently is a better outcome than firms’ viewing recovery planning as an annual compliance tick-box exercise.

3.6 The PRA considers that the proposal ensures that the regulatory burden imposed on SDDTs is proportionate. In 2024, the PRA published the solvent exit planning policy for non-systemic banks and building societies which will be effective from 1 October 2025.^{footnote [14]} All SDDTs will be subject to the upcoming solvent exit policy which is complementary to recovery planning. The proposal could help maintain an overall proportionate burden on SDDTs in minimising disorderly failure through their preparations on recovery planning (which restores financial position in stress) and on solvent exit (which could be in stress or non-stress circumstances).

3.7 Moreover, the PRA considers that the proposal helps promote consistency within the PRA’s prudential framework. In CP7/24 – The Strong and Simple Framework: The simplified capital regime for SDDTs, the PRA proposed reducing the frequency of Internal Liquidity Adequacy Assessment Process (ILAAP) and Internal Capital Adequacy Assessment Process (ICAAP) reviews from at least annually to at least every two years for SDDTs that are not new and growing banks. The PRA received several CP7/24 responses which requested the PRA to also evaluate the existing recovery plan review frequency for SDDTs. The PRA considers that the proposal in this chapter complements the proposals set out in CP7/24 by aligning the expected review frequency, as an SDDT’s ILAAP and ICAAP documents serve as key inputs that inform its recovery plan.

PRA objectives analysis

3.8 The proposal advances the PRA’s primary objective of safety and soundness. As SDDTs’ business models do not tend to change materially on a yearly basis, expecting them to review their recovery plans at least annually does not meaningfully advance their safety and soundness. The proposal provides a longer period between reviews, which facilitates SDDTs to invest additional time and effort to enhance quality and credibility of their recovery plans. Higher quality recovery planning better enables SDDTs to maintain or restore the viability and financial position in stress, avoiding to the maximum extent possible any significant adverse effect on the financial system.

3.9 The proposal advances the secondary competition objective. It ensures that smaller firms are not excessively burdened with the same requirements as for the larger firms. The relative cost to SDDTs could be higher than for larger firms. Reducing the minimum recovery plan review frequency for SDDTs therefore reduces disproportionate costs and allows for more effective competition.

3.10 The proposal supports the PRA’s secondary objective of facilitating international competitiveness and growth. It aligns with the approach taken in key non-UK jurisdictions, which require non-systemic firms to review recovery plans less frequently. The proposal supports the PRA’s effective and proportionate regulatory regime, ensuring that the UK remains competitive and attractive as a place to do business.

‘Have regards’ analysis

3.11 In developing this proposal, the PRA has had regard to the FSMA regulatory principles, and the aspects of the Government’s economic policy as set out in the HMT recommendation letter from November 2024. The following factors, to which the PRA is required to have regard, were significant in the PRA’s analysis of the proposal:

• The principle that a burden or restriction which is imposed on a person should be proportionate to the benefits which are expected to result from the imposition of that burden (FSMA regulatory principle): The proposal would introduce more proportionate requirements on SDDTs while maintaining their resilience. It reflects that SDDTs’ business models and recovery plans do not tend to change regularly or materially on a yearly basis. The longer period between reviews could further benefit SDDTs with more meaningful review and higher quality recovery planning. It also ensures an overall proportionate burden on SDDTs in minimising disorderly failure through their preparations on solvent exit (which could be in stress or non-stress circumstances) which will be effective from October 2025, and on recovery planning (which restores financial position in stress).
• Recognition of differences between businesses (FSMA regulatory principle): The proposal recognises that SDDTs’ business models are less complex in comparison to larger firms. The proposal ensures that the smallest firms do not face disproportionate costs that are involved with recovery planning due to the economies of scale when compared to larger firms.

3.12 The PRA has had regard to other factors as required. Where analysis has not been provided against a ‘have regard’ for this proposal, it is because the PRA considers that ‘have regard’ not to be a significant factor for the proposal.

4: Cost benefit analysis and other considerations

Cost benefit analysis

4.1 While the PRA is not legally required to publish a cost benefit analysis in line with the exemption provided for in FSMA section 138L(3), this section outlines the PRA’s assessment of the costs and benefits associated with the proposals for transparency.

Proposal 1 – increasing the Resolution Assessment threshold

4.2 The PRA considers that the proposal would not reduce firms’ resilience. The proposal would not change the underlying requirement on firms to prepare for resolution under Fundamental Rule 8, while ensuring that only the very largest firms remain subject to the periodic reporting and disclosure requirements. The PRA has not identified additional costs to individual firms, industry, the PRA or other stakeholders.

4.3 The PRA expects cost savings for the small number of firms that would, absent this proposal, move into scope of the Resolution Assessment Part. These firms would benefit from saving the costs of complying with reporting and disclosure requirements.

4.4 The proposal could have benefits relating to the PRA’s secondary objectives for competition and competitiveness and growth over time. The proposal would maintain robust requirements, thereby contributing to a resilient UK financial system which makes the UK an attractive place to do business. Mid-tier firms, which would otherwise come into scope of the Resolution Assessment Part, would have greater headroom to grow their retail deposits before being scoped in by the rules. The regulatory compliance cost saved (in relation to submitting reports and publishing disclosures periodically) may translate into additional lending to the real economy, although this is expected to be relatively minor and has not been quantified.

4.5 A cost benefit analysis was published when the policy was first introduced in 2018.^{footnote [15]} The PRA estimates the quantified annual industry cost saving to be between £1.2 million and £1.8 million, because of the small number of mid-tier firms that would, absent this proposal, have become subject to the Resolution Assessment Part.

Proposal 2 – reducing Recovery Plans review frequency

4.6 The PRA considers that the proposal would not reduce SDDTs’ resilience. While the proposal reduces the minimum review frequency, it does not change the requirement on an SDDT to keep its recovery plan up to date, which includes ensuring that it is updated to reflect any change which could have a material effect on, or necessitates a change to, the recovery plan or group recovery plan.

4.7 The PRA expects benefits for SDDTs as the proposal reduces the required frequency of recovery planning reviews from at least annually to at least every two years. This would allow SDDTs to save time and costs, including saving the time spent by senior management, to review their recovery plans. These should translate into decreasing their regulatory compliance costs on an ongoing basis. SDDTs may also be able to deploy more of their resources elsewhere which could aid their commercial endeavours.

4.8 With the proposed longer duration between reviews, the PRA expects firms to produce higher quality recovery plans as a result of the additional time provided by the proposal. This achieves a more optimal outcome than SDDTs viewing recovery plans as an annual compliance tick-box exercise.

4.9 The annualised cost saving of the proposal per firm is estimated to be between £105,000 and £155,000, with an overall industry saving between £7 million and £10.5 million. However, as the proposal expects SDDTs to produce higher quality recovery plans with the longer review periods, the realised savings may be lower than indicated above. This has not been quantified due to the variability in existing quality of SDDTs’ recovery plans. The PRA considers that it would therefore be not appropriate to attempt to present an estimate of what the cost of this may be.

4.10 Supervisory experience has led the PRA to understand that a high proportion of new and growing banks tend to experience frequent material changes in their business. As such, many new and growing banks are anticipated to be continuing to need to update their recovery plans more frequently than the proposed two-year period. The PRA has therefore excluded all SDDTs that are new and growing banks from the estimated cost-saving calculations. This avoids knowingly overestimating the benefits to industry.

Impact on mutuals

4.11 The PRA considers that the impact on mutuals within the scope of the proposals is expected to be no different from the impact on other firms, because the proposals do not change the substance of the existing requirements.

4.12 In relation to the PRA’s proposal to increase the Resolution Assessment threshold, the PRA notes that mid-tier building societies may be more likely to benefit from the proposed increase. The building society funding model means they may have larger retail deposit bases relative to mid-tier banks. The proposal means mid-tier building societies may be more likely to benefit from the additional headroom for growth before they come into scope of the rules, compared to the position under the current threshold.

Equality and diversity

4.13 In developing the proposals in this CP, the PRA has had due regard to the equality objectives under section 149 of the Equality Act 2010. The PRA considers that the proposals do not give rise to equality and diversity implications.