This Prudential Regulation Authority (PRA) supervisory statement (SS) is relevant to Small Domestic Deposit Takers (SDDTs) and SDDT consolidation entities (hereafter ‘SDDT(s)’ is used to refer to SDDTs and SDDT consolidation entities), and applies to these firms instead of SS31/15 – The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) for SDDTs. It provides further detail on the high-level expectations outlined in ‘The PRA’s approach to banking supervision’.
The SS has five chapters, including:
- Chapter 2: ‘Expectations of SDDTs undertaking an ICAAP’. This sets out the PRA’s expectations in relation to the ICAAP and the requirements set out in the Internal Capital Adequacy Assessment (ICAA) Part of the PRA Rulebook.
- Chapter 3: ‘Stress testing, scenario analysis and capital planning’. This sets out the PRA’s expectations of SDDTs in relation to stress testing, scenario analysis and capital planning, and the requirements set out in Chapter 12 of the ICAA Part of the PRA Rulebook.
- Chapter 4: ‘Reverse stress testing’. This sets out the PRA’s expectations of SDDTs in relation to reverse stress testing, and the requirements set out in Chapter 15 of the ICAA Part of the PRA Rulebook.
- Chapter 5: ‘The Capital Supervisory Review and Evaluation Process (C-SREP)’. This sets out the factors that the PRA takes into consideration to assess an SDDT’s ICAAP. It explains the setting of SDDT specific capital requirements and the Single Capital Buffer (SCB) (set under the PRA’s Pillar 2B framework), the consequences in the event an SDDT fails to meet its Total Capital Requirement (TCR) or uses the SCB, and disclosure.
This SS should be read in conjunction with Statement of Policy (SoP) 5/25 – The PRA’s methodologies for setting Pillar 2 capital for Small Domestic Deposit Takers (SDDTs).