PS4/26 – The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs) – final 

1: Overview

1.1 This Prudential Regulation Authority (PRA) policy statement (PS) provides the final policy for the simplified capital regime and additional liquidity simplifications for Small Domestic Deposit Takers (SDDTs) and SDDT consolidation entities,^{footnote [1] footnote [2]} which was published as near-final in PS20/25 – The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs) – near final. The proposals for the simplified capital regime and additional liquidity simplifications for SDDTs were set out in consultation paper (CP) 7/24 – The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs).

This PS contains the PRA’s final policy materials detailed below:

• PRA Rulebook: CRR Firms: SDDT Regime Instrument 2026 (Appendix 1);
• amendments to supervisory statement (SS) 31/15 – The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) (Appendix 2);
• amendments to statement of policy (SoP) 5/15 – The PRA’s methodologies for setting Pillar 2 capital (Appendix 3);
• the introduction of SoP5/25 – The PRA’s methodologies for setting Pillar 2 capital for Small Domestic Deposit Takers (SDDTs) (Appendix 4);
• the introduction of SS4/25 – The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) for Small Domestic Deposit Takers (SDDTs) (Appendix 5);
• amendments to SoP2/23 – Operating the Small Domestic Deposit Taker (SDDT) regime (Appendix 6);
• amendments to SS3/21 – Non-systemic UK banks: The Prudential Regulation Authority’s approach to new and growing banks (Appendix 7);
• amendments to SS6/14 – Implementing capital buffers (Appendix 8);
• amendments to SS16/16 – The minimum requirement for own funds and eligible liabilities (MREL) – buffers and Threshold Conditions (Appendix 9);
• amendments to SS24/15 – The PRA’s approach to supervising liquidity and funding risks (Appendix 10);
• amendments to SS32/15 – Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082, PRA111, and PRA119 (Appendix 11);
• amendments to SS34/15 – Guidelines for completing regulatory reports (Appendix 12);
• final updated reporting templates and instructions (Appendix 13); and
• corresponding CRR rules – the simplified capital regime for SDDTs (Appendix 14).

1.3 In Chapter 7 of CP7/24, the PRA explained that the proposed new and tailored reporting templates for SDDTs were labelled with an ‘S’ to indicate that they are SDDT-specific templates, and that this label was subject to future change as the PRA finalises the reporting proposals. Appendix 15 to this PS sets out the mapping of the final codes to those used in CP7/24. The final codes are the same as the near-final codes (set out in Appendix 14 of PS20/25).

1.4 The amendments to SS31/15 and SoP5/15 descope SDDTs from these policy materials. This PS also confirms the deletion of SoP3/23 – Operating the Interim Capital regime.

1.5 This final PS should be of interest to PRA-authorised banks and building societies (firms), PRA-designated UK investment firms, and their qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, investment firms, and financial institutions that are subsidiaries of these firms, regardless of their location.

1.6 This final PS should be of particular interest to SDDTs, firms who meet the SDDT criteria and are considering becoming an SDDT, and entities that do business with SDDTs.

1.7 This final PS has been published on Tuesday 20 January 2026. Alongside this PS, the PRA has also published final policy, rules, and supervisory expectations on a number of related banking capital frameworks:

• PS1/26 – Implementation of Basel 3.1: Final rules
• PS2/26 – Retiring the refined methodology to Pillar 2A – final
• PS3/26 – Restatement of CRR requirements – 2027 implementation – final

Background

1.8 In CP7/24, the PRA proposed to create a significantly simpler capital regime for SDDTs, while ensuring they maintain adequate capital. In PS20/25, the PRA published the near-final policy for the SDDT capital regime, along with additional simplifications to liquidity requirements.

1.9 In determining its policy, the PRA considers representations received in response to the consultation and publishes an account of these along with its response (feedback). For a general account of the representations made in response to CP7/24 and the PRA’s feedback, refer to PS20/25.

Summary of responses

1.10 The PRA received 18 responses to CP7/24. Appendix 1 in PS20/25 lists the respondents who consented to their names being published. Paragraphs 1.17-1.19 and Chapters 2-9 in PS20/25 summarise respondents’ comments on the proposals.

Changes to draft policy

1.11 In PS20/25, the PRA provided a summary of the changes made to the draft policy in the near-final policy.^{footnote [3]} Chapters 2 to 8 in PS20/25 provided more detail about the changes and the PRA’s feedback to responses.

1.12 The PRA has not made substantive changes to the policy and rules in PS20/25. The PRA has, however, made:

• minor amendments to the rules published as near-final, principally to reflect minor amendments made to PRA Rulebook: CRR Firms: (CRR) Instrument 2026 and PRA Rulebook: CRR Firms: (CRR No.2) Instrument 2026;^{footnote [4] footnote [5]}
• minor amendments to the supervisory statements and statements of policy to enhance clarity and readability; and
• minor corrections and clarifications to the reporting templates and instructions.

1.13 In December 2025, the PRA published PS26/25 – Discontinuing SS20/15: Supervising building societies’ treasury and lending activities, in which the PRA finalised the deletion of SS20/15 – Supervising building societies' treasury and lending activities. In PS26/25, the PRA stated its intention to remove the paragraph that referred to SS20/15 that was in the near-final version of SS4/25 when it publishes final policy and rule instruments on the SDDT capital regime. Accordingly, this PS confirms the deletion of this paragraph in SS4/25.^{footnote [6] footnote [7]}

1.14 This PS takes account of how the policy advances the PRA’s objectives and of significant matters that the decision maker had regard to.^{footnote [8]} Statements on how the near-final policy advances PRA objectives, the regulatory principles the PRA considers most material to the near-final policy, and the impact of the near-final policy on mutuals can be found in PS20/25. The PRA considers these statements remain valid for the final policy. The PRA considers the differences between the proposed rules and final rules are not significant, as it did about the differences between the proposed rules and the near-final rules (see PS20/25 for details). Statements about the obligations on the PRA related to the making of CRR Rules and certain rules applying to holding companies^{footnote [9]} can also be found in PS20/25 (eg a summary of the purpose of the rules).

Implementation

1.15 The SDDT capital regime will take effect on Friday 1 January 2027, other than the changes to SoP2/23 and rules and expectations relating to frequency of ICAAP updates (including reverse stress-testing) and ILAAP updates which take effect on Tuesday 20 January 2026, the date on which this final PS is published.

1.16 The PRA has confirmed its final policy on the frequency of ICAAP updates and reverse stress-testing, which is the same as the near-final policy set out in PS20/25. As mentioned in paragraph 1.15, it has also confirmed the early implementation date of Tuesday 20 January 2026 for this policy. Consequently, the amendments to the ICAA Part and the policy set out in paragraphs 2.1, 2.3, and 4.1 of SS4/25 apply to SDDTs from 20 January 2026, and the policy set out in paragraph 2.1 of SS31/15 does not apply to SDDTs from that date. The PRA is communicating this policy on the SS31/15 webpage. The PRA is bringing SS4/25 into effect as a whole on Friday 1 January 2027 and is removing SDDTs from the scope of SS31/15 from that date. 

1.17 The revocation of the existing rules relating to the definitions of an ICR firm and an ICR consolidation entity, and the deletion of SoP3/23, take effect on Tuesday 20 January 2026.^{footnote [10]}

1.18 References related to the UK’s membership of the EU in the SSs and SoPs covered by the policy in this PS have been updated as part of this PS 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 law.^{footnote [11]}

1.19 The PRA will shortly publish a final reporting taxonomy reflecting the final policy and rules set out in this PS. The reporting requirements for the SDDT capital regime will take effect from Friday 1 January 2027.