Supervisory approachThe Prudential Regulation Authority (PRA) is responsible for the prudential regulation of banks, building societies, credit unions, insurers and major investment firms. It aims through its supervision to develop a rounded, robust and comprehensive view of these firms, to judge whether they are being run in a safe and sound manner, and whether insurers are protecting policyholders appropriately.
Regulating smaller firms
We take a different approach to supervising the smaller firms that we regulate, due to their limited potential to cause harm to the financial system.
Credit unions, small overseas banks, small overseas insurers and mutual insurers are in the Prudential Regulation Authority (PRA) lowest category of potential impact. At an individual level, these firms have little capacity to cause significant harm to the stability of the financial system. They could, however, generate some disruption to the financial system at an aggregate level, in the event of problems across a whole sector.
Additionally, our objectives require us to promote the safety and soundness of all the firms it supervises, and to contribute to securing an appropriate degree of protection for all policyholders. This motivates a baseline level of supervisory monitoring for these firms.
The PRA's approach to supervising smaller firms
Our supervisory approach for smaller firms includes:
- supervising firms on a portfolio basis using automated tools to analyse your regulatory returns
- examining individual firms when a risk crystallises (as discovered through, for example, a visit to the firm, or an approach from the firm itself), or in response to authorisation requests from the firm
- conducting peer group analysis across sectors as a whole, to develop a clear understanding of the risks posed by both small firms in aggregate and by a typical firm
- conducting annual assessments of these firms, but in large peer groups.
We do not visit smaller firms on a fixed, regular schedule. But all firms, regardless of category, are subject to on-site work by the PRA - with a period of notice - at any time.
Information and materials for credit unions is available here.
Our rules and expectations for branches are available is Supervising international banks: the PRA's approach to branch supervision - PS8/14.
Information and materials for run-off firms is available here.
Contacts for smaller firms
These firms do not have a named supervisor. Instead, they should contact our Firm Enquiries Team at PRA.FirmEnquiries@bankofengland.co.uk or by phone on +44 (0)20 3461 7000.
Skilled Persons Reviews
A skilled person review is one of the regulatory tools we can employ under FSMA as amended by the 2012 Act. There are two types of skilled person review under FSMA as amended by the 2012 Act that gives us the power to commission reviews by Skilled Persons as required:
- s166 Reports by Skilled Persons; and/or
- s166A Appointment of Skilled Persons to collect and update information.
We use these powers to obtain an independent view of aspects of a firm's activities that, for example cause concern or where further analysis required. The use of Skilled Persons Part of the PRA Rulebook sets out the PRA's requirements for a Skilled Person Review. Reports by Skilled Persons - SS7/14 sets out our policy on, and expectations for, the use of these powers.
The Skilled Person Panel (see also Skilled Person Panel Lot descriptions) used for directly commissioned s166 reviews commenced in April 2017 and will end in March 2021.
Information on the skilled persons reviewed commissioned by the PRA is published on a quarterly basis.
Firm feedback survey
The Prudential Regulation Authority (PRA) proactively seeks input from firms on the effectiveness and quality of its supervisory framework and approach.
We obtain feedback from firms through several means. The annual firm feedback survey is an important part of this.
The survey gives PRA-authorised firms the opportunity to comment on their experience of being supervised. The survey seeks views from a range of firms on a number of topics, including:
- how well the PRA understands a firm's business
- how well the firm understands the PRA's regulatory objectives
- the level of challenge from the PRA to the firm
- the firm's relationship with the PRA.
We ask some standard questions but there is a chance for firms to make additional comments if they wish.
Which firms does the feedback survey cover?
When we started the survey in 2013 it was limited to the largest firms. We seek feedback from these firms each year.
We also regulate approximately 1,000 small and medium-sized firms. In 2016, on a trial basis, we extended the survey to include 90 of these firms. Following the success of that trial, we have decided to include a larger sample of about 200 small and medium-sized firms every year.
How are the survey results used?
The survey is run by an independent team. We analyse the responses so that we can identify trends over time. The information is also used to modify the way we supervise. We will generally pass feedback to our supervisory teams, but will be mindful of any confidentiality issues.
What has changed as a result of the surveys?
As we highlighted in our recent Annual Report, we have made some changes following feedback from the survey:
- We have improved processes to reduce the number of information requests that we make and to ensure that the information we do request is actually needed. We have also coordinated some requests to avoid duplication.
- We have also taken on board feedback about changes in supervisory teams to improve the handover process. While many firms understand that we need to redeploy staff periodically, as a result of this feedback we have increased our focus on ensuring new teams are better informed when they take responsibility for firms. This makes the PRA more effective and reduces the burdens on the senior management of firms.
Your feedback will also help us to know if we need to explain better why we are doing things.
When is the survey launched?
The PRA sends the survey to the largest firms in four groups; each group will receive the survey at a different time during the year.
On 4 September 2017, we launched the survey to the small and medium-sized firms that have been invited to complete it this year.
The aggregated results for the 2016/17 survey were published on 12 December 2017.
We appreciate your participation in the survey. It is important to us that we continue to understand and find out what you think is working well and what we could do better.
Information not available on this page is available on The National Archives.