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 in 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 list of Skilled Person Panel suppliers), used for directly commissioned s166 reviews, commenced in April 2017 and will end in March 2021. The description of the lots can be accessed through the Skilled Person Panel Lot descriptions.
Information on the skilled persons reviews commissioned by the PRA is published on a quarterly basis.
To see a list of historical PRA skilled persons reports commissioned, please see The National Archives link below:
Firm feedback survey
The PRA proactively seeks input from firms on the effectiveness and quality of its supervisory framework and approach. One of the ways the PRA does this is through the annual firm feedback survey. This process is overseen by the PRA’s Supervisory Oversight Function (SOF) which is independent of frontline supervision.
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:
- the PRA's understanding of firms and their markets
- firm's understanding of the PRA's regulatory objectives and expectations
- the level of challenge from the PRA to the firms
- the effectiveness of firm's relationship with the PRA
- the PRA's coordination with other regulators.
We ask some standard questions and also provide firms with the chance to make additional comments.
We appreciate firms’ participation in the survey. It is important that we continue to understand, as the PRA evolves, both what firms think works well and what we might do differently.
Which firms are included? When should firms expect to receive the survey?
The largest firms that the PRA supervises receive the survey every year. A number of these firms are also invited to follow-up meetings to discuss their views in more detail.
Each year a sample of the small and medium-sized firms are also invited to complete the survey. The firms included in the sample for 2018 can expect to receive a notification on 9 May 2018.
How are the survey results used?
SOF analyses firms’ responses to identify both good practices and areas where the way that the PRA supervises firms could be improved. This analysis is reported to PRA senior management and shared with the PRA’s Practitioner Panel. Firm specific feedback is also passed on directly to the relevant supervisory directorate, being mindful of any confidentiality issues.
What has changed as a result of the surveys?
In response to feedback about information requests, the PRA has improved processes to reduce the number of requests made and to ensure that the information requested is actually needed. We also seek to coordinate some requests to avoid duplication.
We have also improved handover processes, taking on board feedback from firms about the impact that changes in supervisory teams can have on firms. While many firms understand that we need to redeploy staff periodically, we have increased our focus on ensuring new teams are better informed when they take responsibility for firms.
Feedback received from firms also helps the PRA to identify where it needs to explain better why it is doing things.
Are the results of the survey published?
The PRA published the aggregated results for the 2016/17 survey on 12 December 2017.
Information not available on this page is available on The National Archives.