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Prudential Regulation Authority (PRA)

The Prudential Regulation Authority (PRA) is a part of the Bank of England and responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms. It sets standards and supervises financial institutions at the level of the individual firm.  In total the PRA regulates approximately 1,500 financial institutions.   
The PRA has three statutory objectives:

  1. to promote the safety and soundness of these firms; and
  2. to contribute to the securing of an appropriate degree of protection for policyholders (for insurers).
  3. to facilitate effective competitions between firms.

It makes an important contribution to the Bank’s core purpose of protecting and enhancing the stability of the UK financial system. There are also statutory requirements – Threshold Conditions – that firms must meet. These include firms maintaining appropriate capital and liquidity, and having suitable management.
The PRA, through regulation, sets standards/policies which it expects firms to meet and monitors compliance against these.  It assesses whether financial firms are safe and sound, whether insurers provide appropriate protection for policyholders and whether firms continue to meet the Threshold Conditions.  It also assesses risks firms may pose to financial stability in the future and takes action against those that it consider to pose the greatest risk.
The PRA’s most significant supervisory decisions bare taken by its Board – comprising the Governor of the Bank of England, the Deputy Governor for Financial Stability, the Chief Executive Officer of the PRA (and Deputy Governor for Prudential Regulation), and independent non-executive members. The Board is accountable to Parliament.

Structure of the Prudential Regulatory Authority

The PRA has three areas:

  • Banking:  Banking is responsible for conducting the supervision of domestic and international UK banks, investment banks and overseas banks.
  • Insurance:  Insurance is responsible for conducting the supervision of UK general and life insurers and is responsible for seeking to ensure that policyholders have an appropriate degree of protection.
  • Policy:  Policy leads on development of policy and consequent Handbook rules, covering prudential standards for firms. It is responsible for the implementation of the prudential regime for liquidity, capital, accounting, operational risk and governance and negotiating policy input into specific international agreements.

The PRA works alongside the Financial Conduct Authority (FCA) in the performance of its role.

Click for a link to the PRA website including the “Prudential Regulation Committee” and additional information.

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