Correspondence

Exchange of letters on the regulatory regime for smaller banks and building societies

Exchange of letters between the Chief Executive of the Prudential Regulation Authority and the Economic Secretary to the Treasury on the regulatory regime for smaller banks and building societies.

Documents

Letter from the Chief Executive of the Prudential Regulation Authority to the Economic Secretary on the regulatory regime for smaller banks and building societies

This file may not be suitable for users of assistive technology. Request an accessible format.

If you use assistive technology (such as a screen reader) and need a version of this document in a more accessible format, please email digital.communications@hmtreasury.gsi.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.

Letter from the Economic Secretary to the Chief Executive of the Prudential Regulation Authority on the regulatory regime for smaller banks and building societies

This file may not be suitable for users of assistive technology. Request an accessible format.

If you use assistive technology (such as a screen reader) and need a version of this document in a more accessible format, please email digital.communications@hmtreasury.gsi.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.

Details

Chief Executive of the Prudential Regulation Authority (PRA), Andrew Bailey’s letter sets out the Bank of England’s position in favour of a differentiated regulatory approach, which would support financial stability while allowing a more proportionate approach to applying international standards to smaller banks and building societies.

The letter states that the PRA will review, in their first annual competition report, whether any changes can be made to the application process for institutions wanting to move onto the internal ratings based approach to risk-weighting to calculate their capital requirements. Big banks use internal models to work out the amount of capital they need to hold against particular assets, but newer and smaller banks often have to use the standardised model, which can require them to hold more capital against the same type of asset, meaning that they cannot grow as quickly. A key complaint of challenger banks and building societies has been that they face an unfair playing field on capital.

The Economic Secretary’s reply welcomes these initiatives, which are in line with the government’s objectives to promote greater competition in banking, and confirms that the Treasury will support this agenda both at home and abroad.

Published 11 November 2015