Bank of England explores 'simpler' rules for smaller banks post-Brexit

The Bank of England is considering plans for a simpler prudential framework for smaller, non-international banks following the UK’s exit from the European Union.

Under existing regulations, based on the approach adopted in the EU, the same rules are applied to all banks and building societies, regardless of size or activities.

The Bank said that the current regulation does simplify certain prudential rules for smaller banks and building societies, but to a lesser extent than in some other jurisdictions.

A discussion paper from the Prudential Regulation Authority (PRA), the bank’s regulatory and supervisory arm, sets out how it could deliver a simpler regime for the smallest “non-systemic” banks and building societies as the first step in building a framework that could eventually extend simplification to larger, but still non-systemic UK domestic firms.

“Any future changes designed to simplify prudential regulation for smaller firms will be balanced against the risk of increasing barriers to growth that may discourage smaller banks and building societies from becoming large enough to provide effective competitive challenge to largest banks and building societies,” said the PRA.

The authority is welcoming comments on the ideas in the discussion paper from interested parties.

Following responses, the next step for the organisation will be publishing a consultation paper, setting out the proposed prudential rules for defining whether a firm is in scope of the simpler regime and some of the proposed requirements.

The PRA said that design and implementation of the new rules is likely to take a number of years to complete
“Making our regime for small firms simpler, but not weaker, will be good for safety and soundness and for competition,” said Sam Woods, chief executive of the Prudential Regulation Authority and deputy governor for Prudential Regulation. “We therefore plan to simplify our rules and have today set out many different ways in which we could do this for deposit-takers in order to stimulate a public debate about the best way forward. I have no doubt that any firms who might be affected will give us strong views on their preferences, and I also encourage everyone else with an interest in this topic to let us know what they think.”

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