The PRA regulates a diverse range of banks and building societies in the UK. These differ in size and the activities they do, but we currently seek to achieve PRA objectives by applying broadly the same prudential regime to all of them. This means smaller banks and building societies may face prudential requirements and expectations that are over-complex relative to what is actually needed to ensure their safety and soundness. This complexity may have negative effects on their costs, and thereby on their resilience and on effective competition in the UK banking sector. This is why we want to explore ways to simplify the prudential framework for smaller, non-systemic, banks and building societies, starting with the publication of this discussion paper.

It is important that we simplify in the right way. We are aiming to simplify the prudential framework only in ways that will maintain the resilience of smaller banks and building societies. Simplicity should not be at the expense of safety and soundness of individual firms, nor should it undermine financial stability. This is why we refer to a 'strong and simple' prudential framework.

We also want to avoid the inadvertent creation of new barriers to growth. We want to implement a framework that supports a dynamic and diverse banking sector in the UK, in which successful banks and building societies can grow and less successful ones can contract and exit in an orderly fashion.

These trade-offs - between increasing simplicity, maintaining resilience, and avoiding further barriers to growth - are highlighted in the paper as different options for designing a strong and simple framework are discussed. The paper also builds on a number of recent PRA initiatives to support dynamism in the sectors we regulate, including the changes we have made to the prudential framework for credit unions and, most recently, our updated approach to supervising new and growing banks.