This chapter describes the existing prudential framework for small, non-systemic banks and building societies in the UK. It outlines the reasons why the framework may be overly complex for these firms and the possible consequences for PRA objectives.
The existing prudential approach
2.1 Under the existing set of PRA rules and the legislation that apply to PRA-regulated firms, core regulatory requirements are broadly the same for all firms [Although when a firm becomes systemically important, prudential requirements increase to reflect the bigger impact its distress could have on financial stability. For how capital buffer requirements increase for systemically important banks, see Chart D.2 in Bank of England Financial Stability Report, December 2019.]. This approach reflects the evolution of prudential regulation over the past forty or so years [Goodhart, C (2011), The Basel Committee on Banking Supervision: a history of the early years 1974-1997, Cambridge University Press.]. The Bas
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