This chapter outlines a long-term vision for a strong and simple prudential framework for non-systemic firms in the UK and explains how the PRA could realise this vision over time.

A long-term vision

3.1 The PRA is considering moving over the long term to a prudential framework for non-systemic and non-internationally active firms that simplifies prudential regulation for these firms while maintaining their resilience and not increasing the barriers to growth these firms face. The overarching objective of this 'strong and simple' framework would be to enable a dynamic and diverse banking sector in the UK in which successful firms can grow as other less successful ones contract and exit, while maintaining the resilience of PRA-regulated firms. The framework should be flexible enough to accommodate different business models, including models that could emerge in the future. Such a framework should be designed so that it supports firms' safety and soundness, and hence supports UK financial stability, while also furthering the PRA's secondary competition objective.

3.2 A key principle for the design of the prudential framework for non-systemic and noninternationally active firms is that the UK continues to meet the Basel Core Principles for Effective Bank Supervision (Box C). Simplifying prudential requirements means that the framework could differ from the regulatory standards set out in the Basel standards in certain areas, but the UK would still comply with the Basel Framework because the PRA would continue to apply Basel standards to internationally active banks.