4.1 The PRA proposed that as banks grow and mature following authorisation, they should:

• have greater clarity over the path to profitability, including how they will meet all relevant loss absorbing capital requirements;

• strengthen governance and increase the independence of the board as they mature; and

• expect to invest significantly in risk management and controls, and have a mature control environment typically by five years after authorisation.

Proportionality

4.2 Two respondents highlighted the importance of proportionality in relation to new and growing banks, given the comparatively simple product suite, balance sheet structure, and resultant nature of the risk exposure. Similarly, another respondent commented that scaling back or simplifying certain requirements (e.g. regulatory reporting), or ensuring that new or existing requirements are implemented in a proportional manner for new and growing banks, would be helpful in enabling firms to effectively compete.

4.3 The PRA aims to be proportionate in the requirements for new banks in order to facilitate effective competition, and advance its secondary competition objective. The PRA's expectations are proportionate to the size and complexity of banks and take into account that a new bank is unlikely to meet all the expectations the PRA has of an established bank from inception, and in many cases that it will require time to build, and demonstrate capabilities. This flexibility is important given the diversity of new bank business models (including, for example, the fact that not all new banks have a simple product suite).