2.1 The simpler regime is intended for small firms that are not systemically important and are focused on deposit-taking from, and lending to, households and corporates in the UK. As such, the PRA's proposals for a definition of a Simpler-regime Firm and the criteria in this definition (the 'scope criteria') are designed relative to the aims of the regime, reflecting the attributes that are indicative of smaller, less complex firms. For example, the proposed criteria are designed and calibrated to include smaller firms that operate primarily in the UK domestic markets, and do not necessarily need to be subject to complex prudential requirements to ensure their safety and soundness. In practice, the proposed definition of a Simpler-regime Firm would capture existing firms and small firms entering the market focused on providing banking services to UK households and corporates.

2.2 The PRA proposes to introduce a number of objective and transparent criteria for assessing whether a firm meets the definition. The PRA proposes a firm must meet all of the below criteria to be considered a Simpler-regime Firm.

Size

2.3 In DP1/21, the PRA explained that smaller firms tend to face higher average costs of understanding, interpreting, and operationalising prudential regulation. Since the simpler regime would be intended for those firms that experience the complexity problem most acutely, the PRA considers it necessary to include in the Simpler-regime Firm definition a size criterion based on an objective and easily observed measure.