FPC’s welcoming statement for policy statement (PS) 20/25 – The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs) – near final
The Financial Policy Committee (FPC) welcomes today the Prudential Regulation Authority’s (PRA’s) policy statement 20/25 – The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs) – near-final.
The Financial Policy Committee (FPC) welcomes the Prudential Regulation Authority's (PRA) Policy Statement (PS) 20/25, which finalizes the second phase of the "Strong and Simple Framework" by introducing a simplified capital regime for Small Domestic Deposit Takers (SDDTs), alongside liquidity simplifications. This matters because it reduces regulatory burdens, enhances competition among smaller UK banks and building societies, and maintains resilience without full Basel 3.1 standards, with implementation on 1 January 2027.
Key dates
- 17 January 2025 Deadline
- Deadline for comments on related CP14/24
- 28 October 2025
- Publication of near-final PS20/25
- 1 January 2026
- Full Basel 3.1 standards apply to ICR opt-in firms (ICR revoked); some changes to SoP2/23, ICAAP/ILAAP update frequencies effective from PS4/26 publication
- 20 January 2026
- Publication of final PS4/26 confirming PS20/25; effective date for ICAAP/ILAAP updates (including reverse stress-testing)
- 1 January 2027
- Simplified capital regime for SDDTs takes full effect
Suggested considerations
- Assess SDDT eligibility: Confirm if firm meets scope criteria from PS15/23; decide between SDDT regime or full Basel 3.1.
- Update capital frameworks: Implement Pillar 1/2A simplifications, SCB, and reporting changes; recalibrate risk-weighted assets, buffers, and stress testing.
- ICR transitions: If applicable, prepare for 1 January 2026 Basel 3.1 shift or 1 January 2027 SDDT entry; cease ICR reliance.
- Policy and process revisions: Revise ICAAP/ILAAP per 20 January 2026 changes; adapt reporting (51 descoped templates).
- Supervisory engagement: Monitor CCoR cluster limits (200% trigger); engage PRA on Pillar 2A via CP12/25.
What changed
- - Pillar 1 simplifications: Adoption of Basel 3.1 standardised approaches to credit and operational risk; disapplication of due diligence for credit risk, simplifications to market risk, removal of...
- Pillar 2A methodologies: Simplifications for credit risk, credit concentration risk (CCoR), and operational risk; amendments to single-name concentration monitoring (cluster limit tightened to 200%,...
- Capital buffers: Introduction of a new Single Capital Buffer (SCB) replacing the Capital Conservation Buffer (CCoB), Countercyclical Capital Buffer (CCyB), and PRA buffer; removal of CCyB adjustment...
- Stress testing and reporting: Replacement of cyclical stress testing with non-cyclical framework; increased descoped reporting templates from 38 to 51, plus SDDT-specific versions of four templates.
- Revocation of Interim Capital Regime (ICR): Firms opting into ICR must transition to full Basel 3.1 on 1 January 2026 or SDDT regime on 1 January 2027.
Compliance impact
Urgency: High – With full implementation on 1 January 2027 (less than 12 months from today), SDDTs face tight timelines for capital recalibrations, ICR exits, and reporting overhauls; missing deadlines risks supervisory intervention or full Basel 3.1 compliance costs. This significantly eases burdens (e.g., simpler buffers, reduced reporting) but requires proactive gap analysis to leverage simplifications while ensuring resilience.
References
- [1] bankofengland.co.uk/prudential-regulation/publication/202... third-party
- [2] bankofengland.co.uk/prudential-regulation/strong-and-simple third-party
- [3] pwc.co.uk/financial-services/assets/pdf/the-strong-and-si... third-party
- [4] mondovisione.com/media-and-resources/news/uk-financial-po... third-party
- [5] bankofengland.co.uk/news/2025/october/fpcs-welcoming-stat... third-party
- [6] regulationtomorrow.com/eu/pra-ps20-25-the-strong-and-simp... third-party
- [7] addleshawgoddard.com/en/insights/insights-briefings/2025/... third-party
- [8] katalysys.com/insights/small-domestic-deposit-takers-capi... third-party
AI-generated analysis. May contain errors or omissions — verify with the original BoE source before acting. Full disclaimer.