PS20/25 – The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs) – near-final

What Changed

• The simplified capital regime introduces structural changes across all three pillars of capital requirements: Pillar 1 (Risk-Weighted Assets)
• SDDTs must apply Basel 3.1 standardised approaches for credit risk and operational risk, with specific simplifications.
• Due diligence requirements in the standardised approach to credit risk are disapplied for SDDTs.
• Counterparty credit risk (CCR) for derivatives and credit valuation adjustment (CVA) risk are disapplied (with minor exceptions).
• Market risk framework is simplified, with SDDTs applying the credit risk approach to trading book positions and removal of foreign-exchange and commodity risk capital requirements.
• The Interim Capital Regime (ICR) will be removed upon implementation. Pillar 2 (Supervisory Review)

Suggested Considerations

• *For SDDTs Currently Operating or Considering Entry:
• *Notification Decision – Determine whether to enter the SDDT regime and submit notification to the PRA by 31 March 2026 if seeking to benefit from simplified rules.
• *Policy Review – Conduct comprehensive review of PS20/25, related policy statements (PS18/25, PS19/25, PS8/25, PS14/25), and supporting methodologies (SoP5/25, SS4/25, amendments to SoP2/23).
• *Capital Calculation Transition – Prepare systems and processes to transition from current capital calculation methodologies to Basel 3.1 standardised approaches with SDDT simplifications, including:
• Removal of CCR and CVA calculations for derivatives
• Simplified market risk framework implementation

Key Dates

Who is Affected