PS20/25 – The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs) – near-final
Executive Summary
**PS20/25** represents the second and final phase of the PRA's "Strong and Simple Framework," establishing a significantly simplified capital regime for Small Domestic Deposit Takers (SDDTs) while maintaining their resilience. This near-final policy statement, published on 28 October 2025, fundamentally restructures capital requirements, liquidity rules, and operational frameworks for SDDTs—a critical development for smaller deposit-taking institutions seeking regulatory relief from disproportionate compliance burdens.
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) - Pillar 2A method
What You Need To Do
- *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
- Removal of CCR and CVA calculations for derivatives
- Simplified market risk framework implementation
Key Dates
Compliance Impact
Urgency Rating: HIGH
Who is Affected
Summary
Policy Statement 20/25