UK Prudential Regulation Authority publishes its plan for 2022/23

The PRA publishes their 2022/2023 business plan

 The PRA published their annual Business Plan, laying out 4 areas of strategic focus. As the pandemic hopefully draws to a close, the regulated firms will most likely witness significant changes to their "day-to-day" operations, with the Parliament focusing on the Future Regulatory Framework and increased scrutiny on adequate monitoring of climate change. In particular, the turmoil of changes will affect insurers, who will also be subject to the Solvency II review.  As highlighted by Chief Executive Sam Woods, the PRA needs to be seen as having “an expanded role as a rule-maker and an increased focus on operational resilience.


The PRA's strategy

The PRA's strategy will be based on 4 main goals:

  • Retain and build on the strength of the banking and insurance sectors after reforms spurred by the financial crisis;
  • Play a leading role in identifying new and emerging risks and developing international policy;
  • support competitive and dynamic markets in the sectors that the PRA regulates;
  • run an inclusive, efficient, and modern regulator within the central bank.

    Let us take a short dive into them:

Retain And Build On The Strength Of The Banking And Insurance Sectors 


For insurance companies, the strategy will focus on reform of Solvency II, stress testing and improving internal models. The PRA will consult on reforms to Solvency II soon after the Government announces proposals (in April). Regarding stress testing, the PRA will undertake a stress test in May 2022, with the results to serve as os a baseline for shaping future priorities. In addition, the PRA has highlighted that one of the core areas of focus will be to adequately monitor and oversee climate-related financial risks.

Be At The Forefront Of Identifying New And Emerging Risks, And Developing International Policy


Climate Change

Large firms and a sample of smaller firms will be asked to report on how they have embedded the management of climate-related financial risks into their risk management frameworks. Starting 2022, the PRA will not focus solely on implementing a climate-risk strategy, but on active supervision of climate-related risks. 


The PRA will identify and respond to risks and opportunities faced by regulated firms as they seek to digitalise their processes to reduce costs, retain existing customers, and attract new customers through digital channels.

Artificial Intelligence (AI) And Machine Learning

A Discussion Paper on AI will be published by the PRA in the later months of 2022, following research and findings of the AI Public-Private Forum (AIPPF).


Support Competitive And Dynamic Markets In The Sectors regulated by the PRA


Regulatory Change

Future regulatory framework review: a new Financial Services Bill is expected to go before Parliament later in 2022.

Developing The PRA’s Policy Approach

Developing the PRA's approach to policy will encompass two elements: a discussion paper laying out the approach to prudential policymaking under the Future Regulatory Framework, and a new PRA rulebook.

International Engagement

In the aftermath of Brexit, the PRA will expand the list of jurisdictions to agree on memorandums with more engagement in shaping the UK as a "business-friendly" jurisdiction. 

Run An Inclusive, Efficient, And Modern Regulator Within The Central Bank


If two words could sum up the PRA plans in this aspect, they would be "innovation" and "effectiveness", with the PRA stating that it would put emphasis on their employee's digital skills, at the same time enhancing their authorisations processes to boost quality standards and effective change management. 


What's next?

Whereas some of the elements laid out in the PRA strategy are a continuance of work already begun, there are quite a few highlights worth mentioning. Firstly, the PRA's focus on climate-related risks is a step forward from the plans on introducing sustainability disclosures into the "jump to action" stage, where they will become an integral part of reporting requirements for firms. This is not only connected to the PRA's objectives, but a higher-level strategy laid out in the Future Regulatory Framework. 

Another development to follow is the Future Regulatory Framework (FRF), which outlines how the financial services regulatory framework should be adapted to future challenges and how regulations will reflect the UK's new position post-Brexit. The FRF outlines HM Treasury’s proposals and emphasizes an increasing focus on increasing the competitiveness of the UK financial market through the secondary objectives of the Prudential Regulation Authority and the Financial Conduct Authority. The PRA and FCA will be obliged to provide annual reports on performance, based on their growth and competitiveness objectives and long-term goals. In addition, climate change and the race to net-zero will be set as a regulatory principle to align with the EU's goal of a net-zero economy by 2050.