The Strong and Simple Framework

On 12 September 2024, the PRA released the second near-final policy statement and rules for implementing Basel 3.1 standards, covering credit risk, the output floor, and reporting and disclosure requirements. This announcement is particularly significant for all PRA-regulated banks, building societies, investment firms, and financial holding companies. 

Alongside the Basel 3.1 standards the PRA published consultation paper CP7/24 "The Strong and Simple Framework". This framework aims to significantly simplify the capital requirements for Small Domestic Deposit Takers (SDDTs) while maintaining their resilience. The new regime proposes simpler calculations for certain risk-weighted assets, Pillar 2 methodologies and capital buffers. These changes are designed to foster a competitive, diverse, and sustainable banking sector in the UK. The PRA's initiative addresses long standing concerns from smaller firms and sets the implementation date for the simplified capital regime to 1 January 2027, with the consultation period closing on 12 December 2024.

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