The Prudential Regulation Authority is the UK's prudential supervisor for banks, building societies, credit unions, insurers and major investment firms. A division of the Bank of England, it sets capital, liquidity and governance standards, conducts firm-specific supervision, and runs consultation cycles that shape model-risk and operational-resilience expectations.
How it works
The PRA operates inside the Bank of England, distinct from the conduct-focused FCA. It authorises and supervises around 1,500 prudentially significant firms, setting Pillar 1/Pillar 2 capital requirements and enforcing standards via supervisory statements and consultation papers (CPs). Policy moves through formal consultation cycles before rules take effect.
Why it matters now
In 2025-2026 the PRA is reshaping UK implementation of Basel 3.1, model-risk-management expectations (SS1/23) and operational resilience — areas where AI and third-party assurance regimes are now in scope, hence late-2025 roundtables with PRA-regulated firms.
Example
The PRA was created by the Financial Services Act 2012, taking over prudential supervision from the abolished FSA in April 2013. Its SS1/23 supervisory statement on model risk management took effect on 17 May 2024, setting principles that banks must embed across model lifecycle, validation and governance.
Frequently asked
- What is the PRA?
- The Prudential Regulation Authority is the UK's prudential supervisor for banks, building societies, credit unions, insurers and major investment firms. A division of the Bank of England, it authorises around 1,500 firms and sets capital, liquidity and governance standards. It was created by the Financial Services Act 2012 and began operating in April 2013.
- How does the PRA differ from the FCA?
- The PRA supervises prudential soundness — capital, liquidity, solvency and resilience — while the FCA focuses on conduct, consumer protection and market integrity. Both succeeded the abolished FSA in April 2013, splitting its mandate. Dual-regulated firms like major banks and insurers answer to both, but the PRA sits inside the Bank of England whereas the FCA is independent.
- What is the PRA's role in Basel 3.1?
- The PRA leads UK implementation of Basel 3.1, the final post-2008 capital reforms covering credit, market and operational risk. It has phased in the rules with a delayed start date, currently targeting January 2027, having pushed timelines back amid US and EU divergence. The PRA tailors output floors and internal-model constraints to UK firms through consultation papers.
- What is SS1/23 and why does it matter?
- SS1/23 is the PRA's supervisory statement on model risk management principles for banks, effective 17 May 2024. It sets five principles spanning model identification, governance, development, validation and use of third-party and AI models. Firms must maintain a model inventory and embed independent validation across the model lifecycle, making it a benchmark for UK model-risk frameworks.
- Which firms does the PRA regulate?
- The PRA regulates roughly 1,500 prudentially significant firms: deposit-takers (banks, building societies, credit unions), insurers and major investment firms designated under the Financial Services and Markets Act. Smaller investment firms and consumer-facing entities fall solely under the FCA. Designation depends on systemic relevance and balance-sheet risk rather than firm size alone.