Having consulted on proposed updates to its supervisory statement (SS5/21) on its approach to international banks and subsidiary supervision in July 2024, the PRA has today (20 May 2025) issued its final policy statement (PS6/25) and an updated version of SS5/21. The new policy is effective immediately, with the exception of the changes to the material relating to branch reporting which take effect from 1 March 2026.
As the final changes do not exactly mirror the changes consulted up (see our earlier client note on the consultation here), International Banks will need to consider the final Supervisory Statement carefully to ensure compliance.
As part of these changes the PRA have explicitly extended the scope of the PRA’s expectations of booking arrangements to also apply to “UK trading banks” (i.e. PRA authorised banks and designated investment firms that are headquartered in the UK or are part of the group based in the UK, and have investment banking or sales and trading activities in both the UK and overseas), and such firms should take note of the expectations. In practice PRA supervisors of the relevant UK firms have used the expectations in SS5/21 as the basis for reviewing their booking arrangements, but firms will nevertheless need to get up to speed with the up-to-date expectations as amended in accordance with PS6/25.
With respect to booking arrangements, the policy statement directs firms to undertake a self-assessment against the revised expectations to a timeline agreed with their PRA supervisory contact. As with the original SS5/21, in doing so firms are required to provide their PRA supervisory contact with a clear explanation of any gaps that they need to address and their proposed timeframe for doing so.
Read on for details on the key changes made by PS6/25:
Branch risk appetite
- Level of thresholds: The PRA’s existing expectation is that where an international bank is undertaking significant retail activity, this should take place through a subsidiary rather than a branch. In SS5/21 the PRA sets out how it will make a firm-by-firm determination of whether it is content for an international bank to undertake retail activities in the UK through a branch based on indicative criteria relating to the levels of retail and small company deposit taking. Following the failure of Silicon Valley Bank (SVB) in March 2023, the PRA has decided to include an additional threshold to help it identify and manage potential future vulnerabilities. Further, in light of its secondary objective on facilitating competitiveness and growth, the PRA is uplifting its existing thresholds based on FSCS covered deposits (in line with inflation of c.30%). SS5/21 therefore now:
- includes an additional indicative threshold of £300 million of total retail and small company instant access account balances (i.e., including non FSCS-covered deposits);
- uplifts the threshold for FSCS covered instant access deposits from £100m to £130m;
- uplifts the threshold for total FSCS covered deposits from £500m to £650m
- HNWI: As noted in the consultation, the PRA has added a reference to indicate that the PRA may consider it appropriate for an international bank to operate through a UK branch, even if its retail demand deposits are above the indicative thresholds, in cases where this is caused by deposits from high-net-worth individuals (given the need for continuity of access to instant access deposits for general retail and SME depositors, relative to HNWI customers that are more likely to have access to alternative transactional banking arrangements – and a branch that breaches thresholds solely on the basis of activity of this nature is likely to pose less of a risk to UK financial stability).
- The PRA will going forward also take into account significant demand deposits from corporate customers undertaking UK economic activity (such customers are likely to be dependent on that branch as their sole provider of transactional banking). Some of these corporate customers might well be above the turnover threshold and be classified as ‘wholesale’, however these deposits may resemble the deposits from small companies in the risk these pose to UK financial stability. Rather than setting quantitative threshold for such activity, the PRA intends to use supervisory dialogue and assessment work to explore the scale and nature of relevant deposits on a case-by-case basis and would use high-level reporting data on total large company demand deposits to help guide such discussions.
- SS5/21 now clarifies that group wide resolution arrangements for branches will be considered when establishing if a branch should operate as a subsidiary in the UK. This is because the PRA is generally content that adequate resolution arrangements, were backed by loss absorbing resources group level, will mitigate the risk of discontinuity of banking services from a branch failing. As with other elements of branch risk appetites the PRA will approach this matter on a case-by-case basis.
Booking arrangements
- Extending scope: As proposed in the consultation, the PRA is extending the scope of application of booking expectations to include “UK trading banks”. The PRA explains that this extension is to ensure that those banks undertaking the same activity in the UK are treated in the same way.
- More granular detail: The PRA is keen to reiterate that it remains open to firms operating a diverse range of booking arrangements provided there are effective systems and controls in place. With this in mind, the PRA sets out a number of clarifications to the expectations for all International Banks and UK trading banks when they plan material changes to their existing booking arrangements. (SS5/21 para 4.24A to 4.25AE). It also updates the expectations on the operation of split desks, where the firm provides the same product wrong, and may have risk management hubs in, more than one location. Firms will need to consider this additional detail carefully to ascertain whether there are any systems and controls changes needed in order to meet expectations. In the PRA’s view these are expectations that it has already been using with firms over the past few years as developed during the Desk Mapping Review process (and are consistent with the outcomes of the DMR) – therefore it does not anticipate firms needing to amend structures that were put in place to implement the outcome of the DMR. In CP11/24, the PRA noted that it expected firms to meet the expectations set out in updated SS5/21 within a reasonable timeframe, taking into account the firm’s current position and the scale of any change that might be required, and that these firms should provide their supervisors with a planned timeframe for doing so. PS6/25 confirms that the PRA will ask firms to undertake a self assessment against the final supervisory statement most likely to be used in the annual Periodic Summary Assessment.
- The updated Supervisory Statement reiterates the importance of firms notifying the PRA at an early stage when they are considering making booking model changes.
Liquidity Reporting
As consulted upon, the PRA is changing the way that it collects whole-firm liquidity data from third-country firms. A new part is being added to the PRA Branch Return Form, and consequential amendments are being made to Rule 22 of the PRA Rulebook.
In an effort to reduce the number of Supervisory Statements applicable to third-country firms, the PRA has revoked SS1/17, which sets out the PRA’s expectations of branch liquidity reporting, and replace it with an update to the existing SS34/15 – Guidelines for completing regulatory reports (the policy intent of SS1/17 is retained in the revised expectations in SS34/15).
In order to give firms sufficient time to implement the changes to the Branch Return into their reporting systems and processes and to align these with the whole firms reporting processes, the implementation date for these branch reporting changes has been extended to 1 March 2026.
Materials
PS 6/25 - International firms: Updates to SS5/21 and branch reporting (policy statement)
SS5/21 - International banks: the PRA's approach to branch and subsidiary supervision (supervisory statement updated to May 2025)
SS34/15 - Guidelines for completing regulatory reports (supervisory statement updated to May 2025)
CP11/24 (July 2024) - International firms: Updates to SS5/21 and branch reporting (consultation)
Contents