The PRA’s changing approach to policymaking Under the Government’s proposals, the PRA is expected to move from ‘rule taker’ to ‘rule maker’ for most areas of prudential policy within our remit. This is a fundamental increase in the scope of our responsibilities. As is only right, this increase in responsibility will be accompanied by a new framework of legal requirements and increased scrutiny, including, importantly, to Parliament from which our powers and responsibilities derive. This will include new requirements to ‘have regard’ to issues like international standards, equivalence, the relative standing of the UK to do business, as well as climate change and productive finance. We expect more focus on these by external stakeholders, and we are committed to paying due attention to these factors as we carry out our activities. But within the context of this new regulatory framework a key question remains: what kind of regulator does the PRA wish to be, as it steps into this new role? I will begin to answer this question now. Let me first say that the PRA approach to policy making will continue to have robust prudential standards at its heart to safeguard UK financial services and the stability of the UK financial system.
Responsive policymaking means that we respond swiftly and appropriately to issues, favouring flexibility over a ‘one size fits all’ approach. This will ensure our framework is appropriate in light of the risks, and it will benefit industry by being more tailored. Our policies will be implemented in a way that minimises frictions, recognising that the creation of new rules is only one option we can take. Setting expectations for firms and effecting change through our supervision are alternative tools in our toolkit, and new issues should start with an open conversation, for example through a Discussion Paper. Being responsive means that we are alive to new concerns as they arise – we need only look to the events of last year that highlight the importance of this. And our aim to be accessible reflects our goal of ensuring prudential regulation is as clear as possible through reform of the rulebook. We are well aware that the ‘patchwork’ of primary legislation, statutory instruments, on-shored binding technical standards, and PRA rules and guidance currently in force, is difficult to navigate – a rationalisation of this material will yield benefits for us as well as firms. The realisation of this vision will take years of coordinated work. Legislation will need to be passed that sets out the framework of our new responsibilities and our new powers. Thereafter, rules will need to be transferred in the correct way from the statute book to our rulebook.