With more than 25 million members and an average CET1 ratio of more than 26%, the building society sector was well placed to weather the storm from a financial resilience perspective, extending more than £ billion of new loans in 2020 and offering a peak of more than 300,000 payment deferrals to customers in financial difficulty. From an operational perspective, societies also adapted quickly to lockdowns and home-working arrangements, with almost all society branches continuing to serve their members through the pandemic. But the disruption caused by Covid-19 has shown why it is critically important for firms to identify the key services they provide and invest in their resilience. Societies – like all of 1/5  BIS central bankers' speeches  us – have witnessed an acceleration in technology innovation over the last year. Continuing to build on these developments and incorporating them into operating models will be important, both for the sector’s operational resilience, but also for serving the evolving needs of the sector’s members. As we sit here today, the outlook looks better than we might have expected a year ago. But a considerable amount of uncertainty remains, not least as many of the bridging measures put in place by the authorities begin to roll off. Though it may now look less likely, additional financial and operational pressures may still be on the horizon, and we will be monitoring that closely.
The second trade-off is the approach to simplification. There are two broad approaches we can follow: the first is what we have called a ‘streamlined’ approach, while the second is what we have called a ‘focused’ approach – you can tell from this that the PRA is not a marketing agency. You can think of the ‘streamlined’ approach as retaining most of the chapters of our Rulebook, but simplifying the text within them. On the other hand, you can think of the ‘focused’ approach as completely removing whole chapters from our Rulebook. For example, under a streamlined approach we could perhaps simplify our Pillar 2 capital requirements, whereas under a focused approach we might get rid of them altogether. How far we go in either direction will partly depend on how broad the scope of the framework is. This then brings me to what I think is the third key trade-off: the strength of the framework. The more focused an approach we take – that is, the more requirements we completely remove – the more likely it is that the calibration of the remaining requirements may need to be increased to ensure that the overall framework remains strong. This indeed is the approach that has been taken by several other jurisdictions, such as the US and Switzerland. By how much calibrations might need to adjust would in turn depend on what requirements had been removed, what if any requirements had replaced them, and what requirements had remained in place.