The Financial Policy Committee (FPC) has expressed its approval of the Prudential Regulation Authority’s (PRA) recent policy statement 20/25, known as “The Strong and Simple Framework.” This policy introduces a simplified capital regime for Small Domestic Deposit Takers (SDDTs), which is nearing its final form.
The FPC supports the introduction of a new Single Capital Buffer (SCB) for SDDTs. This move will exempt these firms from the Countercyclical Capital Buffer (CCyB) and Capital Conservation Buffer (CCoB). The SCB aims to simplify compliance for SDDT firms, reducing costs while maintaining resilience by ensuring capital requirements and buffers remain comparable to those outside the SDDT framework.
Despite these changes, the UK CCyB will still apply to most lending activities directed at UK households and businesses by the banking sector. The FPC believes this will continue to effectively support credit supply to the UK’s real economy.
Information from this article can be found here.
