The Prudential Regulation Authority (or PRA) is the independent regulator for the financial services industry in the UK. It is responsible for overseeing the prudential conduct of regulated entities in the insurance, investment, retail and corporate banking sectors. The PRA’s main objectives are to maintain and promote confidence in the financial services sector and safeguard its stability. The PRA is responsible for assessing the risk profile of all regulated entities and requires them to maintain sufficient capital in the form of equity and reserves to protect against potential losses. The PRA also monitors compliance with relevant regulatory and statutory requirements, including the maintenance of adequate risk management systems, and exercises supervisory and disciplinary powers where necessary.

What does the PRA do?

The PRA is responsible for overseeing the prudential conduct of regulated entities in the insurance, investment, retail and corporate banking sectors. The PRA’s main objectives are to maintain and promote confidence in the financial services sector and safeguard its stability.The PRA also monitors compliance with relevant regulatory and statutory requirements, including the maintenance of adequate risk management systems, and exercises supervisory and disciplinary powers where necessary. The PRA has a number of key functions:

  • Regulate the financial services industry;

  • Ensure that the risk management practices of regulated entities are appropriate;

  • Obtain and maintain a broad understanding of the financial services industry; and

  • Ensure that customers have access to a range of high quality financial services.

The PRA’s regulatory objectives

The PRA has three main regulatory objectives:- To maintain and promote confidence in the financial services sector To safeguard the stability of the financial services industry To ensure that customers have access to a range of high quality financial services

How is the PRA structured?

The PRA is headed by three independent Regulatory Directors who are appointed by the UK Government. The PRA’s Board of Directors is responsible for overseeing the day-to-day running of the PRA and is made up of the three Regulatory Directors, the Chairman of the Board of Directors and up to three non-executive directors.The PRA is also supported by a Management Board which is made up of the three Regulatory Directors and senior managers from the PRA’s business areas. The Board of Directors meets regularly to review the PRA’s strategy and performance.

The PRA’s regulatory functions

The PRA has a number of key functions which it is responsible for overseeing:- Regulation;- Advice and disclosure;- Market oversight;- Risk management;- Capital requirements.

Key PRA functions

- Regulate the financial services industry;- Obtaining and maintaining a broad understanding of the financial services industry; and- Ensuring that customers have access to a range of high quality financial services.

The PRA’s regulatory role in relation to the Financial Services Compensation Scheme (FSCS)

The FSCS is a statutory insurance scheme that protects consumers from the failure of authorised intermediaries such as banks and building societies. The PRA is responsible for the authorisation and oversight of intermediaries, including the review of their performance and maintenance of adequate capital.

The PRA’s regulatory role in relation to the Financial Ombudsman Service (FOS)

The FOS is a statutory ombudsman service that provides an independent and effective dispute resolution service for customers of regulated firms. The PRA is responsible for the review of firms’ compliance with their regulatory obligations.

The PRA’s regulatory role in relation to the Money Advice Service (MAS)

The MAS is a statutory service that provides independent financial advice to people who are not able to access the financial services market. The PRA is responsible for the review of firms’ compliance with their regulatory obligations.

The PRA’s regulatory role in relation to the Financial Reporting Council (FRC)

The FRC is a non-departmental public body responsible for promoting high quality, reliable and independent financial reporting. The PRA is responsible for the review of firms’ compliance with their regulatory obligations.

The PRA’s regulatory role in relation to the Insurance Ombudsman Service (IOS)

The IOS is a statutory insurance ombudsman service that provides independent and effective dispute resolution services for customers of insurance intermediaries. The PRA is responsible for the review of firms’ compliance with their regulatory obligations.

The PRA’s regulatory role in relation to the Banking Ombudsman Service (BOS)

The BOS is a statutory ombudsman service that provides independent and effective dispute resolution services for customers of banks and building societies. The PRA is responsible for the review of firms’ compliance with their regulatory obligations.

The PRA’s regulatory role in relation to the Credit Reporting Agencies (CRA)

The CRA is a statutory credit reporting body responsible for providing credit information to businesses and financial institutions. The PRA is responsible for the review of firms’ compliance with their regulatory obligations.

The PRA’s regulatory role in relation to the Money Laundering Reporting and Due Diligence (MLRD) Act

The MLRD Act is a statutory reporting and due diligence scheme that aims to prevent and detect money laundering. The PRA is responsible for the review of firms’ compliance with their regulatory obligations.

Summing up

The PRA is a statutory body responsible for regulating the financial services industry in the UK. The PRA is independent of both the government and the financial services industry, and is ultimately accountable to the public. The PRA is responsible for overseeing the prudential conduct of regulated entities in the insurance, investment, retail and corporate banking sectors. The PRA is responsible for assessing the risk profile of all regulated entities and requires them to maintain sufficient capital in the form of equity and reserves to protect against potential losses. The PRA also monitors compliance with relevant regulatory and statutory requirements, including the maintenance of adequate risk management systems, and exercises supervisory and disciplinary powers where necessary.