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What is the Prudential Regulation Authority?
The Prudential Regulation Authority (PRA) is a subsidiary of the Bank of England that performs prudential regulation for over 1,500 major financial institutions located in the UK.
These include financial institutions like banks, building societies, major investment firms and more. Since the majority of British citizens rely heavily on these financial firms, the PRA has been tasked with ensuring that these institutions remain in good condition so the public can adequately rely on them for payments, funds and savings.
History of the Prudential Regulation Authority
The Prudential Regulation Authority is a newer financial regulatory authority in the UK. Prior to the PRA, the UK had the Financial Services Authority (FSA). The FSA was the main governmental body in charge of regulating financial services companies. In 2013, the FSA disbanded and the PRA was created.
The PRA is owned by the Bank of England, it’s not a direct British government agency. Since its establishment, the PRA has been innovative and has adjusted to the rise of technology within the finance industry. Today the PRA uses the latest technology to supervise and regulate the biggest financial institutions in the UK.
Key provisions and features of the PRA
Supervision of financial institutions: The Prudential Regulation Authority supervises all major financial institutions in the UK. Each type of financial institution is supervised for specific needs and is assessed on the impact that its failure could have on the economy. The PRA refers to this as tailored supervision. The supervision done by the PRA indicates to the British government how the economy is performing and any areas that need to be addressed.
Risk management: The PRA is the foremost authority in ensuring that financial firms are following healthy risk practices. Many global financial crises have been a direct result of over leveraged financial institutions. The PRA sets capital requirements, liquidity requirements and risk requirements to ensure financial institutions are in good financial standing.
Who must comply with the PRA?
The Prudential Regulation Authority covers the gambit of financial services, with a regulatory regime that applies to most major UK financial service organisations, including:
- Building societies
- Credit uninions
- Major investment firms
Find out how CUBE simplifies regulatory compliance.