What is the Prudential Regulation Authority (PRA)?

The PRA supervises around 1,500 financial institutions including banks and insurance
companies.
You wouldn’t give money to someone you didn’t trust, would you? Making a deposit into a bank or
building society account is like giving your trust to that organisation. You trust that it will look after your
money and, when you want to access that money again, it will be there. Also, if you buy a policy with
an insurer, you would expect it to pay out when you need it.

Banks, as well as other financial services such as insurers and building societies, are all businesses.
Their success is measured in the same way as other businesses, including the profit they make.

However, these are the companies that hold your money for you so that you can make payments and
control your financial life. There is a responsibility that comes with that. That’s where the PRA comes
in. As part of the Bank of England it is our role to ensure that firms act safely and reduce the chance
of getting into financial difficulty.

What do we do?
We are prudential regulators. We create policies for firms to follow as well as watch over aspects of
the business – we call this supervision. We want to ensure that the financial services and products
that we all rely on can be provided in a safe and sound way.

We were established as part of a new wave of regulation in financial services after the financial crisis
of 2007. We now supervise around 1,500 financial institutions
including banks and insurance companies.

Also, we make sure there are systems in place to support what your bank / insurer has offered you.
 We do this through:

 Tailored supervision: Each firm is supervised according to its needs and the impact it would
have on the economy – should it fail. One size does not fit all. Tailored supervision allows us to spot
when things are going wrong.
 Being forward looking: Things might be going well today, but what about in an unexpected
event? We testOpens in a new window stressful scenarios on firms to see how they would respond to
unexpected events. From there, we work with these firms to develop strategies to help build resilience
in crisis situations. We also encourage firms to hold adequate financial resources –
specifically capital and liquidityOpens in a new window – to keep things ticking.
 Looking at the bigger picture: Not surprisingly, if banks stopped working, the entire economy
would grind to a halt. Similarly, if an insurer was unable to pay out on policies, this could affect a
number of people and businesses. Our aim is to ensure that the entire financial system continues to
work in a safe and sound way. If things do end up going wrong, we try to ensure this happens in an
orderly way.

Who are the UK regulators?

In 2013 the previous regulator – the Financial Services Authority (FSA) disbanded and the PRA and
the Financial Conduct Authority (FCA) were born.
We already know what the PRA do but how does that compare to the FCA? The PRA and the FCA
are two separate entities – although we do work closely with the FCAOpens in a new window on
certain issues/firms.
The main difference is that the FCA works with firms to ensure fair outcomes for consumers. One of
its responsibilities is regulating and ensuring fair practice in consumer creditOpens in a new window.
This comes into play when you take out a loan or use a credit card for example. Also if you want to
check if a firm is legitimate or report a possible scam for example, the FCA is the go-to contactOpens
in a new window.

Inside the Bank of England

PRA and Financial Policy Committee (FPC) 
Both the PRA and the Financial Policy Committee (FPC) are part of the Bank of England. The way
they work is like a jigsaw puzzle. The PRA looks at the detail in each individual puzzle piece and
makes sure that it is placed where it’s supposed to be (known as micro-prudential regulation). The
PRA’s most important micro-prudential decisions are made by the Prudential Regulation
Committee (PRC). The FPC has a view of the bigger picture – the complete puzzle (known as macro-
prudential regulation).

https://www.bankofengland.co.uk/knowledgebank/what-is-the-prudential-regulation-authority-pra