PRA — definition for UK financial services

PRA (Prudential Regulation Authority)

The Prudential Regulation Authority (PRA) is the UK's prudential regulator for banks, building societies, credit unions, insurers and major investment firms. Part of the Bank of England, it operates under the Financial Services and Markets Act 2000 with a general objective of promoting the safety and soundness of the firms it supervises.

The Prudential Regulation Authority (PRA) is the UK’s prudential regulator for systemically significant financial firms. Created by the Financial Services Act 2012 and now part of the Bank of England, the PRA supervises around 1,500 banks, building societies, credit unions, insurers and designated investment firms. These firms are described as “dual-regulated” because they answer to the PRA for prudential soundness and to the Financial Conduct Authority (FCA) for conduct.

The PRA’s objectives

Section 2B of the Financial Services and Markets Act 2000 (FSMA) gives the PRA a general objective of promoting the safety and soundness of the firms it regulates, focused on minimising the impact their failure would have on the stability of the UK financial system. For insurers, section 2C adds an objective of contributing to securing an appropriate degree of protection for policyholders. The PRA also has a secondary competition objective and, following the Financial Services and Markets Act 2023, a secondary objective to facilitate UK competitiveness and economic growth.

How the PRA supervises

The PRA takes a judgement-based, forward-looking approach rather than a purely rules-based one. It sets capital and liquidity requirements (implementing the Basel framework and, for insurers, Solvency UK), conducts stress testing, and assesses governance and risk management through its supervisory dialogue. The PRA Rulebook sits alongside the FCA Handbook, and the two regulators jointly operate the Senior Managers and Certification Regime (SM&CR) for dual-regulated firms, each approving senior managers within its remit.

Who it affects

Only PRA-designated firms (deposit-takers, insurers and the largest investment firms) fall within the PRA’s scope. Every other authorised firm is prudentially regulated by the FCA.

FCA, SM&CR and operational resilience.

Frequently asked questions

What is the PRA and who does it regulate?

The Prudential Regulation Authority (PRA) is the prudential supervisor for the UK's most systemically important financial firms: banks, building societies, credit unions, insurers and PRA-designated investment firms. These roughly 1,500 firms are 'dual-regulated', supervised by the PRA for prudential soundness and by the FCA for conduct. All other firms are prudentially regulated by the FCA alone.

What are the PRA's statutory objectives?

Under FSMA 2000, the PRA has a general objective (section 2B) of promoting the safety and soundness of the firms it regulates, principally by minimising the adverse effect their failure could have on financial system stability. It has an insurance-specific objective (section 2C) of contributing to policyholder protection, and a secondary competition objective. The Financial Services and Markets Act 2023 added a secondary competitiveness and growth objective.

Is the PRA part of the Bank of England?

Yes. Since the Bank of England and Financial Services Act 2016, the PRA's functions are exercised by the Bank of England acting through the Prudential Regulation Committee. The PRA was originally created as a subsidiary company of the Bank under the Financial Services Act 2012; the 2016 reform integrated it more fully into the Bank's structure.