UK: PRA feedback on the regulation of UK branches of international banks consultation responses

Why should I read this?

In Policy Statement PS6/25 “International firms: Updates to SS5/21 and branch reporting”, published 20 May 2025, the PRA:

• introduces an additional criterion, related to the levels of deposits, to be used to by the PRA to determine whether an international bank should operate from a branch or a UK subsidiary;
• clarifies the PRA’s expectations of non-UK banks’ booking arrangements and risk management; and
• sets out the changes to the Branch Return Form, designed to improve the collection of whole-firm liquidity data.

Although there was general support from consultees to the proposals in CP11/24, the PRA has made some changes to its original proposals.

See our previous client briefing, “UK: PRA consults on the regulation of UK branches of international banks”.

Firms operating through a branch or a subsidiary

The PRA has amended the existing criteria, and added an additional criterion, by which to determine whether a non-UK bank may operate from a branch or should be required to establish a separately authorised UK subsidiary, as set out in Supervisory Statement SS5/21 “International banks: The PRA’s approach to branch and subsidiary supervision”. The PRA has:

• increased two existing indicative FSCS-linked deposit thresholds by 30% each to mirror inflation since initial calibration. These increase the relevant limits above which the PRA would expect a non-UK bank to subsidiarise to:
  • £130m, in respect of FSCS covered balances in instant access accounts belonging to retail and small company customers; and
  • £650m, in respect of all FSCS covered balances, regardless of customer or account type;
• created a new indicative threshold under which it considers that a branch of a non-UK bank should hold less than £300m of retail and small company instant access account balances, taking into account all balances, whether covered or uncovered by the FSCS

It is worth noting that the PRA has retained a proposal to discount deposits from or on behalf of high net worth individuals (HNWI) from the £130m and £300m limits, conceding that it may allow firms exceeding those thresholds only because of deposits taken from HNWIs to operate through a UK branch. The PRA has decided not to change its approach to defining HNWI for these purposes, which definition is the same as in ring-fencing legislation.

Booking Expectations

The PRA provides feedback to address responses received and updated its expectations regarding the non-UK banks’ booking arrangements as set out in SS5/21:

• Scope of Application: The PRA has extended the scope of its expectations as regards booking models contained in SS5/21 to UK trading banks, including firms with investment banking or sales and trading activities in both UK and overseas. It covers trading activities and the PRA asks firms to consider applying the same principles to banking book activities if they pose similar risks.
• Implementation: The PRA notes firms are expected to meet the expectations within a ‘reasonable timeline’ and should undertake a self-assessment against the final supervisory statement (most likely to be used in the annual Periodic Summary Assessment).
• Notifications: The PRA reiterates that firms are required to notify the PRA when they plan to make material booking model changes.
• Split desks: The PRA has clarified that firms should think carefully before moving to split desks that it should not be a frequent occurrence and there will be a high threshold to justify such a move. Control over split desks should be conducted at a level appropriate for the firms’ risk profile and its organisation and the PRA has added guidance on what it means by this. The PRA is not mandating the use of collateral pooling.
• Remote booking: The PRA has clarified its expectations as to the booking of risks from outside the UK, including that it expects any 100% remote booking model to require a high level of evidence to justify why it is acceptable (the PRA’s default position being that it is unlikely to be justifiable).

Changes to the Branch Return Form

The PRA confirms that it is delaying the implementation of the revised version of the Branch Return Form and that firms will only need to use that for the first time for their data as at 30 June 2026 with a due date of 30 business days. The PRA has reduced the reporting burden by amending the Branch Return Form so that it will only require data on instant access deposit balances and number of customers (not transactional deposit data). It will monitor the number of instant access deposits and may request information if this approaches or exceeds the number of transactional accounts it would expect a branch to have.

Liquidity Reporting

In CP11/24, the PRA proposed changes to reporting requirements for third-country branches, to limit the obligation to provide summary information on whole firm Liquidity Coverage Ratios (LCRs) and Net Stable Funding Ratios (NSFRs) as reported to the home state supervisor. The PRA has provided clarity on what firms should do when there is a mismatch in the timing between the PRA Branch Return Form dates and the dates it is required to report these metrics to its home state regulator and other minor clarifications on scope.

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