Updates to SS5/21 and branch reporting

Level of thresholds

• New threshold: PS6/25 confirms the introduction of a new threshold for branches in addition to the three existing thresholds under SS5/21, to bridge the gap in uncovered deposits. This would require branches to have less than £300m in retail and small company deposits in transactional and instant access accounts, regardless of FSCS coverage.
• Amended thresholds: in PS6/25 the PRA also uplifts the £100m and £500m thresholds (for FSCS-covered retail and small company deposits and total FSCS-covered deposits) to £130m and £650m respectively, to reflect cumulative inflation since they were introduced. The PRA considers that this approach will give international firms additional room to expand activity in their UK branches, supporting investment and economic growth whilst managing the risk of contagion.

The PRA considers that the main benefit of the increase in existing deposit thresholds is to increase branches’ scope for deposit growth whilst still operating within the PRA’s branch risk appetite – this should ensure that the UK continues to provide an internationally competitive environment for financial services.

Reporting changes

• Extended timeline: the PRA has extended the implementation date of changes to the Branch Return reporting to H1 2026, with the new form now to be used from 30 June 2026 rather than 31 December 2025.
• Transactional deposits: to avoid the potentially disproportionate requirement for all firms to report a breakdown of transactional deposits, references to this in the new £130m and £300m thresholds have been removed. These thresholds now refer to instant access deposits only. The existing indicative threshold of 5,000 customers with transactional accounts will remain.
• Reduced reporting burden: the Branch Reporting Form will now only require routine reporting of instant access deposits and number of customers. The number of customers will act as an indicator that may trigger closer supervisory scrutiny.

Deposits in scope of thresholds

The PRA has decided to maintain the proposals set out in the CP that if a firm were to exceed the uplifted £130m threshold and the new £300m indicative threshold, due to deposits from High-Net-Worth Individuals (HNWIs), the PRA might consider it appropriate to allow an international bank to continue to operate through a branch. This is likely to be relevant for only a small number of banks which will be expected to evidence that their customer profiles meet the definition of HNWIs. The PRA will also retain the quantitative threshold of £250,000 of net assets excluding primary residence and pension for assessing HNWIs.

The PRA clarifies that, as in the CP, branches will not be required to identify or report customers which may be dependent on them for banking services. The PRA will assess branches with high levels of instant access non-financial corporate deposits using a “case by case, flexible, and proportionate approach” — its branch risk appetite will account for whether a branch has significant instant access deposits from corporate customers that are likely to be dependent on that branch for banking services. It may adopt the same approach for deposits from charities, charitable trusts, educational and religious institutions, and UK local authorities.

As set out in the CP, firms should manage their arrangements with deposit aggregators in a manner consistent with outsourcing and third-party risk management expectations.

Instant access deposits

The PRA has clarified the definition of instant access deposits (‘those from which customers can withdraw money unconditionally, without providing notice or paying penalties’) and confirmed that it will not apply a different treatment for accounts that are contractually instant access but behaviorally non transactional.

Interaction with the Resolution framework

The PRA has retained its proposal that, where a firm exceeds the new £130m and £300m thresholds, it will consider the resolution arrangements in the bank’s home jurisdiction may consider it appropriate for an international bank to operate through a branch. This reflects the PRA’s view that adequate resolution arrangements, where backed by loss absorbing resources at group level, will generally mitigate the risks of discontinuity of banking services from the failure of branch failure. This arrangement will be operated on a case-by-case basis.

In the final policy, the PRA has:

• Provided flexibility on the reporting as at dates firms can use for the provision of liquidity information where there is a mismatch between the PRA’s Branch Return submission deadlines and the Home State Supervisor’s (HSS’s) requirements.
• Postponed the implementation of revised Branch Return reporting rules — see above.
• Clarified reporting expectations in stress — including that, where possible, it will align requests for whole firm liquidity information under stress with the information provided to the HSS.

Overall, the PRA has clarified the scope of application, notably on branches and UK trading banks and regarding Article 21c of CRD6. It has also modified some language around booking responsibilities and trade capture and improved the clarity of drafting in multiple areas.

Conflicts with other regulators’ expectations

The PRA notes that regulators do not have a common set of expectations about firms’ booking arrangements. It will continue to work “cooperatively and collaboratively” with home state regulators to address differences and agree “mutually acceptable outcomes”. This will typically be covered under Memoranda of Understanding with overseas regulators. Firms will be expected to comply with the expectations of the PRA and other regulators where possible. Where this will not be possible, firms should engage proactively with the PRA.

The PRA and ECB are continuing to work closely together on the Desk Mapping Review (DMR), to review proposed arrangements on a case-by-case basis.

Scope of application

The PRA has clarified that:

• The expectations apply to regulated activities carried on in the UK by an international or UK trading bank; and
• For UK trading banks, the expectations apply to the UK authorized firm — the authorized firm is expected to work closely with affiliates to ensure that it meets the booking expectations.

‘Complex risks and complex activities’

The PRA has expanded the range of examples to clarify that banking book activities such as secured financing, leveraged finance and warehouse loans that have a close link to investment banking activities are likely to be in-scope of SS5/21. It has also confirmed that cash products and derivatives are within the scope of the booking expectations.

CRD6 Article 21c

Article 21c of CRD6 introduced a significant change by prohibiting third-country institutions from providing core banking services such as deposit-taking, lending, guarantees and commitments into the EU on a cross-border basis without a physical presence. To deliver these services, non-EU banks must now establish a branch in a Member State and apply for authorization. 

The PRA has clarified that, where firms are in scope for both, it expects firms to consider its booking expectations when implementing Article 21c, noting that:

• Some business within scope of the booking expectations and which may fall within the scope of Article 21c (e.g. secured financing for corporate borrowers), has already been looked at within the DMR.
• The amended application of the PRA’s booking expectations to banking book activities,) does not extend to all core banking activities likely to be in scope of Article 21c implementation, in particular where they do not pose substantially similar booking risks to cash and derivative products in the trading book.

Notification of material booking changes 

The PRA has clarified that it will not expect frequent changes ‘in the normal course of business’ and included more examples of how to assess materiality of changes.

Split desks

No change to proposals but some further clarification around operation of split desks.

Single consolidated risk function

The PRA has clarified that consolidated risk management should be set at a level that is commensurate with the structure of the relevant business division and that it is neither mandating the use of collateral pooling nor proposing any changes to Senior Manager Functions (SMFs).

Remote booking and back-to-back trading 

Following the indication in the CP that the PRA would be unlikely to accept a booking structure with all traders remote from the risk hub, respondents queried whether local ownership, accountability for and supervision of the books could render this acceptable. The PRA has clarified that any existing arrangements where there is 100% remote booking into the UK should be ‘subject to greater scrutiny and require high levels of evidence that they are appropriately controlled’.

The PRA also confirms that it continues to include cross location back to backs as part of the ‘legitimate movement of risk’ within a bank.

Metrics

The PRA will not prescribe the precise metrics that firms might use. Firms therefore have some flexibility and should assess which metrics are most material for their business.

Trader controls

The PRA has clarified that it does not prescribe the mix of directive, preventative and detective controls that firms should choose. Consultation responses expressed some resistance to the use of pre trade, hard technological preventative blocks. It is for firms to assess the appropriate mix of preventative, detective, ‘hard’ and ‘soft’ controls and explain their reasoning.

Pre-existing control weaknesses

The PRA confirms that it does not expect to receive attestations that there are no pre-existing control weaknesses when firms request changes to booking models. It will expect to have been made aware of any material weaknesses already.