Responsible Openness Revisited: The PRA's Evolving Framework for International Bank Supervision

On 20 May 2025, the Prudential Regulation Authority (PRA) published a Policy Statement (PS6/25) and updated Supervisory Statement (SS5/21), setting out a refined supervisory framework for international banks operating in the United Kingdom. These publications follow the PRA’s earlier Consultation Paper (CP11/24) in July 2024 on proposed updates to its approach to international banks and reflect the regulator’s final policy following industry feedback. Together, they underscore the PRA’s commitment to the principle of “responsible openness”, a supervisory approach that seeks to reconcile the benefits of cross-border financial integration with the imperative of domestic financial stability. 

In this blog post, we examine the PRA’s updated expectations including the regulatory drivers behind these changes, the implications for international banking groups, and practical steps firms should consider in response.

Refined subsidiarisation thresholds

The PRA has recalibrated its indicative thresholds for assessing when it expects an international bank operating in the UK as a branch with retail business to operate via a subsidiary. Specifically, the previous thresholds for Financial Services Compensation Scheme (FSCS)-covered deposits have been increased by 30% to £130 million for retail and small company deposits in instant access accounts and £650 million for total FSCS-covered deposits. The PRA explains these increases as advancing the PRA’s secondary objective of facilitating competitiveness and growth in the UK economy, but the increases simply reflect inflation since the thresholds were set originally and do not reflect a change in the PRA’s risk appetite. 

The PRA is also proceeding with the new indicative threshold that it proposed in CP11/24. UK branches holding in excess of £300 million in total retail and small company deposits in instant access accounts will now be expected to subsidiarise, even if FSCS coverage thresholds are not breached. This is a direct supervisory response to the 2023 failure of Silicon Valley Bank UK, where significant volumes of uninsured deposits exited at pace amid market volatility. However, the existing 5,000 retail and small company customers threshold remains unchanged. 

Supervisory focus on booking arrangements

The PRA has refined and clarified its expectations of the risk management and governance of booking arrangements, signalling a continued focus  on the local oversight of internationally integrated businesses. Notably, the expectations now extend not only to international firms, but also to UK-incorporated firms with international investment banking or sales and trading activities, reflecting a broader supervisory reach. Firms are  expected to operate with  transparent booking models, effective UK-based oversight and risk ownership. The PRA has expressed concern that complex or opaque booking structures, particularly where risk is booked in the UK but managed elsewhere, may hinder effective supervision and resolution planning. In response, the PRA has provided more explicit guidance on what it expects from firms including clear management accountability, appropriate management information and the ability of UK governance bodies to understand how and where risk is generated. Where a firm proposes a change to its booking model that is  material in terms of scale or in terms of increasing the complexity of, or reducing the effectiveness of, its risk management, the PRA expects early engagement and may impose conditions or restrictions on what the firm may do. 

These expectations align with international regulatory concerns about “empty shell” structures and the need for jurisdictional clarity on where risk is taken and managed. Groups, both UK and non-UK, with investment banking or sales and trading activities in the UK and overseas should review their booking arrangements to ensure alignment with the PRA’s clarified expectations.

Branch Return and Liquidity Reporting

To improve visibility over liquidity risks within branch operations, the PRA is amending the Branch Return to require firm-wide liquidity metrics. Specifically, the PRA will collect summary information on whole firm Liquidity Coverage Ratios (LCR) and Net Stable Funding Ratios (NSFR) as reported to the Home State Supervisor (HSS) through the PRA Branch Return Form. 

Additionally, the PRA has updated the Branch Return Form to note that to the extent data for the 30 June or 31 December reporting period end dates are not available within the PRA's Branch Return submission timelines, firms should provide the most recent data points available as submitted to the HSS. This change seeks to address the potential difficulties of providing liquidity information, raised by respondents to their consultation paper, where there might be a mismatch between the PRA’s Branch Return submission deadlines and the HSS’s requirements. 

The PRA recognises that it may take some time for firms to implement these changes into their reporting systems and processes and align these with the whole firm’s reporting processes. As a result, the PRA has extended the implementation date to 1 March 2026. 

Separately, the PRA has taken the opportunity to simplify terminology within the revised return. References to ‘transactional deposits’ have been removed from the £130 million and new £300 million indicative thresholds.  This adjustment reflects the PRA’s view that ‘transactional deposits’ constitute a subset of ‘instant access deposits,’ and omitting the former clarifies the scope of the thresholds without substantive change.

Strategic outlook: key considerations for international banks

The PRA’s revisions to SS5/21 and accompanying PS6/25 mark a further evolution in the UK’s supervisory architecture that seeks to reconcile openness to international banking with greater clarity, control, and local resilience. Rather than a dramatic policy shift, these updates represent a recalibration: refining thresholds, sharpening expectations of booking governance and enhancing visibility into liquidity risk.

For international banking groups with a UK presence, several strategic considerations now come into sharper focus:

• Branch footprint planning should take into account the updated thresholds for subsidiarisation, including the new £300 million benchmark for transactional balances – a signal that the PRA’s supervisory judgement will increasingly focus on liquidity characteristics, not just deposit protection eligibility. Firms approaching or exceeding these thresholds should review their UK footprint, deposit mix, consider their growth trajectory and be prepared for proactive engagement with the PRA. 
   
• Booking model governance must be demonstrably robust, with clear front-to-back accountability and effective local oversight. Remote or complex arrangements will continue to attract scrutiny, and proposals for material change should be supported by early, candid engagement with the PRA.
   
• Data infrastructure and reporting must be capable of meeting enhanced expectations under the revised Branch Return, particularly in relation to firm-wide liquidity metrics. Ensuring that systems can support accurate and timely reporting will be key.

The overarching message is one of continuity, not rapture. The PRA continues to welcome international banking groups in the UK, but with increasingly well-defined expectations of governance, transparency and subsidiarisation. Firms should keep their UK operating models under review and be confident that they can demonstrate that their structures remain aligned with the PRA’s evolving approach. 

As ever, early and constructive engagement with the PRA will be critical to navigating these developments with confidence. 

Next steps: preparing for supervisory engagement 

1. The policy changes took effect upon publication on 20 May 2025.
    
2. For firms operating UK branches, the revised Branch Return form and associated guidance will apply from 1 March 2026, with the first submission due for data as at 30 June 2026, and a deadline of 30 business days thereafter. 
    
3. In relation to booking arrangements, the PRA is encouraging firms to undertake structured self-assessment against the revised expectations. The timing and scope of that exercise should be discussed and agreed with the firm’s usual supervisory contacts.