Prudential Regulation Authority (PRA)

The Prudential Regulation Authority (PRA) is a UK regulatory body operating under the Bank of England. It is responsible for ensuring that banks, building societies, insurers, and certain large investment firms are financially stable and operate in a way that reduces risk to the UK financial system.

What the PRA Regulates

The PRA supervises:

• Deposit-taking institutions (e.g. banks, building societies)
• Insurance companies
• Systemically important investment firms

It works alongside the Financial Conduct Authority (FCA), which regulates conduct, while the PRA focuses on financial resilience.

Why the PRA Matters

The PRA ensures that:

• Firms maintain adequate capital and liquidity buffers
• Risk management systems are robust
• Institutions can be safely wound down without major disruption to the economy

Its goal is to promote the safety and soundness of regulated firms and to contribute to securing an appropriate degree of protection for policyholders.

Examples and Use Cases

• A UK retail bank must hold minimum capital reserves and submit stress-test results to the PRA.
• An insurance firm is supervised by the PRA to ensure it can meet long-term claims obligations.

Mini-FAQ

How is the PRA different from the FCA?
The PRA regulates financial soundness; the FCA focuses on customer conduct and protection.

Does the PRA license firms?
Yes, it authorises and supervises firms in coordination with the FCA.

Can the PRA take enforcement action?
Yes. It can impose conditions, restrict permissions, or take enforcement steps to protect financial stability.