HomeRegulatorsPrudential Regulation Authority (PRA)

Prudential Regulation Authority (PRA)

This page is your all-in-one resource for the PRA (Prudential Regulation Authority). You will learn about their responsibilities, importance and when you might encounter them. The regulatory work they do improves the stability of the UK’s financial markets. This should give consumers of money transfer companies confidence when sending funds to the UK.

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United Kingdom

What Is the Prudential Regulation Authority?

The PRA is a regulatory body in the United Kingdom for the prudential regulation of financial entities, which requires them to have enough capital to manage risk. The type of financial institutions that it is charged to oversee includes major investment firms, insurers, credit unions, building societies and banks.

The Bank of England oversees the PRA, and they control them through the Prudential Regulation Committee. The PRA was the result of the Financial Services Act 2012, and from the start, it has worked with the Financial Conduct Authority – one of the leading UK regulators in the financial industry.

The headquarters of the PRA is in London, United Kingdom, and they were formed on the 1st of April, 2013. The PRA has quasi-government regulatory powers instead of being a direct arm of the UK’s government.

What Is the PRA Responsible for?

Now let us turn our attention toward the responsibilities of the Prudential Regulation Authority. This enables customers of money transfer services to figure out how this regulator can help improve the UK economy.

  • Judges firm’s risk to economy: the PRA seeks to spot firms that could be a potential risk to the economy. They want to ensure that all firms offering financial services are built with the lowest risk possible. This ensures that policyholders are protected against bad financial practices.

  • Forward-thinking: the regulator examines the potential future problems of firms so that risk to policyholders can be prevented before it takes shape. Therefore, confidence in the UK’s financial markets can be maintained.

  • Focused approach: the PRA is focused on only the issue of reducing risk. Sticking with this core objective ensures that the task will be completed. Other regulatory matters are left to alternative regulators in the UK.

  • 1,500 financial entities: the PRA is responsible for regulating over 1,500 financial entities in the UK economy. This includes major investment firms, insurers, credit unions, building societies and banks.

The Prudential Regulation Authority is not looking for an approach that involves zero-risk policies. That would be impossible in most cases and a counter-productive way of regulating the UK economy. Instead, they try to reduce the chances of financial failure so that significant disruption to the UK’s economy is not caused.

An example of the PRA in action is when they sent out a formal request to the biggest lenders in the UK to suspend share repurchases and dividends at the end of the year. This was in response to the COVID-19 pandemic crisis that started in March 2020.

What Is the Importance of the PRA?

Now let us turn toward the importance of the PRA. This section highlights why they are a key asset of the UK’s financial markets. Their work reduces risk in financial services companies, providing peace of mind when sending money to the UK.

  • Protects policyholders: the regulatory activity the PRA is involved in provides a layer of protection for policyholders. It holds firms accountable for their financial practices and forces them to improve if there are inconsistencies.

  • Increases trust in the UK economy: the PRA allows depositors and consumers of financial services to have more trust in firms. That is because regulators such as the PRA ensure that firms follow low-risk financial practices.

  • Assistance: the work done by the PRA helps other regulators improve their responsibilities to the UK financial markets. For instance, they work alongside the Financial Conduct Authority to reduce firms' risk in their policies.

  • Competition: the PRA also facilitates effective competition between firms. By maintaining a level playing field in the financial industry, it promotes innovation since small competitors can make a name for themselves.

PRA Regulations

This section highlights the regulations, crimes and industries relevant to the Prudential Regulation Authority. Therefore, at a glance, you can determine the relevancy of the PRA and where their responsibilities end.

  • Regulations: the PRA was created due to the Financial Services Act 2012. However, they operate under the direction of the Bank of England through the Prudential Regulation Committee. They also work alongside the Financial Conduct Authority, which means that it can help meet the regulatory requirements of that organisation.

  • Crimes: the PRA takes a close look at the way firms do business and implement financial practices. They spot potential foul play and can report it to the relevant authorities. However, they do not deal with the policing of crimes and giving out fines by themselves.

  • Industries: the PRA is responsible for monitoring the financial practices of firms operating in the financial services sector. This includes major investment firms, insurers, credit unions, building societies and banks.

  • Accountability: the Prudential Regulation Authority is accountable to the Bank of England. Also, they work closely with the FCA to ensure that the British economy is healthy.

What Regions Does the PRA Cover?

The PRA is only responsible for the financial firms that operate in the UK. They do not deal with companies that do not provide services in Britain. However, they might look at trends and risk profiles of firms internationally to get a better idea of how the UK economy is affected.

When Might You Encounter the PRA?

You are unlikely to encounter the PRA because it does not have a role in offering services to the general public. However, it helps policyholders indirectly by ensuring that the financial services in the UK have liquidity and hold enough money in case of unforeseen circumstances.

Can the PRA Make New Rules?

The PRA does not have the authority to make new rules since its powers are limited. However, the Bank of England and the FCA have the power to create new rules. By working with these organisations, the PRA can suggest rule changes to ensure that the British economy remains healthy.

How to Contact the PRA?

You may wish to contact the PRA to learn more about their work in helping the UK economy remain stable. You can also ask questions about how they can benefit customers of money transfer companies. However, the PRA does not have direct contact details; instead, we will provide the Bank of England contact details – the entity in charge of their operations.

Other Regulators

Bottom Line

To conclude, the PRA is an integral part of the UK economy since they help maintain the health of financial services firms. This protects policyholders that rely on financial firms to hold money, receive a mortgage and make investments. Therefore, money transfer customers can have peace of mind using the UK’s economy.

You can continue learning about the UK money transfer process by checking out the other guides on our website. For example, consider reading through Send Money To the UK and Send Money to the USA from the United Kingdom. These guides are excellent resources for getting the best FX rates on many currency pairs involving GBP.

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Martynas Pupkevicius
Martynas Pupkevicius
Martynas is a seasoned freelance writer that has written on a broad range of topics over his 10 year career. He enjoys diving into the research and sharing what he's learned with readers.