A fine balance: what can international banks expect from Prudential Regulation Authority (PRA) regulation in 2026 and beyond?

Yet, with lessons from the failure of Silicon Valley Bank (SVB) still fresh in the mind, the PRA continues to evidence its commitment to vigilance against imported risks to UK financial stability. So how is the potential tension between a ‘warm welcome’ and ‘all necessary caution’ playing out for international banks doing business, or looking to do business, in the UK?

“Responsible openness” and what it means

The PRA’s updated April 2026 supervisory statement on international bank supervision confirms the regulator remains open to international banks operating in the UK through branches and subsidiaries. However, the PRA underlines that its welcome to international banks will be extended “responsibly”.

The regulator will ensure that firms meet threshold conditions (or minimum regulatory entry standards), particularly for risk management and the capability to be effectively supervised in the UK. As Bank of England governor, Andrew Bailey, argues in his October 2025 speech: “There is no trade-off between financial stability and objectives like growth and competitiveness”.

The balancing act of “responsible openness” reflects the PRA’s legal mandate. The PRA’s general objective is to promote the safety and soundness of the firms it regulates with a view to limiting impacts on UK financial stability.  That objective is advanced in a context which includes both (i) a secondary objective of facilitating the competitiveness of the UK financial sector and promoting economic growth in the medium to long term and (ii) a remit letter from HM Treasury for this Parliamentary session which emphasises the pursuit of UK economic growth and to which the PRA must have regard. Yet promoting safety and soundness remains the PRA’s primary objective for bank, including international bank, supervision.

Changes to the PRA’s rules and guidance for international banks over the past year throw more light on the PRA’s approach to balancing their core objective of safety and soundness with creation of a more competitive UK environment for international banks. Whilst there have been some positive reductions in red tape, the overall trend has been one of the PRA strengthening its oversight of international banks operating in the UK.

Group entity senior manager (SMF7) roles (April 2026)

A first phase of changes to the Senior Manager & Certification Regime (SMCR) not requiring legislative amendment was confirmed in April 2026. The package was broadly de-regulatory, albeit not as far-reaching as some had hoped. It streamlined current requirements for short-term senior manager appointments, criminal record checks, regulatory references and documents setting out allocation of responsibilities.

However, at the same time, the PRA took the opportunity to reinforce its regulatory reach over senior executives at international banks operating in the UK.  The PRA extended the Group Entity Senior Manager (SMF7) role to controllers and their representatives where these have significant day-to-day management responsibilities at a PRA-authorised firm. The regulator also clarified its expectations around those senior leaders who should apply for approval as SMF7 and restated its ability to itself designate individuals as SMF7 (in exceptional circumstances and in dialogue with the firm).

The policy statement says: “A core part of the PRA’s strategy of responsible openness to highly interconnected branches and subsidiaries is that persons who may not work directly for the PRA-authorised firm are within the scope of the SMF7. The PRA considers that such persons should be accountable to the PRA for their decisions and actions in relation to the UK business.” 

The PRA’s view is clearly that additional risks may emerge from restrictions on the PRA’s ability to influence key decision-makers, or to or hold them accountable, be that because of geographical location or otherwise. Senior staff at international banks who want to direct business in the UK must remain accountable to UK regulators. 

May 2025 updates to the supervision of international banks

Last May, the PRA’s policy statement updating its approach to international bank supervision similarly reflected prioritisation of prudential concerns.  Nuanced recalibrations to make the UK a more competitive host country were tempered by the PRA’s determination to learn regulatory lessons and remain “responsible” in its oversight of incoming firms.

Subsidiarisation thresholds

Thresholds for retail activity which would usually trigger the need for an international bank to operate in the UK as a subsidiary rather than a branch were uplifted for inflation. The thresholds for deposits covered by the FSCS rose to £130m for instant access deposits (from £100m) and to £650m (from £500m) for total FSCS-protected deposits. 

However, as a nod to the flight of funds from start-ups and high net worth individuals which was a factor at SVB, at the same time, a new indicative threshold of £300 million of total retail and small company instant access account balances, including non FSCS-covered deposits, was introduced. The PRA confirmed it may also consider the scale of demand deposits from UK corporate customers who may be more reliant on a banking branch.

Branch liquidity reporting

In similar recognition of events at SVB, the Branch Regulatory Return was expanded from 1 March 2026 to include additional whole firm liquidity reporting. The PRA also set expectations for firm-specific liquidity reporting in times of stress. 

Desk booking arrangements

For both international and UK banks involved in trading activities, the PRA also renewed its expectations on desk booking arrangements. The tone of the changes was focused on ensuring proper transparency for the PRA and the presence of adequate local risk management and controls in the jurisdiction where trades are booked.

In essence, the PRA is broadly agnostic as to what form booking arrangements take, allowing international firms to organise themselves as they see fit and compete globally, regardless of any UK footprint for their trading business. However, the PRA will not allow the booking of trading risks without adequate infrastructure where this may endanger UK financial stability.

Examples of PRA expectations include trading firms being expected to (i) establish appropriate senior management oversight and governance over trading activities and related risk management (ii) present a clear rationale and risk management strategy for split desks and (iii) take steps to ensure that trade booking arrangements do not hinder orderly resolution.

PRA 2026 international bank supervision priorities

According to the PRA’s January 2026 priorities letter for the UK international banks sector, “The UK banking sector’s resilience requires maintained focus on risk management, governance and controls, operational and financial resilience, and data risk.”

The letter goes on to discuss concerns around credit exposures to private markets, internal model management and risks from new technology and the digitalisation of assets. It stresses the need for resilience, both operational and financial, and recognises the importance of high-quality data in driving effective risk management.

Competitiveness and growth enter the picture at the end of the letter where the PRA encourages firm engagement with the Future Banking Data project which will streamline the burden of regulatory reporting. The letter also references the acceleration of application timelines, the work of the PRA unit supporting firms to scale and the extension of the supervisory Periodic Summary Meeting cycle from 1 year to 2 years for some firms. 

Looking ahead: prospects for international bank supervision

All these developments indicate that, whilst the PRA is open to recalibrating outdated thresholds, reducing administrative burdens and streamlining reporting to ensure the UK remains a competitive regulatory environment, international banks have not to date experienced any substantive relaxation of UK prudential standards. Is this set to continue?

The PRA is entering another period of significant change. From a policy perspective, the run-up has begun for new bank capital regimes (Basel 3.1 implementation and the new Strong & Simple approach) coming into effect from 1 January 2027. More work is also expected on liquidity frameworks, critical third parties and implementation of operational resilience requirements. The International Monetary Fund (IMF) will also be assessing the UK financial sector in 2026/27.

Against this backdrop, June 2026 sees the end of Sam Woods’ term as Deputy Governor for Prudential Regulation. He is replaced by Katherine Braddick whom Chancellor Rachel Reeves describes as “an accomplished pro-business leader with the experience to keep our financial system safe while backing the investment and lending that drives growth”. This leadership change coincides with the end of the PRA’s most recent 5-year strategy and reduced supervisory headcount under the Bank of England’s recent initiative to save costs and re-position itself for the future. Might a changing of the guard herald a potential shift in how the PRA’s “responsible openness” approach lands with international banks on the ground?

It seems unlikely. With the confines of the PRA’s legal mandate and the UK’s commitment to maintaining global prudential standards, there seems limited prospect for any significant relaxation of UK regulatory requirements for international banks. The burden of UK regulatory administrative compliance may ease but international firms must still give assurance to the PRA that they are in command of, and accountable for, any risks they pose to UK financial stability.