The UK Prudential Regulation Authority (PRA) has finalised its new approach to supervising branches and subsidiaries of international banks and branch reporting.  The new Supervisory Statement - International banks: The PRA's approach to branch and subsidiary supervision - came into force immediately on 20 May 2025.

Announcing the changes, Sam Woods, Deputy Governor of Prudential Regulation and CEO of the PRA, said:

“These changes will maintain the UK’s very open approach to international banking, while filling a gap we identified in our regime and increasing some thresholds to support competitiveness and growth”.

Speaking to Senior Managers at a number of international banks since the changes were finalised, it is clear that they are welcome.  Clear statement of the PRA's expectations is particularly helpful when communicating requirements to the overseas parent.  There is also relief that implementation of the Branch Return reporting has been postponed from H2 2025, as originally anticipated, to H1 2026.

So, to recap, what are the key changes and what happens next?

Background

On 20 May 2025, the PRA released PS6/25 – International firms: Updates to SS5/21 and branch reporting and updated Supervisory Statement International banks: The PRA's approach to branch and subsidiary supervision, detailing its final rules and policies regarding the supervision of branches and subsidiaries of international firms.  This followed the July 2024 publication of CP11/24 – International firms: Updates to SS5/21 and branch reporting, which proposed updates to reflect developments since the original July 2021 Supervisory Statement and to clarify certain aspects of the PRA’s approach.

Key changes originally proposed in CP11/24

1. Introduction of additional indicative criteria for the PRA to consider when determining whether it would be appropriate for an international bank to operate in the UK as a branch rather than a subsidiary.  The PRA’s starting point is that it generally expects international banks to operate as subsidiaries rather than branches, as this gives the PRA increased visibility of and influence over firms operating in the UK.
2. Clarification of the expectations of firms’ booking arrangements and extending their formal application to a subset of UK banks.
3. Amendments to the PRA branch return designed to improve the collection of whole-firm liquidity data.
4. Minor amendments to SS5/21 to clarify some of the PRA’s existing expectations and processes, including:

• Clarifying the role of deposit aggregators
• Clarifying the PRA’s process for assessing equivalence of home jurisdictions of international banks
• Clarifying expectations of international banks on innovations in use by deposit-takers of deposits, e-money and regulated stablecoins
• Conclusion of the temporary permissions regime

Key changes between CP11/24 and PS6/25

1. Branch Risk Appetite – To provide international banks with additional room to expand their activities within UK branches, the PRA increased the existing £100m and £500m thresholds for deposits covered by the Financial Services Compensation Scheme (FSCS) by 30%, broadly reflecting inflation. A new indicative threshold of £300m for total retail and small business instant access deposits has also been introduced. Beyond this threshold, international banks are generally expected to operate in the UK as subsidiaries rather than branches.
2. Booking Models – The scope of application was clarified, particularly concerning branches and UK trading banks, and in relation to Article 21c of CRD VI (EU Directive 2024/1619).  Modifications were made to booking responsibilities and trade capture language to ensure clarity and compliance.  In response to industry feedback around the increased use of split desks, the PRA made an explicit statement confirming that the booking expectations also apply to UK trading banks with investment banking or sales and trading activities in both the UK and overseas.
3. Liquidity Reporting – Recognising the particular challenge for international banks dealing with different reporting requirements and deadlines for home and overseas regulators, the PRA introduced flexibility in the reporting dates firms can use for providing liquidity information.  Where data for the Q2 or Q4 reporting period end dates is not available within the PRA's Branch Return submission timelines, banks should provide the most recent data points submitted to the home regulator and advise accordingly.  Additional clarification was also provided on reporting expectations during stress, the scope of whole-firm reporting, and certain reporting definitions.

Implementation and next steps

The updated Supervisory Statement came into force on 20 May 2025.  All international banks operating in the UK and their wider group should ensure that they are familiar with the PRA's latest expectations and how they apply to them.  Most of PRA's expectations in the Supervisory Statement apply equally to international banks operating as subsidiaries or through a UK branch.  Where there is a distinction between the PRA’s expectations, the Supervisory Statement states this.

New branch reporting policies, including updates to SS34/15 Guidelines for completing regulatory reports and the Branch Return Form, will not take effect until 1 March 2026. Firms must use the revised Branch Return Form for data as at 30 June 2026, with a submission deadline of 30 business days after 30 June 2026.

International banks should also conduct a self-assessment against the revised booking arrangement expectations, following a timeline agreed with their PRA supervisory contact.  Any gaps should be identified promptly and remediated in agreement with PRA Supervision.