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Perspective:
Perspective
22 May 2025
10 minute read

PRA Booking Model and Branch Risk Appetite Finalised: Act Now on Self-Assessment

Margarita Streltses
Faraj Abbasbayli

At a glance
 

  • The PRA has finalised its approach to branch and subsidiary supervision (SS5/21 / PS6/25). This follows last year’s consultation paper (CP11/24) which we summarised here: PRA updates its approach to branch supervision and expectations for booking arrangements | Deloitte UK.
  • The PRA has made several changes to the proposals in CP11/24 and increased the clarity of its expectations throughout. More specifically, it has clarified the scope of application of booking model arrangement expectations, provided some further guidance on the materiality of booking model changes, and clarified its expectations around remote booking, consolidated risk management oversight of split desks and trader controls.
  • The new policy took effect immediately on publication (20 May 2025); now all in-scope firms need to undertake a self-assessment against the PRA’s revised expectations to a timeline that they agree with their supervisor. Firms will need to provide the PRA with a clear explanation of any gaps and proposed timeframe to address them.
  • In relation to branch risk appetite, the PRA re-calibrated two existing indicative thresholds for potential subsidiarisation, increasing both by 30% (to reflect the effect of inflation) to £130m for FSCS-covered retail and small company deposits and £650m for total FSCS-covered deposits. The new proposed threshold of £300m of retail and small company deposits on instant access accounts remains unchanged. The references to transactional deposits have been removed from the £130mn and £300mn indicative thresholds.
  • The PRA has also amended the Branch Return Form to require data on instant access deposit balances and number of customers, and not the transactional breakdown. The PRA has postponed the implementation of the revised Branch Return reporting rules to 1 March 2026.

Section 1: Changes to expectations around booking arrangements

In the final update to SS5/21 the PRA has introduced relatively minor amendments to the draft expectations published last July in CP11/24 but has provided a number of useful clarifications . However, in a small number of cases, these clarifications may raise questions which some firms had not considered when reviewing CP11/24.

Scope of application:

In the final version, the PRA has clarified the application of specific paragraphs to UK trading banks. The PRA has also clarified its expectations in relation to home state supervisors and activities in the banking book.

The PRA expects firms to comply with both its own and their home state supervisory expectations. In the event that these expectations are misaligned or in conflict, firms should proactively notify the PRA. The PRA has confirmed its final expectations align with the Desk Mapping Review (DMR) outcomes and does not anticipate firms needing to revise previously agreed arrangements.

The PRA has also clarified its expectations in relation to Article 21c of CRD6 which will restrict the provision of cross-border core banking services in the EU. When implementing Article 21c, firms should consider the PRA's booking expectations where activities fall under the scope of both. The PRA notes that this “will assist firms’ scoping exercises to better understand in advance which booking models are likely to be acceptable to the PRA”. The PRA will collaborate with firms, the ECB, and other relevant EU National Competent Authorities as implementation progresses, in line with its existing approach. In effect, the post-DMR outcomes become the new baseline against which the PRA will assess any further changes resulting from Article 21c. The PRA has given a clear signal that it expects firms to inform it about any such forthcoming changes.

Although the PRA’s expectations relate primarily to trading books, it has clarified which type of banking book activities may also be in scope. These include, for example, material cross-border funding and lending transactions where the control risk may be similar to that arising from remote or back-to-back booking as well as secured financing and leverage finance transactions which have similarities to investment banking activities.

PRA notification:

The PRA reiterated its expectation that firms should include prospective material booking changes in their periodic supervisory discussions with it. Consequently, the greater the materiality of a planned change, the sooner firms need to raise it with the PRA, especially if they want to implement the changes quickly.

The PRA did not provide any quantitative thresholds in defining what it means by “material booking model changes” but has given a few useful examples of changes that may be considered material. In particular, the PRA has emphasised that it will consider the proportion of activity relocated, not just absolute numbers, especially for smaller desks or staff numbers.

The PRA has also clarified that cross-border staffing moves aligning with historical patterns will not require notification unless they meet additional criteria (such as causing risk fragmentation or reducing the effectiveness of risk management oversight).

Remote booking:

The PRA has reiterated that it is unlikely to allow traders to relocate to another jurisdiction solely to remotely manage the same risk back into the UK, regardless of whether there is UK oversight. The PRA has stressed that any existing arrangements where there is 100% remote booking into the UK should be subjected to greater scrutiny and require high levels of evidence that they are appropriately controlled.

The PRA has also clarified its expectation that the MI should provide adequate oversight of how trading risk is generated and demonstrate adherence to booking model policies and remote booking arrangements.

Split desks:

The PRA acknowledges that split desks may sometimes be necessary but emphasises that there should be a high threshold for moving to split desks and it shouldn't be frequent. Recognizing that business needs evolve, the PRA is open to considering changes to split-desk arrangements if the rationale behind them shifts.

The PRA has further clarified the level of oversight consolidation it would consider appropriate (e.g. global head if two senior business heads report to them). The PRA removed the reference to “a single consolidated risk management oversight” and clarified that it refers to consolidation in both the first and second lines of defence separately. The aim is to maintain control over split desks at an appropriate level, commensurate with the business structure and risk profile.

The PRA emphasises that firms should consider holistic risk management in both normal operations and crises. While not mandated, the PRA considers collateral pooling good practice, particularly for crisis management. It allows for intra-group hedging, potentially avoiding costly and risky market hedging. The firm's policy should define position offsetting/closing factors and expected timelines, aligning with the Bank of England's UK Resolution Assessment Framework expectations.

Trader controls:

The PRA has clarified the language with regards to trade entry responsibilities. The PRA has simplified the wording around trader controls by removing the references to non-trading personnel which were unclear. The PRA stressed, however, that trade entry and independent trade checks should be performed in line with segregation of duty controls as outlined in SS21/25 (2.12).

The PRA has also clarified that it does not prescribe the mix of directive, preventative and detective controls. It is up to each firm to assess the appropriate mix of preventative and detective and “hard” and “soft” controls, but firms will need to be prepared to explain the reasoning behind those choices to the PRA.
 

The PRA confirmed that only material control weaknesses, defined by the PRA as “either a major single issue or a group of smaller issues that affect the relevant area and when taken together could imply a material weakness”, will need to be addressed before any new changes to booking models can be considered, in line with the PRA’s proportionate approach.

Section 2: Changes to branch risk appetite and reporting


Branch risk appetite

The PRA has maintained a new additional indicative threshold for potential branch subsidiarisation of £300 million of total retail and small company demand deposits (i.e., including non FSCS-covered deposits). However, this now only includes retail and small company deposits in instant access accounts; previous references to transactional deposits have been removed. The PRA has however maintained the existing indicative threshold of 5,000 customers with transactional accounts.

The PRA has re-calibrated two existing indicative thresholds, increasing both by 30% to £130m of FSCS-covered retail and small company deposits and £650m of total FSCS-covered deposits. The PRA considers that the increase in thresholds should allow for more deposit growth, in line with its secondary competitiveness objective, and should not inadvertently restrict its branch appetite. The PRA will look through to the underlying beneficiary of the account when assessing the firm against the thresholds including both: deposits of direct depositors and those that are sourced through third parties (e.g. deposit aggregators).

Regarding demand deposits from corporates above the small company threshold, the PRA's approach remains largely unchanged: the PRA will still consider significant demand deposits from larger corporate customers dependent on a branch for transactional banking. The PRA also maintains the decision not to introduce a specific quantitative threshold for this activity and will continue to assess this on a case-by-case basis using supervisory dialogue and assessment work.

The PRA has confirmed that it will give additional consideration to HNWI deposits. Firms which exceed the thresholds due to HNWI deposits should be prepared to provide relevant evidence to the PRA that their customer profiles meet the definition of HNWIs. The PRA has also decided to apply a “look-through” approach to broaden the scope of what may be considered a HNWI deposit including deposits held by non-individuals (e.g. trustee accounts) where there is an underlying HNWI customer.

The PRA has also confirmed that it will have regard to home state resolution arrangements in assessing branch risk appetite. For example, in the case of G-SIBs, the PRA may generally be content for them to operate as branches but will consider this on case-by-case basis.

Branch reporting:

The PRA has amended the Branch Return Form (BRF) to require only data on instant access deposit balances and number of customers. The PRA will not require branches to report transactional deposit data routinely.

The PRA has provided more flexibility on liquidity reporting. Firms will be able to report using the BRF. Firms whose reporting period end dates do not coincide with the PRA's Branch Return deadlines now have increased flexibility and can submit the most recent data provided to their home state supervisor, clearly indicating the reporting period end date used.

The PRA's position on updating SS34/15 to facilitate more frequent data collection during stress periods remains the same, with the clarification that such requests will generally align with information provided to the home state supervisor.

The implementation of the revised Branch Return reporting rules has been postponed to 1 March 2026 to allow firms more time for system and process adjustments.

Conclusion

The PRA expectations in relation to booking arrangements came into force from the publication of the PS6/25 and updated version of SS5/21. All international banks and UK trading banks should kick-off their gap assessment as soon as possible and inform their PRA supervisors of the identified gaps and timelines for compliance. In particular, firms need to review instances of substantial remote booking into the UK and ensure that they can demonstrate to the PRA how it is subjected to greater scrutiny and is appropriately controlled.

Firms will also need to prepare rigorously when considering or requesting approval for any changes in booking arrangements, having particular regard for remote booking, split desk governance, fragmented risk management, and ensuring they provide sufficient justification for any changes.

The changes in the PRA’s branch risk appetite introduce additional reporting and monitoring burdens, but they are unlikely to affect the UK third-country branch population in the immediate future. By recalibrating the indicative thresholds and simplifying some requirements the PRA has clearly shown its regard for its secondary competitiveness objective.

Get in touch

David Strachan

Partner
+44 (0)20 7303 4791

Jaspreet Jhaj

Partner
+44 (0)20 7007 5985

Ed Waller

Director
+44 (0)77 8902 3852

Margarita Streltses

Senior Manager
+44 (0)20 7007 3625

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