UK Banking Licence Authorisation Support

Overview

Obtaining regulatory approval for a Part 4A permission can be a challenging process, but an effective regulatory engagement strategy significantly enhances the chances of success and supports the applicant bank to understand and meet regulatory requirements and expectations.

Part 4A applications are assessed by the Prudential Regulation Authority (“PRA”) and Financial Conduct Authority (“FCA”) over a three-stage process as set out below. During this process, the PRA and FCA will assess whether potential new entrants meet defined threshold conditions to ensure that the granting of a Part 4A licence will not undermine the PRA’s and FCA’s objectives.

Process for obtaining a Part 4A licence in the UK

Authorisation takes place via a three-stage process:

i. Pre-Application:

• An optional, but recommended, stage allowing for early engagement with the regulators.
• Typically, pre-application consists of an initial meeting, feedback meeting and challenge session.
• With no statutory timelines in pre-application, pre-application allows time to address any regulatory feedback early to support a smooth application process.

ii. Application:

• Following formal submission of a Part 4A application, the regulators have a 6 month statutory deadline to determine complete applications, and 12 months for incomplete submissions.
• The regulatory assessment covers all risk stripes, including challenge of the business model, capital risk management, and governance. Key application documents form the foundations of this assessment, including the Regulatory Business Plan ("RBP"), Capital Plan ("ICAAP"), Liquidity Plan ("ILAAP"), Recovery Plan and Solvent Exit Plan.
• Raising sufficient capital to meet post-authorisation regulatory capital requirements is a common challenge observed during application and can distract from critical ‘building the bank’ activities.

iii. Authorisation:

• There are two authorisation routes available: (i) Authorised With Restrictions (AWR); and (ii) Full authorisation.
  
  
  • Option (i): Under AWR, the new bank is authorised subject to deposit-taking restrictions (limit of £50k). Once the Part 4A banking licence has been obtained, the newly authorised bank has a mobilisation period of up to 12 months* to complete final building activities. To exit mobilisation, the bank must provide comfort to the regulator that it meets pre-set mobilisation conditions. Effective project management is essential to ensure successful exit from mobilisation.
  • Option (ii): To achieve authorisation under option (ii), the applicant must satisfy the regulator that it has met all expectations and threshold conditions to be fully authorised with no mobilisation period.
• We observe that start-up banks tend to utilise mobilisation via option (i) to allow them to conduct testing and other activities ahead of launching to market. Meanwhile, option (ii) is generally taken by already established businesses, such as FCA-regulated electronic money institutions, lenders, and subsidiaries and branches of international banking groups.

*only in extremely unique cases has the mobilisation period extended beyond 12 months.

Case Study: From Specialist Mortgage Lender to Licenced Bank

We have recently supported an applicant to successfully gain a banking licence through partnering with their leadership team and providing support as they prepared the crucial regulatory documentation. Since exiting mobilisation, the new bank has grown its balance sheet to over £200m and posted its first full year profit.

How can Deloitte help?

Deloitte has Authorisation specialists, including senior ex-regulators, who have deep expertise and a proven track record of helping firms successfully manage the authorisation process.

The specialist team work in tandem with Deloitte’s global and extensive network of SMEs to draw on a detailed breadth of experience to support potential new entrants throughout the end-to-end application process, including any nuances and common challenges new entrants face when seeking approval.

Deloitte support is tailored to each applicant, saving time and resource which can be directed to other critical activities. Examples of Deloitte’s new bank applicant offerings are included in the following:

Key Contacts

If you are considering applying for permission to accept deposits, our team can help you assess readiness, shape your regulatory strategy and prepare for engagement with the PRA and FCA: