What is the Prudential Regulation Authority ?

What is the Financial Conduct Authority ?
October 8, 2020
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What is the Prudential Regulation Authority (PRA) ? Every financial institution in the United Kingdom make reference to this body on their publications and websites but what exactly is it?

What is the official role of the PRA?

The PRA is basically just another name for the Bank of England. It is one arm of the Bank of England. ‘The Bank of England prudentially regulates and supervises financial services firms through the Prudential Regulation Authority (PRA).’

The point of the authority is to help ensure confidence in banks and financial systems. If people in the community do not have confidence in bank accounts or currency then the financial system ends overnight. Human beings use ‘money’ such as bank notes and coins to enable them to trade with each other. If we did not have these banknotes and coins then we would be back to bartering which is inefficient and does not encourage trade. So it is incredibably important that all human beings trust banknotes and coins. And in the modern digital age human beings must be able to trust digital currency. We need to be able to look at our online bank balance and trust that those pixels on the screen represent something real. The PRA works to ensure banks are safe and secure while carrying out their business. They help ensure there is trust within the community for bank accounts, bank notes and payment systems. They also attempt to regulate the cost of living in the UK by adjusting the main interest rate in the UK.

When was the PRA established?

The PRA was established in 2013. The Financial Services act 2012 created the FCA and the Prudential Regulation Authority. These two agencies replaced the Financial services authority (FSA) while oversaw the 2008 recession and subsequent banking bailouts.

Who does the PRA regulate?

It regulates about 1,500 banks, building societies, credit unions, insurers and major investment firms.

Who is the PRA funded by ?

The authority is funded by the firms that they regulate. The authority charges them fees. The authority is responsible to the Treasury and to Parliament.,

Does the authority have any real power?

Yes, the PRA has serious powers. It can bring criminal and civil charges against anyone operating in the financial world. All these charges have to be proven in court. Of course, the issue with the PRA is the same with the police. It has limited funding and skilled personnel so it is difficult to catch out all rogue traders.

Why would a firm sign up to pay fees to the PRA?

They have to. If you are a bank, building society or insurance company you need to be signed up to the PRA or you simply are not allowed to do business.

Why is the PRA important in property and construction ?

Property development and property investment simply does not proceed without finance. Those companies like banks and private investors providing the finance need to do so in an honest and fair way.

When you see that a business is regulated by the PRA you can trust it a little bit more. But go on to the PRA website and check that the company is regulated and not just claiming to be. Also remember that companies get kicked out of the PRA regularly. Just because a company is regulated by the PRA does not mean they are saints. You can do business with them, they behave badly and then they get thrown out of the PRA – this won’t help your finances. So don’t trust anyone fully despite any credentials.

What is the relationship between the FCA and the Prudential Regulation Authority ?

If you are providing financial services you are regulated by the FCA. If you are a bank or an insurance company you are regulated by the Prudential Regulation Authority. The FCA concentrates on ensuring the end customer is being treated fairly. The PRA concentrates on ensuring that banks are not being too risky.

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Charlie Standen
Charlie Standen
Charlie started out as a quantity surveyor and project manager before moving into property development and property investment. He also enjoys all aspects of writing, videography, and new media. He writes content for the property development course on property development, property investment, and property finance.