The PRA and the FCA: Who Regulates What, and What Dual Regulation Means for Senior Managers
The UK has two main financial regulators: the Prudential Regulation Authority (PRA), part of the Bank of England, and the Financial Conduct Authority (FCA). Most regulated firms deal only with the FCA. But banks, building societies, credit unions, insurers and a small number of major investment firms are regulated by both, an arrangement known as dual regulation. For Senior Managers at those firms, it means two regulators with different priorities, and an approval process that involves both. This guide explains what each regulator does and what dual regulation means in practice.
What Is the PRA?
The Prudential Regulation Authority is part of the Bank of England. It was created in 2013, when the Financial Services Authority was replaced by two new regulators under the Financial Services Act 2012. The PRA’s job is prudential regulation: making sure the firms it regulates are safe and sound, so that they’re unlikely to fail and, if they do, fail in an orderly way. For insurers, it also has an objective to protect policyholders. Its rules are in the PRA Rulebook.
What Is the FCA?
The Financial Conduct Authority regulates the conduct of tens of thousands of financial services firms, and the prudential standards of those not regulated by the PRA. Its focus is making markets work well: protecting consumers, protecting the integrity of the UK financial system, and promoting effective competition. Both regulators now also have secondary objectives relating to international competitiveness and growth, added by the Financial Services and Markets Act 2023.
PRA vs FCA at a Glance
| PRA | FCA | |
|---|---|---|
| Part of | The Bank of England | An independent public body |
| Focus | Safety and soundness of firms; policyholder protection for insurers | Conduct, consumer protection, market integrity and competition |
| Regulates | Banks, building societies, credit unions, insurers and major investment firms | All authorised firms for conduct; solo-regulated firms for prudential matters too |
| Approach | Judgement-based, forward-looking, focused on the firms that matter most to stability | Outcome-focused, with an emphasis on consumer harm and market conduct |
| Rules | PRA Rulebook | FCA Handbook |
Solo-Regulated and Dual-Regulated Firms
Solo-regulated firms are regulated only by the FCA, for both conduct and prudential matters. They make up the great majority of regulated firms: advice and wealth firms, most investment managers, brokers, consumer credit firms, payments and e-money firms, and many others.
Dual-regulated firms are regulated by the PRA for prudential matters and by the FCA for conduct. They include:
- banks and building societies
- credit unions
- insurers and reinsurers, and Lloyd’s managing agents
- a small number of large investment firms designated by the PRA
Our sector pages for banks and building societies and insurers explain the Senior Manager roles these firms typically need.
What Dual Regulation Means for Senior Managers
Two Sets of Designated Functions
At dual-regulated firms, Senior Manager Functions are divided between the two regulators. Broadly, the PRA designates the functions most closely linked to safety and soundness, such as the chief executive, chief finance, chief risk, head of internal audit, chair and the risk and audit committee chairs. The FCA designates functions more closely linked to conduct, such as compliance oversight, the MLRO and other overall responsibility. The exact allocation is set out in the rules, and our complete designations guide lists every function.
Approval Involves Both Regulators
Applications for PRA-designated functions are made to the PRA, which needs the FCA’s consent before approving. Applications for FCA-designated functions go to the FCA. In practice, both regulators take an interest in significant appointments, and the PRA frequently interviews candidates for chief executive, chair, chief finance, chief risk and committee chair roles. Our guide to how long SMF appointments take explains the timetable.
Two Sets of Prescribed Responsibilities
Dual-regulated firms must allocate both the FCA’s and the PRA’s Prescribed Responsibilities to their Senior Managers. The PRA’s cover prudential matters such as capital, liquidity, recovery and resolution planning. Our guide to Prescribed Responsibilities explains how allocation works.
Conduct Rules From Both Regulators
Both regulators have Conduct Rules. At dual-regulated firms, individuals are subject to both sets, which closely mirror each other. Our Conduct Rules training guide covers the FCA’s rules.
Collective Suitability of the Board
The PRA expects the board of a dual-regulated firm to have, collectively, the knowledge, skills and experience to oversee the firm’s activities and risks. Every board appointment is assessed partly on how it contributes. See our post on PRA collective suitability.
Group Executives
Dual-regulated firms in groups need to consider whether group executives who influence the UK firm need approval as Group Entity Senior Managers. See SMF7 explained.
What Each Regulator Looks For in a Senior Manager
| PRA emphasis | FCA emphasis | |
|---|---|---|
| Experience | Prudential expertise: capital, liquidity, risk, financial resilience | Conduct, customer outcomes, financial crime and market integrity |
| Interviews | Common for significant roles; probing on risk appetite and the firm’s vulnerabilities | Used selectively; focus on understanding of conduct risks and responsibilities |
| Board | Collective suitability, independence and challenge | Culture, governance and oversight of customer outcomes |
| Ongoing | Proactive intervention as risks to safety and soundness grow | Supervision focused on consumer harm and conduct failings |
Working With Two Regulators
Senior Managers at dual-regulated firms need to manage relationships with two supervisory teams, each with its own priorities and information requests. Practical lessons from firms that do this well include:
- being clear internally about which regulator leads on which issues
- keeping both regulators informed of significant matters, rather than assuming one will tell the other
- making sure Statements of Responsibilities and the Responsibilities Map cover both regulators’ requirements
- preparing candidates thoroughly for PRA interviews, which can be demanding
A building society needs a new chief risk officer, a PRA-designated function. Its preferred candidate has strong risk experience at an investment firm but limited exposure to a deposit-taker’s balance sheet. The society prepares her for a PRA interview on liquidity, interest rate risk in the banking book and the society’s recovery plan, and explains in the application how her experience complements the board’s existing treasury expertise. The PRA interviews her, the FCA gives its consent, and she’s approved within the expected timetable.
Moving Between Solo and Dual-Regulated Firms
Candidates moving from a solo-regulated firm to a dual-regulated one often underestimate the difference. Prudential expertise, the PRA’s interview process and the collective suitability expectation all mean preparation matters. Firms hiring from outside their sector should plan for a longer approval process and stronger evidence of relevant experience. Our article on dual-regulated SMF hiring at banks and building societies explores this further.
Which Regulator Do You Deal With?
A simple test: if your firm takes deposits, writes insurance or has been designated by the PRA as a major investment firm, you’re dual-regulated. Otherwise, you’re almost certainly regulated by the FCA alone. Payment institutions, e-money institutions and most crypto-asset businesses are supervised by the FCA. If you’re unsure, the Financial Services Register shows each firm’s regulators.
Dual-Regulated Senior Managers
Recruitment for banks, building societies and insurers regulated by both the PRA and FCA. Every SMF search is led personally by Adrian Lawrence FCA
Executive Roles
PRA-designated functions.
→ Regulated CEO (SMF1)
→ Chief Risk Officer (SMF4)
Board Roles
Chairs and committee chairs.
→ Chair and committee chairs
→ NEDs at FCA-regulated firms
Groups
International and group structures.
→ Overseas firms and groups
→ SMF7 explained
Every SMF search is led personally by Adrian Lawrence FCA
Frequently Asked Questions
What is the difference between the PRA and the FCA?
The PRA focuses on the safety and soundness of banks, insurers and other systemically important firms. The FCA regulates the conduct of all financial services firms, and the prudential standards of firms not regulated by the PRA.
Is the PRA part of the Bank of England?
Yes. The PRA is part of the Bank of England.
What is a dual-regulated firm?
A firm regulated by the PRA for prudential matters and the FCA for conduct, such as a bank, building society, credit union or insurer.
Which regulator approves Senior Managers at a bank?
It depends on the function. The PRA approves PRA-designated functions, with the FCA’s consent, and the FCA approves FCA-designated functions.
Does the PRA interview Senior Manager candidates?
Often, particularly for chief executive, chair, chief finance, chief risk and committee chair roles at significant firms.
When was the PRA created?
In 2013, when the Financial Services Authority was replaced by the PRA and the FCA.
About the Author
Adrian Lawrence FCA is the founder of SMF Capital. He is a Chartered Accountant and Fellow of the ICAEW, holds a practising certificate in his own name, and is a former listed-company Finance Director with a BSc from Queen Mary College, University of London. He founded FD Capital in 2018 and has since built a network of five specialist recruitment practices. He leads every SMF Capital search personally, including PRA and FCA-designated appointments at banks, building societies and insurers. View Adrian’s ICAEW profile.
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