UK simplified capital regime for small domestic deposit takers

Small domestic deposit takers (SDDTs) are smaller banks and building societies, focused on the United Kingdom, that satisfy criteria set by the Prudential Regulation Authority (PRA). The PRA's Strong and Simple framework (external site) gives them simpler prudential rules than those for large international banks. Its final policy statement, PS4/26 (external site), sets a simplified capital regime that takes effect on 1 January 2027.

The regime covers SDDTs and SDDT consolidation entities, the parent companies of groups that qualify, and adds further liquidity simplifications (PS4/26 (external site)). These come on top of the liquidity simplifications that an earlier policy statement already introduced for SDDTs (PS15/23 (external site)).

From 1 January 2027 an SDDT calculates its capital under the simplified regime instead of the full Basel 3.1 rules that apply to other firms from that date (PS1/26 (external site)). A new supervisory statement, SS4/25 (external site), applies to SDDTs from that date, and SDDTs leave the scope of supervisory statement SS31/15.

Reporting changes on the same date. SDDTs use their own instructions for reporting own funds and own funds requirements (Annex IIa instructions (external site)), and PS4/26 publishes the final reporting templates (PS4/26 (external site)).

Some parts applied earlier. Rules on the frequency of updates to an SDDT's Internal Capital Adequacy Assessment Process (ICAAP), including reverse stress testing, and its Internal Liquidity Adequacy Assessment Process (ILAAP) took effect on 20 January 2026 (PS4/26 (external site)).

The regime applies to banks and building societies that qualify as SDDTs, and to SDDT consolidation entities (PS4/26 (external site)). The roles most directly concerned:

• Capital Reporting Analyst: moves the capital calculation to the simplified rules.
• Regulatory Reporting Analyst: files the SDDT returns from the first reporting date in 2027.
• Liquidity Risk Analyst: applies the liquidity simplifications and the new ILAAP update cycle.
• Liquidity Reporting Analyst: adapts the liquidity returns to the SDDT regime.
• ALM Analyst: plans the balance sheet under the simplified capital and liquidity rules.

The PRA consulted on the simplified capital regime in September 2024, with responses closing on 12 December 2024 (CP7/24 (external site)). It published a near-final policy in October 2025 (PS20/25 (external site)) and the final policy on 20 January 2026 (PS4/26 (external site)).

The ICAAP and ILAAP update rules applied from 20 January 2026. The capital regime, SS4/25 and the SDDT reporting requirements take effect on 1 January 2027 (PS4/26 (external site)).

The Strong and Simple framework is the PRA's programme for a simpler prudential regime for small, domestic firms (Strong and Simple (external site)). The simplified capital regime is its main capital step.

The refined methodology to Pillar 2A is retired for all firms on the same date, SDDTs included (PS2/26 (external site)).