The strong and simple regime: a practical guide for small domestic deposit takers

It replaces three buffers with one. An SDDT holds a Single Capital Buffer instead of the capital conservation buffer, the countercyclical buffer and the PRA buffer, and the automatic restrictions on distributions (the maximum distributable amount, or MDA) no longer apply when it is used.

The PRA has said publicly that the Single Capital Buffer will be set no lower than 3.5% of risk-weighted assets (SoP5/25, paragraph 12.11). Each firm’s own level is confidential. For a new and growing bank it is sized to cover six months of projected operating expenses, still with the 3.5% minimum. The capital conservation buffer it replaces is 2.5% of total risk exposure amount under the Capital Buffers Part.

From our practice, the floor is not the number. A board paper that sets 3.5% against the 2.5% conservation buffer alone compares the wrong things: today’s stack also holds the countercyclical buffer and any PRA buffer, and the SDDT figure is the PRA’s to set. We show the current buffers in full, a range for the Single Capital Buffer, and a clear label on the range as an assumption until the PRA confirms the level.

The change reaches the recovery plan too. SS9/17 expects capital indicators to be calibrated in relation to the relevant buffers. An SDDT’s recovery indicators were set against buffers that no longer exist, so they need recalibrating to the Single Capital Buffer, and the escalation steps tied to MDA restrictions need rewriting.

Sources: PRA SoP5/25 Pillar 2 capital for SDDTs, para 12.11; PRA PS20/25, 28 October 2025, paras 1.14, 4.43 and 4.58; PRA Rulebook, Capital Buffers, rule 2.1; PRA SS9/17 Recovery planning, March 2026, para 2.51.

Opt in if the savings in capital, reporting and governance outweigh the limits the criteria put on the business plan; stay if the plan could take the firm past a criterion, or if IRB is part of the strategy.

Joining is voluntary. The PRA chose modification by consent so that eligible firms could remain outside, and by 13 October 2025, 56 firms had opted in of around 80 it estimated were eligible. The table sets out the factors that most often decide it.

Some things are the same either way. The refined methodology to Pillar 2A is retired for all firms from 1 January 2027. A firm that stays on Basel 3.1 has its Pillar 2 rebased by the PRA’s off-cycle review for double counting, and that review does not need a full ICAAP. It is also subject to the step-in risk rules, in force since 1 January 2026, and submits its step-in data items with its ICAAP; an SDDT is out of scope.

From our practice: the PRA’s review of the criteria by the end of 2028 is a planning date, not a reason to wait. A firm that opts in and then outgrows a criterion faces a second change of regime, so the forecast in step 2 of the checklist below matters more than the capital saving in the first year. For a shorter version of this question, read should your bank join the SDDT regime; for Basel 3.1 itself, what Basel 3.1 changes for UK banks.

Sources: PRA Rulebook, SDDT Regime: General Application (as at 29 September 2026), rule 3.1; PRA PS15/23, 5 December 2023, paras 2.27 and 2.99; PRA PS20/25, 28 October 2025, para 1.17; PRA PS2/26, 20 January 2026, para 1.11; PRA PS9/24, 12 September 2024, para 6.6; PRA PS5/25, 22 April 2025, paras 1.2 and 1.15.

In the papers we review, the errors cluster in the eligibility forecast and the capital comparison. The rules are rarely misread; the business plan is rarely read against them.

• Eligibility tested on one year-end balance sheet, with no forecast of the 36-month averages or the at-all-times UK exposure limb.
• A group that tests the bank and forgets that criteria 1 to 6 also apply to the consolidated position.
• A capital comparison that sets the 3.5% Single Capital Buffer floor against the conservation buffer alone, or treats the floor as the firm’s actual level.
• Pillar 1 compared and Pillar 2A left out, although the SDDT methodologies differ and the refined methodology goes on both routes.
• The NSFR relief assumed without checking that the Retail Deposit Ratio has stayed above 50% on a four-quarter moving average for four quarters running.
• The two-year cycle treated as a year off, with no information to the board in the off-year and recovery indicators still calibrated to the old buffers.
• A decision taken in the boardroom but not written down. The paper should record both routes, the forecast and the reasons, so a future board and the PRA can see why.

Sources: PRA Rulebook, SDDT Regime: General Application (as at 29 September 2026), rules 2.1 to 2.4; PRA SoP5/25 Pillar 2 capital for SDDTs, para 12.11; PRA PS20/25, 28 October 2025, paras 1.14 and 4.43; PRA PS2/26, 20 January 2026, para 1.11; PRA PS15/23, 5 December 2023, para 2.110; PRA SS9/17 Recovery planning, March 2026, para 2.51.