The PRA has published its first Annual Competition Report. The report explains how the PRA has interpreted the competition objective which it was given following the split of the FSA into the PRA and the FCA in April 2013. This was the first time that the UK prudential regulator of banks and insurers had been given a competition objective, so it is interesting to see how the PRA has dealt with this responsibility.

The report states how the competition objective, which is the secondary objective of the PRA, relates to the PRA’s primary objectives of promoting the safety and soundness of PRA-authorised persons and insurance policyholder protection. The report also explains the steps which the PRA has taken to implement the competition objective and to embed this into PRA policy and the PRA’s supervisory decision-making. It is worth noting that, as the PRA’s competition objective is a secondary objective, the PRA is not seeking to supervise competition at the level of individual firms. Instead, the PRA’s competition objective is limited to assessing how the PRA’s general policies impact competition in the market.

The second half of the report contains examples of how the PRA is delivering against its competition objective and thereby facilitating effective competition in the sectors which it regulates. The examples include the PRA’s work in facilitating market entry, applying the principle of ‘proportionality’ internationally and domestically, considering competition issues in structural reform, implementing macroprudential policy, and the PRA’s review on internal ratings based models.

The foreword to the report by Andrew Bailey, Deputy Governor, Prudential Regulation and Chief Executive of the PRA, states that the competition objective is “a welcome complement to the PRA’s primary objectives [and] has played an important role in influencing [the PRA’s] work...and will continue to do so.” It will be interesting to see whether the PRA’s approach to competition changes over time, as it gains more experience and confidence in analysing competition issues.