How to Approach a PRA or FCA Banking Licence Application

A new banking licence is one of the most demanding regulatory processes in UK financial services. The PRA and FCA are not gatekeepers to be persuaded; they are co-supervisors assessing whether your firm can be safely authorised and credibly run from day one. Applicants that treat the process as a document exercise fail. Applicants that treat it as a business readiness test, with the application as evidence, succeed.

Understand the two routes and choose deliberately

The UK offers two paths: direct authorisation, and the Mobilisation route, which allows a firm to be authorised with restrictions while it completes build-out. Mobilisation is not a softer option. It is appropriate where capital raising, IT build, or senior hiring cannot sensibly be completed pre-authorisation, and where the firm can credibly operate under a deposit cap (typically £50,000 total) for up to 12 months. Choose Mobilisation when it genuinely de-risks execution, not because you are behind.

Treat pre-application engagement as the real process

The formal application is the end of a conversation, not the start. Expect an initial feedback meeting, followed by one or more Challenge Sessions where the regulators probe your business model, governance, financial resources and recovery and resolution thinking. What goes wrong here: founders treat these meetings as pitches. The regulators are testing whether the senior team understands its own risks, can articulate trade-offs, and will respond honestly to challenge. Rehearse with people who will push back harder than the regulators will.

Build the regulatory evidence base in parallel, not sequentially

The Regulatory Business Plan, ICAAP, ILAAP, Recovery Plan, Resolution Pack, Operational Resilience framework, and IT and outsourcing documentation must be internally consistent. The most frequent failure is a business plan projecting one growth trajectory while the ICAAP stress scenarios assume another. Appoint a single owner, usually the CFO or a dedicated programme director, to enforce consistency across every number and assumption that appears in more than one document.

What good looks like on capital and liquidity

ICAAP and ILAAP submissions should show the thinking, not just the outputs. Regulators want to see which risks you considered and discounted, how you calibrated stress severity, and how the Board challenged management's assumptions. Pillar 2A add-ons should be your own view, defensible on first principles, not a reverse-engineered figure to hit a target ratio.

Senior Manager candidates must be ready, not aspirational

Every SMF candidate will be interviewed. The bar is whether they can demonstrate, on the day, how they will discharge their Prescribed Responsibilities. Candidates who speak in generalities, defer to consultants, or cannot describe the firm's top three risks in their own words will not pass. Non-executive candidates, particularly the Chair, SID and Risk Committee Chair, need to show independent thought and real time commitment. A Chair who has not read the ICAAP will not survive the interview.

Second line and internal audit are scrutinised harder than first line

Applicants routinely under-invest in CRO, Compliance, MLRO and Internal Audit capability on the assumption these can scale post-authorisation. The regulators read this as a signal that risk and control are not taken seriously. Have the second line in place, with evidence of independent challenge already happening, before you submit.

Plan for 12 to 18 months from formal submission

Firms that assume a six month timeline create pressure that leads to shortcuts, which the regulators detect. Budget runway, hiring commitments and investor expectations around a realistic timeline. Build in capacity for substantive follow-up questions; these are the norm, not the exception.

The decision point

Before you submit, ask one question honestly: if the PRA authorised us tomorrow with no restrictions, could we open for business safely on Monday? If the answer is no, the application is not ready, regardless of how polished the documents look.

Frequently Asked Questions

How much capital do we actually need to raise before applying?

Enough to meet your Pillar 1 and Pillar 2A requirements with a sensible management buffer, cover wind-down costs, and fund the business through to break-even under a stressed scenario. Firms that raise only to the minimum signal fragility. Expect regulators to probe the credibility of your capital plan and the commitment of your investors through cycles.

Can we use consultants to write the application?

Consultants can structure, challenge and format. They cannot own the content. If an SMF candidate cannot defend a document line by line in interview because a consultant drafted it, the application will stall. Use external support for process and benchmarking, not for substance.

What is the single biggest reason applications fail or are withdrawn?

Governance weakness. Specifically, a senior team that cannot demonstrate collective understanding of the business model's risks, or a Board that looks like it will not provide meaningful challenge to the executive. Capital and IT problems are solvable. A governance gap requires rebuilding the top team.

How should we handle it if our plans change materially during the process?

Tell the regulators immediately. Material changes discovered by the PRA or FCA rather than disclosed by the applicant damage trust in a way that is very hard to recover. Early disclosure, with a clear explanation of the implications, is treated as a sign of a well-run firm.