A Turning Point for Building Societies

Sreekanth Mangulam & Anshuman Prasad
12 hours ago
5 min read

The regulatory environment for UK building societies is undergoing a significant shift. The Prudential Regulation Authority (PRA) is progressing toward the phased implementation of its Strong and Simple Regime (SSR) from 2026. The SSR is designed to simplify prudential requirements for small domestic deposit takers (SDDTs), thereby providing simplified liquidity and disclosure requirements for eligible building societies. Also, the PRA is set to withdraw Supervisory Statement (SS) 20/15, replacing it from 1 January 2026 with SS24/15, the broader framework for supervising liquidity and funding risks. From that date, societies will also be expected to demonstrate stronger board accountability under the Senior Managers and Certification Regime (SMCR).

These changes represent both an opportunity and a challenge. While many societies welcome the end of SS20/15’s prescriptive limits—which often felt restrictive compared to the freedoms banks enjoyed—it also means a new era of principle-based supervision. Greater flexibility brings greater responsibility. Boards will need to set their own risk appetite, build resilience, and ensure their Asset and Liability Management (ALM) frameworks are genuinely robust and data-driven.

From SS20/15 to SS24/15

What SS20/15 Required

SS20/15, “Supervising building societies’ treasury and lending activities,” imposed strict limits on lending categories (prime mortgages, buy-to-let, shared ownership, commercial property, etc.) and conservative rules around treasury exposures. It capped the use of reserves for hedging and required particularly cautious treatment of non-sterling positions.

This gave regulators comfort but limited societies’ ability to innovate. Entering niche lending, adjusting hedging strategies, or making dynamic balance sheet decisions often required explicit PRA approval.

What SS24/15 Brings

SS24/15, “The PRA’s approach to supervising liquidity and funding risks,” applies to all CRD IV firms, including building societies. Its key elements include:

ILAAP (Internal Liquidity Adequacy Assessment Process): Boards must prove they can identify, measure, and manage liquidity and funding risks in a proportionate, well-governed manner.
OLAR (Overall Liquidity Adequacy Rule): Firms must hold enough liquid resources under stress and set clear risk appetite statements.
Prudent funding profiles: Diversification of funding sources, careful monitoring of maturity mismatches, and oversight of asset encumbrance are all essential.
Stress testing and PRA110 reporting: Societies must conduct rigorous liquidity stress tests and submit granular 92-day maturity ladder reports.
Operational resilience: Boards must demonstrate strong intraday liquidity management, collateral practices, and practical assumptions around transfers of funds across entities and currencies.

Where SS20/15 relied on detailed restrictions, SS24/15 expects building societies to design their own frameworks—flexible, but evidence-based and defensible.

The ALM Challenges Ahead

Building societies have strong, knowledgeable ALM and Treasury teams with deep understanding of balance sheet behaviour, Interest rate risks, liquidity drivers, and risk governance. The core challenge, however, lies not in the expertise, but in the infrastructure, which sometimes has struggled to keep pace with the increasing sophistication of modern risk management. Below are a few updates that reflect this reality.

Dependence on Manual or Legacy Systems

Despite the advancements in risk management practices, many societies still rely on spreadsheets or siloed legacy systems for ALM. While these tools have served their purpose in the past, they are now slow, error-prone, and insufficient to meet the demands of today’s regulatory requirements—particularly those related to PRA110 liquidity reporting, IRRBB (Interest Rate Risk in the Banking Book), and complex stress testing. The reliance on legacy processes and systems not only increases operational risks but also places a significant strain on regulatory compliance.

More Sophisticated Risk Modelling

Modern ALM requires behavioural modelling of deposits, prepayment assumptions on mortgages, and scenario-based simulations of funding shocks. While large banks may have in-house quantitative teams, mid-tier lenders and societies often rely heavily on their ALM vendor’s capabilities—making adaptability of these platforms critical.

Data Integration and Reporting

The PRA’s focus on granular liquidity data means ALM systems must pull clean, reconciled data across lending, treasury, finance, and risk systems. Where this integration is weak, societies face delays, manual adjustments, and higher compliance risk.

Board Accountability under SMCR

The PRA has made it clear that liquidity and funding oversight is a board-level responsibility. Senior managers must be able to explain assumptions, defend modelling approaches, and evidence decisions. Systems without clear audit trails or traceable reporting leave boards exposed to regulatory scrutiny. Firms should ensure their ALCO committee management information is of the most up to date and accessible format to ensure effective balance sheet management over the long term.

The Opportunities

Despite the challenges, this shift creates real opportunity for building societies:

Strategic agility: Societies can diversify into new markets such as SME lending, green finance, or development projects, supported by stronger ALM.
Better hedging: Principle-based rules allow more flexibility in using reserves and structural hedges, provided they are justified with evidence.
Dynamic balance sheet management: Societies can adopt pricing and funding strategies tailored to their own risk appetite rather than generic sector-wide rules.
Technology-driven resilience: Modern ALM solutions can integrate liquidity, capital, funds transfer pricing, and risk analytics—providing a single source of truth for decision-making.

The Role of Next-Generation ALM Platforms

To meet SS24/15’s expectations, societies need to move beyond incremental fixes. They require ALM solutions that deliver:

Dynamic balance sheet simulation: Robust scenario modelling across liquidity, interest rate, and market risks.
Data harmonisation: Integrated architectures unifying finance, risk, treasury, and lending data.
Automated regulatory reporting: PRA110, ICAAP, ILAAP, IRRBB—all produced consistently without manual intervention.
Built-in compliance templates: Pre-aligned with PRA and EBA reporting frameworks.
Board-ready transparency: Dashboards, drill-downs, and full audit trails that strengthen governance.

Such systems not only safeguard against compliance risks but also give societies the insight and agility to compete effectively in a market that is changing fast.

Conclusion: From Compliance to Advantage

The move from SS20/15 to SS24/15 is more than a regulatory adjustment. It is a turning point in how building societies govern their balance sheets and manage risks. Where once detailed rules provided a safety net, societies must now build their own, guided by principles and subject to close supervisory review.

Those that embrace modern, integrated ALM solutions—coupled with strong board oversight—can turn compliance into competitive advantage. Societies that fail to adapt risk being held back by inefficiency, regulatory challenge, and limited strategic options.

For building societies, the message is clear: this is the moment to invest in resilience, agility, and insight.

Key Regulatory References

Prudential Regulation Authority. Supervisory Statement 24/15: The PRA’s approach to supervising liquidity and funding risks. Bank of England (2015).
Prudential Regulation Authority. Supervisory Statement 20/15: Supervising building societies’ treasury and lending activities (consultation for withdrawal). Bank of England (2015/2025).
PRA Rulebook and guidance documents. Bank of England.
Policy Statement 4/20: PRA’s final policy on liquidity and funding risks.

About the Authors

Sreekanth Mangulam

is a Co-Founder and Executive Director on the Board of Surya. For the past 25 years he has played an instrumental role in the design, development, delivery, and sales of Surya’s flagship solutions. In his current role, Sreekanth oversees Surya’s global business, driving international growth and fostering strategic partnerships. Under his leadership, Surya has significantly expanded its global footprint, establishing subsidiaries abroad. He also serves as President of Surya Financial Systems Inc. (USA) and is a Board Member of Surya Digital (France).

Anshuman Prasad

is the Managing Director at InCred Insight, with over 20 years of experience in financial services spanning risk management, technology, and analytics. He has led major analytical and techno-functional initiatives that modernized platforms for risk, compliance, and trading across leading financial institutions. Passionate about innovation, he focuses on applying emerging technologies and artificial intelligence to drive business growth and help clients meet their strategic commitments.