The Scale-up Unit is open to building societies. The regulators' own findings point at something bigger.

On 1 September the FCA and PRA opened their Scale-up Unit to building societies. It got less attention than it deserved, so here is what it is, what we'd do about it, and the finding buried in the announcement that we think matters more than the programme itself.

What the Scale-up Unit is

The Scale-up Unit is the regulators' support programme for growing firms. Membership gets you a named contact at the FCA and PRA and earlier, more structured conversations: out-of-cycle capital reviews, help working out which regulatory processes apply to a scaling plan, early discussion of new products and their treatment, and a channel into policy-making.

In plain terms, instead of meeting the regulator process by process, you get a relationship, and the conversations happen before you commit capital and resource, not after.

Until this month it was effectively a banks' club. The entry criteria assumed a balance sheet between £3bn and £20bn and a challenger-bank growth curve. Exactly one building society made the first cohort, alongside five banks.

What changed on 1 September

The regulators opened a second application window and rebuilt the entry route for societies. The guide criteria: assets above £1bn and projected net interest income growth over 15% across three years.

The more important sentence sits next to those numbers. The regulators will welcome applications from societies that don't fully meet the criteria but have credible growth ambitions. The thresholds are a guide, not a gate, and a well-argued growth plan counts for more than a perfect scorecard.

Two caveats, because the regulators make them too. The Unit doesn't lower standards or guarantee decisions, and it isn't a substitute for your supervision team. It removes friction. The requirements stay.

The window closes on 30 September, and the application is an email setting out your growth story, not a programme of work. If your society is anywhere near the criteria and your corporate plan has growth in it, this belongs on the next board agenda. There isn't much to lose.

The question the Unit can't answer

One caution first.

The Scale-up Unit fixes one growth constraint: your relationship with the regulator. It cannot fix the other one. If a growth plan works, the growth arrives as work. More applications, more accounts, more servicing, more exceptions, more reporting. Somewhere in every society, that volume eventually hits a manual process, a rekeying step, or a queue behind the one person who knows how everything works.

That point is the real ceiling on growth, and no regulator can move it.

So whether you apply or not, run one exercise with your exec team. Take the three-year plan and ask: if we hit these numbers, what breaks first? Which journeys carry the volume? Where does headcount currently grow in lockstep with the business? It costs an afternoon, and it's the best preparation for an application, or a perfectly good substitute for one.

The finding worth more attention

The regulators also published reflections on the first cohort, and the standout finding wasn't about any individual firm. It was that some of the most valuable work happened when they put the firms in a room together on shared problems: cyber security, operational resilience, the challenges that look the same in every institution. A new BSA Cyber Forum came directly out of those sessions, chaired by Nottingham Building Society's head of information security and built for information sharing and collective defence.

A programme designed to help individual firms scale produced, as one of its first results, firms discovering what they could solve together.

We think that's the more important lesson in the announcement. Most of the costs that push societies towards scale are shared costs: technology, cyber, resilience, integration, regulatory tooling. None of these make a society distinctive, and every society in the country is paying to solve them alone.

The things that do make a society distinctive cost far less to keep: your lending judgement, your products, your pricing, your service, your members. Those should stay exactly where they are.

So alongside "should we apply to the Scale-up Unit?", we'd put a second question on the board agenda: what should societies stop solving alone?

What we're doing about it

Two things.

We've prepared a short board briefing on the announcement: what the Unit offers, who should apply, what an expression of interest involves, and the questions worth answering before 30 September. It's written for boards, not buyers, and there's no product content in it.

And this autumn we're convening a table of sector leaders on the collaboration question, because the regulators' first-cohort finding deserves a proper answer from the sector itself.

If you'd like the briefing, or a seat at that table, message us or get in touch through the usual channels. The deadline for the Scale-up Unit is 30 September. The deadline for the bigger question is whenever the sector decides to take it seriously.

Source: Bank of England, Scale-up Unit: Banks and Building Societies
https://www.bankofengland.co.uk/prudential-regulation/scale-up-unit/banks