PRA Updates 2026

What Changed

*Credit Risk Framework** Implementation of restrictions on Internal Ratings-Based (IRB) approach scope, effective 1 January 2027, with firms required to reclassify certain exposures (e.g., slotting approach IPRE exposures) as High-Volatility Commercial Real Estate (HVCRE) where applicable. Minor clarifications and amendments to the Standardised Approach and credit risk mitigation techniques. *Operational Risk** Updated Business Indicator Component (BIC) calculation methodology requiring inclusi

What You Need To Do

• *Immediate (by mid-2026)
• *Conduct impact assessment
• *Review IRB permissions
• *Assess FRTB-IMA readiness
• *Arrange board-level assurance

Key Dates

References

• [1] bankofengland.co.uk
• [2] bankofengland.co.uk
• [3] grantthornton.co.uk
• [4] tlt.com
• [5] regulationtomorrow.com
• [6] rics.org
• [7] finreg.aoshearman.com
• [8] afme.eu

What Changed

The PRA has introduced new rules for the calculation of risk-weighted assets, including changes to the credit risk standardised approach, market risk framework, and operational risk requirements. The rules also include amendments to the definitions of probability of default, loss given default, and conversion factor.

What You Need To Do

• Review and update credit risk policies and procedures to ensure compliance with the new standardised approach
• Assess the impact of the new market risk framework on trading book positions and capital requirements
• Update operational risk management frameworks to reflect changes to the Business Indicator and subcomponents

Key Dates

Related Regulations

What Changed

Retirement of refined methodology: The refined methodology, introduced in 2018 (PS22/17) to mitigate perceived conservatism in CR SA relative to IRB for lower-risk assets, is fully retired from Pillar 2A as Basel 3.1 CR SA enhancements achieve similar risk sensitivity without it. No transitional period; immediate replacement by Basel 3.1 standards. Amendments to SS31/15: Updates to Supervisory Statement 31/15 on ICAAP and SREP (Appendix 1), including minor prior adjustment to paragraph 5.12A for

What You Need To Do

• Review and update ICAAP/SREP processes
• Recalculate Pillar 2A requirements
• Align with related frameworks
• Monitor firm-specific impacts
• Governance and reporting

Key Dates

References

• [1] jdsupra.com
• [2] suade.org
• [3] slaughterandmay.com
• [4] bankofengland.co.uk
• [5] regulationtomorrow.com
• [6] deloitte.com
• [7] afme.eu
• [8] paulhastings.com

What Changed

The PRA has retired the refined methodology to Pillar 2A, which was previously used to determine capital requirements for firms. The new policy aligns with the Basel 3.1 standards and introduces a simplified capital regime for SDDTs.

What You Need To Do

• Update internal capital adequacy assessment processes (ICAAP) to reflect the changes to Pillar 2A
• Review and implement the Basel 3.1 standardized approach to credit risk
• Ensure compliance with the new simplified capital regime for SDDTs, if applicable

Key Dates

Related Regulations

What Changed

*Restatement of CRR Provisions** The PRA is transferring remaining CRR requirements from the UK CRR into the PRA Rulebook without material changes to policy substance, except for targeted securitisation amendments. This follows the earlier PS12/25, which finalised the first tranche of restatement requirements in 2026. *Policy Materials and Supervisory Guidance PS3/26 introduces or amends multiple supervisory statements and statements of policy: New: SS4/24 (Credit risk: Internal Ratings Based A

What You Need To Do

• *Immediate (by Q2 2026)
• *Review applicability
• *Assess impact
• *Identify policy changes
• *Medium-term (by Q3 2026)

Key Dates

References

• [1] regulationtomorrow.com
• [2] bankofengland.co.uk
• [3] grantthornton.co.uk
• [4] slaughterandmay.com
• [5] bankofengland.co.uk
• [6] addleshawgoddard.com
• [7] prarulebook.co.uk

What Changed

The PRA has restated the remaining relevant provisions in the CRR within the PRA Rulebook and other policy materials, including amendments to supervisory statements and the introduction of new statements of policy. The changes include updates to the securitisation requirements and the introduction of new rules on credit risk and internal ratings-based approaches.

What You Need To Do

• Review and update internal policies and procedures to ensure compliance with the restated CRR provisions
• Ensure that risk management practices are aligned with the updated rules on credit risk and internal ratings-based approaches
• Review and update securitisation policies and procedures to ensure compliance with the amended requirements

Key Dates

Related Regulations

What Changed

*Simplified Capital Framework The final policy introduces a dedicated capital regime** for SDDTs that descopes them from standard CRR Firms requirements. SDDTs are now subject to tailored Pillar 2 methodologies (SoP5/25) and simplified ICAAP/SREP processes (SS4/25) rather than the standard frameworks. *Liquidity Simplifications Qualifying SDDTs with 50% or more retail deposit funding** are exempted from the Net Stable Funding Ratio (NSFR) requirements, replacing this with a simpler Retail Depos

What You Need To Do

• *Immediate (by January 20, 2026)
• *Assess SDDT eligibility – Determine whether your firm meets all seven qualification criteria, particularly the £20bn asset threshold and domestic asset location requirement
• *Review consolidation group structure – If part of a group, confirm which entity will serve as the SDDT consolidation entity responsible for certification
• *Implement SoP2/23 changes – Adopt updated operating procedures for the SDDT regime
• *Update ICAAP/ILAAP processes – Implement new frequency requirements for capital and liquidity adequacy assessments

Key Dates

References

• [1] bankofengland.co.uk
• [2] hoganlovells.com
• [3] kpmg.com
• [4] bankofengland.co.uk
• [5] bsa.org.uk
• [6] katalysys.com
• [7] regulationtomorrow.com
• [8] grantthornton.co.uk

What Changed

The PRA has introduced a new simplified capital regime for SDDTs, which includes changes to the PRA Rulebook, supervisory statements, and statements of policy. The regime also introduces new reporting templates and instructions.

What You Need To Do

• Review and update capital adequacy assessments to ensure compliance with the new simplified capital regime
• Implement new reporting templates and instructions for SDDTs
• Update internal policies and procedures to reflect changes to the PRA Rulebook, supervisory statements, and statements of policy

Key Dates

Related Regulations

What Changed

The proposed MELL for 2026/27 introduces the following material changes: Budget increase of £4.4 million from 2025/26 (from approximately £103.6 million to £108 million), broadly aligned with inflation Nominal reduction of £6.6 million on a like-for-like basis when excluding the cost of enhancements to the FSCS's revolving credit facility (RCF) Real terms reduction of £11 million when accounting for inflation adjustments RCF enhancement to £3 billion to support the Bank of England's recapitalis

What You Need To Do

• *Review the consultation paper (CP1/26) in detail, particularly Appendices 3 and 4 detailing budget line items and PRA/FCA funding class allocations
• *Assess levy impact on your firm's 2026/27 budget based on your regulated business volume and funding class allocation
• *Prepare internal stakeholder communication regarding the £4
• *Monitor the FSCS January 2026 budget update for detailed cost breakdowns and compensation levy forecasts
• *Submit consultation responses if your firm wishes to comment on the proposal by 10 February 2026

Key Dates

References

• [1] bankofengland.co.uk
• [2] regulationtomorrow.com
• [3] fca.org.uk
• [4] jdsupra.com
• [5] slaughterandmay.com
• [6] ukgicompliance.com
• [7] cliffordchance.com
• [8] policymogul.com