PS15/26 – Pillar 2A review – Phase 1

What Changed

• - The PRA finalises amendments to the Reporting Pillar 2 Part of the PRA Rulebook, including updated Pillar 2 data items (FSA072–FSA076 and FSA081) and an updated Pillar 2 reporting schedule, with consequential changes to templates and instructions.
• The PRA issues an updated Statement of Policy (SoP) 5/15 – The PRA’s methodologies for setting Pillar 2 capital, providing revised methodologies across credit, operational, pension obligation, market and counterparty credit risk.
• The PRA issues an updated SoP 5/25 – The PRA’s methodologies for setting Pillar 2 capital for Small Domestic Deposit Takers (SDDTs), tailoring Pillar 2A approaches and expectations for SDDTs.
• The PRA updates Supervisory Statement (SS) 31/15 – ICAAP and SREP, clarifying expectations on how firms should assess, document and justify Pillar 2A capital in ICAAPs, including how to reflect revised methodologies and scenario analysis.
• The PRA updates SS 4/25 – ICAAP and SREP for SDDTs, setting proportionate ICAAP expectations and aligning SDDT guidance with the revised Pillar 2A framework.
• The PRA updates SS 32/15 – Pillar 2 reporting, including revised expectations on the content, frequency and quality of Pillar 2 reporting and how firms should complete the updated Pillar 2 templates.

Suggested Considerations

• Map your firm’s current Pillar 2A capital framework against the updated SoP 5/15 and, where applicable, SoP 5/25 to identify methodology changes across credit, operational, pension, market and counterparty credit risk.
• Update ICAAP methodologies, models and documentation to reflect revised PRA expectations, including new or enhanced use of credit risk and operational risk scenarios and any updated calibration standards.
• Review and, where necessary, redesign ICAAP governance (board oversight, senior management ownership, model risk and validation frameworks) to ensure that new scenario‑driven and systematic Pillar 2A methodologies are subject to appropriate challenge and approval.
• For firms with material sovereign, central bank, regional government or unconditionally cancellable retail exposures, implement the new systematic Pillar 2A credit risk methodologies and assess the impact on capital requirements and risk‑weighted exposure allocation.
• For firms with significant operational risk, enhance scenario analysis frameworks to capture low‑frequency, high‑severity loss events at the PRA’s expected soundness level, and embed these outputs into ICAAP capital quantification.
• For firms with defined benefit pension schemes, reassess pension obligation risk using the updated PRA framework, removing reliance on old PRA‑prescribed stresses and focusing on scheme‑specific residual risks, buy‑ins and funding strength.

Key Dates

Who is Affected