PS2/26 – Retiring the refined methodology to Pillar 2A – final
Executive Summary
The Prudential Regulation Authority (PRA) has finalized the policy to retire the refined methodology to Pillar 2A, which will take effect on January 1, 2027, aligning with the implementation of the Basel 3.1 standards. This change affects all PRA-regulated banks, building societies, and designated investment firms. The refined methodology will no longer apply to these firms, including Small Domestic Deposit Takers (SDDTs), as they will be subject to the Basel 3.1 standardized approach to credit risk.
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.
Action Required
- 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
Non-Compliance Risk
Failure to comply with the new policy may result in enforcement action, fines, or other regulatory penalties
Who is Affected
Related Regulations
Summary
Policy Statement 2/26