PS25/25 – Enhancing banks’ and insurers’ approaches to managing climate-related risks – Update to SS3/19
Executive Summary
PS25/25 is the PRA's policy statement providing feedback on CP10/25 and issuing updated Supervisory Statement SS5/25, which replaces SS3/19 to enhance banks' and insurers' management of climate-related financial risks through strengthened governance, risk management, scenario analysis, data quality, and disclosures. It matters because it sets a higher regulatory bar for embedding climate risks proportionately into core processes like ICAAP, ILAAP, ORSA, and financial reporting, promoting resilience and strategic decision-making amid evolving climate threats. #
What Changed
The main changes in SS5/25 from SS3/19 and CP10/25 responses include: - Proportionate application clarification: New 'Overarching aims' section in Chapter 3 explains how firms should tailor expectations to their climate risk exposure, business size, and complexity via a two-step process (assess materiality, then respond). - Governance strengthening: Boards and senior management must actively oversee climate risks, embedding them in strategy and ensuring accountability. - Risk management enhancements: Integrate climate risks into existing frameworks/risk registers (supplementary sub-registers allowed); 'accept, manage, avoid' is suggestive, not mandatory; aligns with SS1/21 on operational resilience. - Climate scenario analysis (CSA) advancements: Firms must use CSA strategically for decisi
What You Need To Do
- Conduct gap analysis against SS5/25 within 6 months and remediate (e
- Integrate climate risks into board oversight, strategy, risk registers, ICAAP/ILAAP (banks), ORSA/stress testing (insurers), and financial reporting
- Perform CSA exercises commensurate with exposures, using suitable scenarios to inform decisions; enhance data quality and disclosures
- Document proportionate application (two-step process
- Ensure senior accountability and alignment with standards like SS1/21
Key Dates
Compliance Impact
Urgency: High – Effective immediately (3 Dec 2025), requiring significant uplift to existing approaches; non-compliance risks supervisory scrutiny, as PRA expects ambitious, ongoing progress and may request evidence. Matters for capital/liquidity planning, resilience, and strategic viability amid maturing climate risk landscape.
Who is Affected
Summary
Policy statement 25/25