On 28 May 2026, the Prudential Regulation Authority (PRA) published Policy Statement 15/26 (PS15/26) setting out updates to Pillar 2A methodologies and related guidance, as the first phase of a two-stage review.

Background

In Consultation Paper 12/25 (Pillar 2A review) Phase 1 (CP12/25), the PRA proposed updates to Pillar 2A methodologies and guidance as the first phase of a two-stage review. Pillar 2A capital requirements are set for firms to address risks not already, or not sufficiently, captured by Pillar 1.

CP12/25 marked the beginning of a programme of work to modernise the PRA’s approach to Pillar 2A capital by improving the information, guidance and transparency around the setting of Pillar 2A capital over time. It also outlined the PRA’s proposals to address the consequential impacts of the PRA rules that would implement the Basel 3.1 standards.

Summary

The PRA explained in PS15/26 that respondents generally welcomed the PRA’s intention to address the consequential impacts of the implementation of the Basel 3.1 standards, as well as increase the transparency and proportionality of the PRA’s policy.

The PRA also set out that it received the most responses on the credit risk proposals. In this area, respondents expressed a range of views, with comments focused on the:

  • Case to retain the benchmarking methodology.
  • Calibration and scope of the two proposed systematic methodologies for certain exposures.
  • Level of prescription and the proportionality of the proposed approach to assessing idiosyncratic credit risk.

Having considered the responses to CP12/25, the PRA has made certain changes to the draft policy materials for the purpose of providing greater detail and increasing clarity where it considers appropriate, material changes include:

  • Credit risk: Excluding exposures to small and medium sized enterprises from the systematic methodology for unconditionally cancellable commitments in the retail exposure class (retail UCCs); and, providing greater flexibility in how firms are expected to assess their idiosyncratic credit risks, compared to the CP proposal to introduce expectations for firms to use credit scenarios.
  • Operational risk: Clarificatory updates to improve transparency and guidance for all firms, and changes to the small domestic deposit takers (SDDT) policy materials to align the operational risk Pillar 2A methodology for SDDTs and non-SDDTs.

Next steps

Following the completion of this first phase of Pillar 2A review, the PRA will conduct a more in-depth review of certain individual methodologies within Pillar 2A. The PRA will publish a further consultation on these proposals next year.

The amended Reporting Pillar 2 Part of the PRA Rulebook, reporting templates, reporting instructions and schedule, Supervisory Statements and Statements of Policy will come into force on 1 January 2027.