On 7 July 2026, the Prudential Regulation Authority (PRA) published a statement on enhancing the usability and releasability of capital buffers.

Background

In December 2025, the Financial Policy Committee (FPC) announced that it would work with the PRA and international authorities to enhance further the usability of regulatory capital buffers, reducing banks’ incentives to have capital in excess of regulatory requirements and buffers and thus supporting the provision of real economy lending. In relation to this, the FPC has outlined its view on how to achieve a simpler and more effective capital buffer framework that centres on a single buffer that is releasable in stress, and that can be used without automatic distribution restrictions, which the PRA endorses.

Summary

In relation to this, the PRA has set out certain actions it intends to take, in particular:

  • In the short term, the PRA clarifies that it could release other systemically important institution (O-SII) buffers in the event of systemic stress. It will do this by exercising its existing discretionary powers to vary the ‘O-SII buffer’ rates, including setting them to zero, under the Capital Buffers and Macro-prudential Measures Regulations 2025, engaging with the FPC. Releasing the O-SII buffer would lower the level of capital at which automatic distribution restrictions apply in stress.
  • In addition, the PRA intends to consult in H2 2026 on proposed changes to its Statement of Policy – the PRA’s approach to the implementation of the O-SII buffer and related aspects of its approach to varying O-SII buffer rates in the event of systemic stress. This will include some further qualitative guidance (e.g. example scenarios based on different types of stress and recovery) on rebuild expectations.

Next steps

In addition to the steps being taken to enhance releasability, the PRA has set out that it will consider firms’ feedback that greater clarity on the use of the PRA buffer in circumstances outside periods of systemic stress could help buffer usability. It will also consider whether further engagement with relevant stakeholders, including investors and rating agencies, could support understanding of the role of regulatory capital buffers and how the framework is intended to operate.