On 22 May 2025, the Prudential Regulation Authority (PRA) published a consultation paper, CP12/25 on its Pillar 2A review – Phase 1.
Background
Pillar 2A capital requirements are set for firms to address risks not already, or not sufficiently, captured by Pillar 1. The PRA previously committed to review and update Pillar 2A by first addressing the consequential impacts of Basel 3.1 Pillar 1 changes on Pillar 2 in an off-cycle review of firm-specific requirements. It said that this would be followed by a review of the Pillar 2A methodologies after the PRA’s rules to implement the Basel 3.1 standards have been finalised.
Proposals
CP12/25 sets out the PRA’s proposed updates to the Pillar 2A methodologies and guidance, as the first phase of its two-stage review. Specifically, it outlines proposals relating to credit risk, operational risk, pension obligation risk, and market risk and counterparty credit risk, which are intended to:
- Address the consequential impacts of the near-final PRA rules that would implement the Basel 3.1 standards.
- Improve information, guidance and transparency for firms, including about the methodologies used by the PRA to inform the setting of Pillar 2A capital.
- Make certain changes to improve the proportionality of regulation, including proposals intended to reduce the reporting burden.
Next steps
The deadline for responses to CP12/25 is 5 September 2025.
After this first phase has been completed, the PRA plans to conduct a more in-depth review of individual methodologies within Pillar 2A, on which it will publish a further consultation setting out its proposals.