PRA publishes policy statement on phase 1 of Pillar 2A review

The UK Prudential Regulation Authority (PRA) has published a policy statement (PS15/26) on phase 1 of its Pillar 2A review. The policy statement provides feedback on the PRA's previous May 2025 consultation paper (CP12/25). In addition, having considered the responses to CP12/25, the PRA has made changes to the draft policy materials to provide greater detail and increase clarity where relevant, including:

• Excluding exposure to SMEs from the systematic methodology for unconditionally cancellable commitments in the retail exposure class.
• Removing exposures secured by collateral recognised through the Financial Collateral Simple Method (FCSM) from the scope of the systematic methodology.
• Providing greater flexibility in how firms are expected to assess their idiosyncratic credit risks, compared to the consultation proposal to introduce expectations for firms to use credit scenarios.
• 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.

The PRA's final policy materials in this area can be found in the appendices to the policy statement. The PRA confirms that the implementation date for all final policy and rules in this policy statement is 1 January 2027, to align with the implementation of the Basel 3.1 standards. This means the changes to pension, market and counterparty credit risks will not have separate implementation dates in 2026 as initially proposed.

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