Firms are required to hold regulatory capital to absorb losses. However, banks in the UK often feel that they are holding heightened levels of regulatory capital, which is stifling their potential for evolution and expansion. 

On 28 October 2025, the PRA published Policy Statement PS20/25. This near-final PS summarises the PRA’s feedback on responses to CP 7/24 – The Strong and Simple Framework: Simplified capital regime for SDDTs.

The latest Policy Statement from the regulator near-finalises the retirement of the refined methodology for Pillar 2A capital, and embeds some non-substantive changes on pension obligation risk and interest rate risk in the banking book.

Katalysys recently hosted a roundtable in collaboration with UK Finance and representatives from the PRA, where we discussed the practical challenges firms are facing in preparing for implementation. Based on those discussions and our ongoing work supporting several institutions with Basel 3.1 readiness, we have produced a white paper focusing on the key areas of implementation that carry the greatest risk.

Hosted by UK Finance, Katalysys is pleased to announce a training programme, “The Basel Breakthrough: Future-Proofing Regulatory Reporting for 2027”, aimed at equipping banks and financial institutions with the knowledge, tools and strategies to navigate the forthcoming Basel 3.1 reforms.

As part of PS9/24, the PRA announced an off-cycle review of Pillar 2 capital requirements to address double-counting, rebase Pillar 2A, and mitigate unintended impacts from changes in Pillar 1 RWAs. Although delayed, the process has now resumed with revised reference dates. Firms must provide specified information as at 31 December 2025, with submissions due by 31 March 2026.

The PRA’s new CP21/25 proposes deleting 34 FINREP, 2 COREP, and PRA109 templates – a push to make regulatory reporting more proportionate and less duplicative—a welcome shift toward simplification and efficiency.

In April, the PRA published Consultation Paper 10/25 proposing updates to its supervisory expectations on climate-related financial risks (CRFR). This marks a step-change from SS3/19, enhancing requirements in areas such as governance, risk management, scenario analysis, data, and disclosure.

For small and medium-sized UK banks, these proposals are not only about compliance, but also a chance to embed climate resilience in business strategy, protect value, and build long-term competitive strength.

Liquidity stress testing remains a cornerstone of effective risk management and regulatory compliance for banks. However, a persistent challenge lies in interpreting what constitutes a “severe but plausible” stress scenario, particularly in the context of evolving depositor behaviours and increasing digitalisation of banking.

This paper aims to address this challenge by examining how stress scenarios can be robustly calibrated using empirical evidence backed by statistical methods, with particular focus on liquidity stress testing informing the Internal Liquidity Adequacy Assessment Process (ILAAP).

In this article, we outline the core expectations of an SEA, draw out common challenges, and describes how we can help you transform a regulatory obligation into a strategic opportunity. As the 1 October 2025 deadline approaches, banks must move swiftly to develop, review, and approve their SEA documents. Starting early is critical to allow for internal engagement, governance, and any required iterations of the document.

The PRA published a Policy Statement on 17 July 2025, outlining proposals to implement the remaining Basel large exposures standards (LEX standards). A key change for small and medium-sized banks is the proposed removal of CRM eligibility for immovable property, meaning exposures secured by immovable properties would no longer qualify for CRM under Large Exposures.

In early July, the PRA issued several policy statements and consultation papers with implications for banks of all sizes. We've summarised the key developments and outlined their practical impact across firm types.

The PRA published Policy Statement PS6/25, outlining measures to strengthen the supervision of branches and subsidiaries of foreign banks, while supporting the UK’s competitiveness.

The PRA has published Consultation Paper 12/25, marking the first phase of a two-stage review of its Pillar 2A methodologies and supporting guidance. This consultation seeks to address the consequential impacts of the PRA’s near-final rules for implementing the Basel 3.1 standards, while also providing additional clarity on its Pillar 2A methodologies.

As part of PS7/25, the PRA has published further details on its approach for calculating SME and infrastructure lending adjustments.

Arriving hot on the heels of our earlier article on what the 2025 Bank Capital Test Means for small- and medium-sized banks, the Prudential Regulation Authority (PRA) has quietly published an accompanying set of stress parameters. These include both rates-up (supply shock) and rates-down (demand shock) scenarios, and can serve as a useful benchmark for firms not participating in concurrent stress testing. They may be particularly helpful for use in internal stress testing exercises, including within the Internal Capital Adequacy Assessment Process (ICAAP).

With the Bank of England’s 2025 Bank Capital Stress Test now in motion, small and medium-sized banks should take note. While only the large banks participate directly, it is nonetheless of interest for other firms as they approach their next stress testing exercise. The latest publications bring stress parameters up to date from the 2024 Desk-based Stress Test, and some elements have changed. This article explores what banks can take away from the latest stress programme and how to reflect those developments in their own risk management processes.

Following our recent webinar, our team has prepared responses to questions raised during the event. Click the download button to read the questions and answers.

On Demand Webinar: Strategies and best practices for small and medium-sized banks

Recorded on: Thursday, 27 March 2025

Today, the Prudential Regulation Authority (PRA), in consultation with HM Treasury, announced a one-year delay to the implementation of Basel 3.1 in the UK. Originally scheduled to take effect on 1 January 2026 for banks not classified as Small Domestic Deposit Takers (SDDTs), the new implementation date is now set for 1 January 2027.