May 2026 Regulation Update

Pillar 2A Review – Phase 1

The Prudential Regulation Authority (PRA) published its Policy Statement 15-26 in which it confirmed that all changes as a result of the Pillar 2A review will be implemented on 1^st January 2027. In the earlier consultation (12-25), multiple effective dates had been proposed, but they will no longer be applicable. Of note are:

• The IRB Benchmarking method (comparison of a firm’s credit risk standardised approach weights at a portfolio level versus the IRB benchmark) will be withdrawn.
• Systematic methodologies will be introduced for non-UK exposures to central, regional and local governments; and central banks. Minimum effective risk weights will be introduced and contribute towards a Pillar 2A add-on.
• For retail unconditionally cancellable commitments, a credit conversion factor add-on of 10% or the value that a firm derives (with justification) at a portfolio level, reduced by 10%, will be applicable.

The PRA issued an updated version of its Supervisory Statement SS 4-25 applicable to ICAAPs of firms that will be subject to the Small Domestic Deposit Takers Regime. This statement incorporates requirements of PS 15-26 and is effective from 1^st January 2027.

PRA Business Plan 2026-27

The PRA issued a business plan for 2026-27 and within it, there were the following items of interest:

• New requirements for reporting of operational incidents and third-party relationships will be implemented by the PRA and the Financial Conduct Authority.
• The PRA will work closely with HM Treasury on reforms to the ring-fencing regime. As part of this is the possibility of allowing ring fenced entities to offer more products and services to UK businesses. There may also be sharing of resources (e.g. Information Technology and Processing) across the ring fence. A consultation paper is expected by the end of the summer.
• The PRA will launch a firm engagement portal, initially to enable certain regulatory transactions to be submitted more efficiently.
• Changes will be made to securitisation rules to make capital requirements more proportionate. As a result, the cost of investing and issuing securitisations is expected to fall.

Financial Conduct Authority’s (FCA) Regulatory Initiatives Grid

The FCA published its grid that lists planned regulatory changes. Of note are the following.

Large Exposures Framework

The various proposals that were included in Consultation Paper 14-24 and were not part of Policy Statement 14-25, will be finalised in a publication in Q4 2026. Of the proposals not yet finalised is the proposed withdrawal of the use of the Internal Models Method to calculate the counterparty credit risk exposure on securities financing transactions (SFTs).

Complaints Reporting

New reporting will be introduced from July 2027. The first reporting period will be 1^st January to 30^th June 2027. Three separate returns (Complaints DISP 1 Ann 1R; Consumer Credit Complaints; PS Complaints) will be replaced by a single one. Further details are in Consultation Paper 25-13 and Policy Statement 25-19.

Pillar 3 Disclosures on MREL

Four new templates will be introduced with effect from 1^st January 2027. Disclosures for a period ending 31 December 2026 will be impacted. Further details are in PRA Policy Statement 11-26. Although there are four new templates, not all MREL firms (i.e. those with a minimum capital need that exceeds the higher of ‘Tier 1 to meet the leverage ratio requirement’ and the ‘total of Pillar 1 and Pillar 2A’) will need to populate each one.

High Loan to Income (LTi) Residential Mortgage Lending

Subject to changes in response to feedback to consultations, it is intended that firms be able to increase their share of High LTi lending during H2 of 2026. At an aggregate level across the sector, the 15% ceiling (volume of such lending averaged over the four previous quarters) will remain in place.

Operational Resilience – Incident, Outsourcing and Third Party Reporting

Third party arrangements reporting will consist of a register that is to be maintained and submitted to the PRA on an annual basis. Third country branches are excluded from this requirement.

Operational incidents reported in a standard format will also be introduced.

Submissions will be to FCA Connect. Implementation is expected in March 2027. Further details are in PRA Consultation Paper 17-24 and Policy Statement 7-26.

Investment Firms Prudential Regime

The regime is to be reviewed. Firms will be invited to provide feedback during 2026. A consultation paper will be issued in 2027.

WIRES Releases

 

Version No.	Content	Estimated Release Date
7.3.0	Basel 3.1 and the Small Domestic Deposit Takers Regime – Bank of England Banking Taxonomy 4.0.0 (DPM, validation rules, templates)	01/07/2026

 

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This regulatory update is Whistlebrook’s understanding of the position as at 1st June 2026.