PS12/25 – Restatement of CRR and Solvency II requirements in PRA Rulebook – 2026 implementation

1: Overview

1.1 This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses to consultation paper (CP)8/24 – Definition of Capital: restatement of CRR requirements in PRA Rulebook, and parts of Chapter 3 and 7 of CP13/24 – Remainder of CRR: Restatement of assimilated law concerning supervisory expectations related to securitisations and the mapping of external credit rating agency ratings to credit quality steps (ECAI mapping), and outlines the PRA’s final policy in respect of those proposals.

1.2 This PS is structured as follows:

• Chapter 1 – Overview
• Chapter 2 – Definition of capital
• Chapter 3 – ECAI Mapping
• Chapter 4 – Securitisation supervisory expectations

1.3 The PRA’s final policy on the definition of capital, set out in Chapter 2, comprises the following:

• amendments to the Own Funds and Eligible Liabilities (CRR) Part and the Definition of Capital Part of the PRA Rulebook (Appendix 2);
• a new statement of policy (SoP) – The PRA’s approach to waivers and permissions under Own Funds (CRR) Part (Appendix 4); and
• amendments to supervisory statement (SS)7/13 – Definition of capital (CRR firms) (Appendix 5).

1.4 The PRA’s final policy on ECAI mapping, set out in Chapter 3, comprises the following:

• the introduction of a new Credit Risk: Standardised Approach (CRR) Part of the PRA Rulebook for CRR firms, amendments to the Solvency Capital Requirement – Standard Formula, Matching Adjustment and Glossary Parts of the PRA Rulebook for Solvency II firms and the introduction of a new Securitisation (CRR) Part of the PRA Rulebook for CRR firms (Appendix 6);
• amendments to Technical Standard 2016/1799 (Appendix 7);
• amendments to SS10/18 – Securitisation: General requirements and capital framework (Appendix 8); and
• amendments to SS3/17 – Solvency II: illiquid unrated assets (Appendix 9).

1.5 The PRA’s final policy on updates to securitisation supervisory expectations, set out in Chapter 4, comprises of amendments to SS9/13 – Securitisation: Significant Risk Transfer (Appendix 10).

1.6 This PS is relevant to PRA-authorised banks, building societies, PRA-designated investment firms and PRA-approved, or PRA-designated, financial or mixed financial holding companies (collectively ‘firms’). It is not relevant to credit unions or third-country branches.

1.7 In addition, Chapter 3 on ECAI mapping is also relevant to UK Solvency II firms, the society of Lloyds and its managing agents, and insurance and reinsurance undertakings that have a UK branch (third country branch undertakings), hereafter collectively referred to as ‘Solvency II firms’.^{footnote [1]}

1.8 Unless otherwise stated, any remaining references to EU or assimilated legislation refer to the version of that legislation which forms part of assimilated law.^{footnote [2]} In this PS and the appendices, the term ‘own funds’ is synonymous and used interchangeably with ‘regulatory capital’ or ‘capital’. For example, ‘own funds instruments’ is interchangeable with ‘regulatory capital instruments’. ‘Own funds’ is used in this PS when referring to material in the Own Funds and Eligible Liabilities (CRR) Part and the Definition of Capital Part of the PRA Rulebook, as this term has been used to ensure coherence with the other Parts of the CRR. ‘Regulatory capital’ or ‘capital’ is used when referring to material in SS7/13.

Accountability framework

1.9 In determining its policy, the PRA considers representations received in response to consultation, publishing an account of them and the PRA’s response (‘feedback’).^{footnote [3]} Details of any significant changes are also published. In the respective chapters in this PS, the ‘Summary of responses’ section contains a general account of the representations made in response to the CP and the ‘Feedback to responses’ section contains the PRA’s feedback. Updated explanations are included in the relevant chapters of this PS, where the PRA has made changes to the draft policy.

1.10 The policy and rules set out in this PS have been developed by the PRA in accordance with its statutory objectives and informed by the regulatory principles and the matters to which it must have regard when making policy and rules as set out in FSMA 2023.^{footnote [4]} Where the final rules differ from the draft in the CP in a way which is, in the opinion of the PRA, significant, the Financial Services and Markets Act 2000 (FSMA)^{footnote [5]} requires the PRA to publish:

• details of the differences together with an updated cost benefit analysis; and
• a statement setting out in the PRA’s opinion whether the impact of the final rules on mutuals is significantly different from: the impact that the draft rule would have had on mutuals; or the impact that the final rule will have on other PRA-authorised firms.

1.11 In CP8/24 and CP13/24, the PRA set out details of the applicable accountability framework and provided its assessment of relevant considerations separately in each chapter. The ‘Changes to draft policy’ section of the respective chapters in this PS refers to the assessments included in CP8/24 and CP13/24, taking into account consultation responses where relevant. When making CRR Rules and certain rules applying to holding companies, the PRA must consider and consult HM Treasury (HMT) about the likely effect of the rules on relevant equivalence decisions. The PRA has done so and received no further comments.

1.12 The PRA has included in this PS a statement identifying CRR restatement provisions (set out in Appendix 3). A summary of the purpose of the proposed rules are included in the relevant chapters of this PS.

Implementation and next steps

1.13 The implementation date for final rules and policy material reflecting the policy changes set out in this PS is 1 January 2026.

1.14 This policy statement covers the PRA proposals in CP8/24 and some of the PRA’s proposals in CP13/24. The remaining proposals consulted on in CP13/24 (including those set out in Chapter 3 that have not been covered in this PS) are dependent on the finalisation of the Basel 3.1 rules and will be the subject of a subsequent policy statement.^{footnote [6]}

2: Definition of Capital

2.1 In CP8/24, the PRA proposed to restate the majority of the requirements in Part Two of the CRR relating to definition of own funds without substantive changes. The PRA proposed to make some minor adjustments to certain requirements to enhance the proportionality or transparency of the PRA’s approach. The PRA proposed the following in CP8/24 to come into force on 1 January 2026:

• Proposal 1 – restate the vast majority of CRR requirements relating to the definition of own funds without substantive change;
• Proposal 2 – proportionality in the Pre/Post-Issuance Notification (PIN) regime;
• Proposal 3 – inclusion of interim profits in Common Equity Tier 1 (CET1) capital resources;
• Proposal 4 – reduction of Additional Tier 1 (AT1) and Tier 2 instruments;
• Proposal 5 – clarify the regulatory capital treatment of non-CET1 shares;
• Proposal 6 – require PRA permission for additional forms of capital reduction;
• Proposal 7 – permit the terms governing CET1 instruments to reflect the possibility of (but not commit to) a future capital reduction;
• Proposal 8 – amend SS7/13 to facilitate other proposals; and
• Proposal 9 – set out the criteria for own funds-related permissions in a SoP.

Summary of responses

2.2 The PRA received five responses to CP8/24. The names of the three respondents to the CP who consented to their names being published are set out at Appendix 1. Two respondents did not consent to publication of their names. The PRA additionally received a response to CP13/24 containing suggestions relevant to CP8/24, and has included its feedback to these suggestions in this PS. Respondents generally welcomed the PRA’s proposals, while making a number of observations and requests for clarification which are set out in ‘Feedback to responses’ section of this chapter.

Changes to draft policy

2.3 The following changes have been made to the draft rules and related policy materials:

• correction of typographical errors;
• changes necessary to the PRA rules to reflect the delayed implementation of the Basel 3.1 standards; and
• inclusion of additional guidance in the new SoP – The PRA’s approach to waivers and permissions under Own Funds (CRR) and in SS7/13.

2.4 More detail on these changes is provided in the ‘Feedback to responses’ section of this chapter.

2.5 The PRA considers that these changes are not significant and that the provision of additional guidance will have a beneficial impact on firms.

2.6 The PRA notes that the changes made to the draft rules and related policy materials do not substantially amend the substance of the proposals in CP8/24. Therefore, the PRA objectives analysis, cost benefit analysis, opinion on the impact of its proposals on mutual societies, and consideration of ‘have regards’ for these proposals remain the same as set out in CP8/24.

2.7 In addition, when making CRR rules, the PRA must also publish a summary of the purpose of the proposed rules. The purpose of the rules included in Own Funds and Eligible Liabilities (CRR) Part and the Definition of Capital Part of the PRA Rulebook (Appendix 2) is to restate the relevant provisions in the assimilated CRR in the PRA Rulebook, with some minor modifications to certain requirements to enhance the proportionality or transparency of the PRA’s requirements on definition of own funds.

Feedback to responses

2.8 The PRA has considered the representations received in response to CP8/24. This section sets out the PRA’s feedback to those responses, and its final decisions. The sections below have been structured to group related responses as follows:

• implementation timing;
• minor clarifications to rules;
• addition of further guidance;
• permissions for reduction of own funds; and
• eligibility of capital instruments.

Implementation timing

2.9 The PRA proposed that the proposals in CP8/24 should be implemented on 1 January 2026. One respondent suggested that the proposals, and particularly Proposal 4, should be implemented as soon as possible. The respondent supported decoupling the proposals from other policies that the PRA also intended to implement on 1 January 2026.

2.10 The PRA has decided to maintain the original proposed implementation date. This has been achieved by decoupling these proposals from the PRA’s proposed implementation of the Basel 3.1 standards, requiring some minor changes to the rules.^{footnote [7]} The PRA considers that implementation on 1 January 2026 will provide firms with adequate time to prepare for these and other policies due to come into effect on the same date.

Minor clarifications to rules

2.11 One respondent suggested making two clarificatory changes. In several places, the proposed rules referred to share premium accounts ‘related to’ capital instruments. The respondent noted that after coming into existence, share premium is no longer linked to the capital instrument and is fungible. The respondent suggested instead referring to share premium accounts ‘resulting from the issue of’ capital instruments.

2.12 The PRA has decided not to implement this suggestion as it considers that the existing wording is sufficiently clear. The PRA notes that it has not observed any difficulties to date with the interpretation of this text.

2.13 The respondent also noted that the proposed pre/post-issuance notification (PIN) rules contained requirements for firms to notify the PRA ‘as soon as practicable’. The respondent suggested that the rules should require notification ‘as soon as reasonably practicable’, to better allow for delays outside the firm’s control.

2.14 The PRA considers that there is little or no tangible difference between the two formulations in this context. Nevertheless, the PRA has decided to make this change for consistency with other, similar rules.

Addition of further guidance

Timing of inclusion of interim profits in Common Equity Tier 1 capital

2.15 The PRA proposed that rather than being required to apply for prior permission to include interim profits in Common Equity Tier 1 capital (CET1) as is the case today, firms should instead be required to submit a notification afterwards.

2.16 One respondent welcomed this proposal while requesting that the PRA provide additional guidance on the point at which interim profits may be reflected in reported CET1 resources. The PRA has decided to add its expectations in this regard to SS7/13, including a worked example.^{footnote [8]} The PRA considers that this change will promote consistent application of the rules across firms.

Repurchases of AT1 and Tier 2 instruments that would materially enhance the safety and soundness of the firm

2.17 CRR Articles 77 and 78 set out the requirements for reducing own funds. Article 78(4) contains the requirements to be met before the PRA grants permission to reduce own funds instruments or related share premium accounts during the five years following issuance. The PRA proposed to restate this Article in a SoP^{footnote [9]} with an amendment indicating that the PRA may, in exceptional circumstances, decide to grant permission for repurchases of Additional Tier 1 (AT1) and Tier 2 instruments even if the other conditions are not met, but the action would materially enhance the safety and soundness of the firm.

2.18 Three respondents welcomed this proposal. One respondent requested that the PRA further clarify the circumstances in which it may decide to grant such a permission by incorporating additional guidance in SS7/13. The PRA has decided to add its expectations in this regard to SS7/13.^{footnote [10]}

Meaning of ‘substantially the same’

2.19 PRA PIN rules differentiate between instruments whose terms are ‘substantially the same’ as those previously reviewed by the PRA and those for which this is not the case. The PRA has set out in SS7/13 its expectations concerning the definition of ‘substantially the same’. The PRA did not propose in CP8/24 to amend those expectations. One respondent suggested that the PRA should clarify whether changes to certain specific features of AT1 instruments would result in them being ‘substantially the same’.

2.20 The current text of SS7/13 intends to provide firms with some flexibility to exercise judgment as to whether a given change would result in the instrument being ‘substantially the same’. To this end, it notes that AT1 instruments ‘will normally not be considered substantially the same’ if the firm is proposing changes to certain broad categories of provisions, or if there is ‘material change’ to other provisions.

2.21 The PRA considers that it is not desirable to set out its view on the specific AT1 features raised by the respondent, as this may raise questions as to the PRA’s view on other features. It would be impractical to identify and categorise an exhaustive list of all potential features of capital instruments. The PRA has decided instead to reinforce the existing language that provides flexibility for firms to exercise judgment.^{footnote [11]}

AT1 instrument trigger event

2.22 The CRR requires that for an instrument to be eligible as AT1, its terms must provide that a trigger event^{footnote [12]} occurs when the CET1 ratio falls below a specified level, which must be at least 5.125%. The PRA did not propose to change this requirement.

2.23 Separately, the PRA in SS7/13 expresses its view that a 5.125% CET1 ratio trigger may not activate in time to prevent the failure of a firm. And the PRA leverage ratio rules require that for an AT1 instrument to contribute to the numerator of that ratio, the trigger must be set at a minimum of a 7% CET1 ratio.^{footnote [13]} One respondent suggested in this context that the PRA should further clarify the minimum CET1 ratio trigger for instruments to be eligible as AT1.

2.24 The PRA has decided not to change the CRR requirement now. The PRA considers that a change to the minimum CET1 ratio trigger would likely constitute a material change to the proposals, necessitating further consultation, which could delay the timeline for implementation of the definition of own fund requirements. The PRA will continue to keep this in mind in its future review of the PRA rules.

Structuring AT1 instruments to achieve liability accounting

2.25 The CRR is indifferent as to whether an AT1 instrument is classified as equity or liability under the relevant accounting framework. SS7/13 notes that in some cases, firms may prefer to issue liability-accounted AT1 instruments to manage certain risks, such as currency risk. The PRA did not propose to make any changes in this area.

2.26 One respondent suggested that the PRA should further clarify its expectations on methods used to achieve liability accounting treatment for AT1 instruments; in particular, whether the PRA would prefer that instruments utilise a ‘contingent clause’ structure or a ‘variable conversion price’ structure.^{footnote [14]}

2.27 The PRA has decided not to accept this suggestion. The PRA does not have a preference on the accounting classification of AT1 instruments and do not wish to comment on the structure employed to achieve that accounting classification. As set out in section 3 of SS7/13, the PRA expects to discuss with firms their analysis on features of draft capital instruments that they submit to the PRA under the PRA pre-issuance notification rules (Rule 7B, Definition of Capital Part of the PRA Rulebook), and the PRA expects firms to refrain from including features in capital instruments that may affect their ability to absorb losses.

Calculation of minority interests

2.28 Articles 81 to 88 of the CRR set out the requirements that must be met before firms may include minority interests in the consolidated own funds. One respondent to CP13/24 suggested two changes to the calculation of minority interests.

2.29 First, the CRR requires firms to determine the minority interests to be included in the consolidated own funds by calculating the surplus capital in a subsidiary over the lower of that subsidiary’s local requirements or its contribution to the group’s minimum requirements. The respondent suggested that the PRA should permit firms to use the higher of local and group requirements where it is agreed that this is a more accurate measure of loss absorbency.

2.30 The PRA has decided not to accept this suggestion. The PRA notes that Basel standards require the ‘lower of’ approach. The PRA’s view is that this requirement helps to ensure that the inclusion of minority interests in own funds is sufficiently prudent.

2.31 Second, Article 81(1) of the CRR refers to ‘CET1 items of a subsidiary’, but does not specify whether the baseline for this calculation should be the pre-consolidation figure (i.e. the CET1 position of the subsidiary itself) or post-consolidation figure (i.e. the CET1 of the subsidiary that is included at consolidated level). The respondent noted that the pre- and post-consolidation figures may differ where an overseas subsidiary uses a different accounting framework from the group, and suggested that the PRA provide guidance to ensure consistency of approach across firms.

2.32 The PRA considers that the pre-consolidation figure is the appropriate baseline for the calculation of minority interests, and has clarified this expectation in SS7/13.

Permissions for reduction of own funds

‘Exceptional circumstances’ test for applications under Article 78(4)(d)

2.33 As previously noted, CRR Articles 77 and 78 set out the requirements for reducing own funds, and Article 78(4) contains the requirements to be met before the PRA grants permission to reduce own funds instruments or related share premium accounts during the five years following issuance. Within this, Article 78(4)(d) contains the requirements to be met before the PRA grants permission where the own funds instruments or related share premium accounts have been replaced with own funds instruments of equal or higher quality. The PRA proposed not to restate in its SoP the CRR requirement that such action is ‘justified by exceptional circumstances’.

2.34 One respondent welcomed this proposal. The respondent requested confirmation that the proposed change would mean that firms are free to conduct tender exercises during the five years following an instrument’s issuance.

2.35 The PRA has decided not to make changes to the draft policy. The PRA considers that the SoP was adequately clear as to the factors that the PRA will take into account when deciding whether to grant permission for such a transaction.

Timing of applications for reduction permissions

2.36 One respondent suggested that the PRA should reduce the timeline for review of applications for Article 77/78 permissions. Article 31 of the Own Funds (CRR) Part generally requires firms to submit such applications at least three months before the intended transaction would be announced to holders of the relevant own funds instruments.

2.37 The PRA notes that the relevant rules were outside the scope of CP8/24, but has considered whether changes should be made, including by analysing data on the time taken to reach decisions on such applications.

2.38 The PRA has decided not to amend the rules, on the basis that some proposed transactions are complex or require the firm to prepare and submit further supporting information during the application period. The PRA notes that the existing rules already provided for flexibility where it would be impracticable to comply with the general requirement. In most cases, the PRA approved the application for reduction of capital instruments before the three month period expired. The PRA aims to further reduce the time taken to reach decisions on regulatory transactions and will keep this matter under review.

Eligibility of capital instruments

Publication of CET1 list

2.39 The PRA proposed not to restate a provision of the CRR that requires it to maintain and publish a list of all forms of capital instruments that qualify as CET1 instruments. One respondent suggested that it would be helpful for the PRA to continue to maintain and publish this list. The respondent suggested that a commitment to do so could be added to SS7/13.

2.40 The PRA confirms that it intends to continue to maintain and publish the list. The relevant provision to require the PRA to publish the list was not included in the draft rules because it would not be operable, as it is not possible for the PRA to bind itself with its own rules. Similarly, the PRA does not consider that it is appropriate to include a commitment in a Supervisory Statement, which contain the PRA’s expectations for firms. The PRA therefore has not implemented this suggestion.

Implementation and next steps

2.41 HMT has made Regulations that revoke the relevant provisions of the CRR. The PRA rules and policy materials to restate these (see appendices 2, 4 and 5) will come into force on 1 January 2026.

3: ECAI Mapping

3.1 In Chapter 7 of CP13/24, the PRA proposed rule and technical standard updates in respect of the mapping of external ratings produced by external credit assessment institutions (‘ECAIs’) to credit quality steps (‘CQSs’). These are specified in the capital adequacy frameworks for Solvency II firms, banks, building societies and designated investment firms. Most PRA and some FCA-authorised firms are required to apply these mappings.

3.2 The PRA proposed to restate updated mapping tables in the PRA Rulebook which would replace the mapping tables currently set out in:

• TS2016/1799 for bank, building society and designated investment firms’ exposures that are risk-weighted under the Standardised Approach to credit risk (‘SA’).
• TS2016/1801 and Table 1 of SS10/18 for bank, building society and designated investment firms’ securitisation positions that are risk weighted under the External Ratings Based Approach (SEC-ERBA).
• TS2016/1800 for UK Solvency II capital adequacy.

3.3 In CP13/24, the PRA proposed modest updates to the content of these tables when restating them into the relevant parts of the PRA Rulebook. The changes reflect new rating scales that have come to market since the existing tables were published and minor amendments to the mapping of some specific rating categories to CQSs.

3.4 The PRA proposed that the insurance-related rule changes would come into force on 1 July 2025, and other mapping-related rule changes would come into force on 1 January 2026.

Summary of responses

3.5 The PRA received five responses to Chapter 7 of CP13/24. The names of the respondents who consented to their names being published are set out at Appendix 1. Respondents generally welcomed the PRA’s proposals to restate mapping tables in PRA rules and to make modest updates. Some respondents requested clarifications and argued that the PRA should make further changes to its draft policy to reflect the PRA’s implementation of the Basel 3.1 standards.

3.6 The PRA received one response to Chapter 7 of CP13/24 containing a suggestion relevant to Chapter 3 of CP13/24. The response does not relate directly to the mapping tables which will be implemented on 1 January 2026. The PRA is not providing feedback to this response in this PS. Feedback to this response will be provided along with the PRA’s feedback to the other responses to Chapter 3 of CP13/24.

Changes to draft policy

3.7 Following the responses to the PRA’s proposals, the PRA has amended its draft rules to map the Banque de France’s Global ANACOT long-term issuer credit rating scale. The PRA has also amended its draft rules to remove the mapping of the Economist Intelligence Unit Limited's sovereign rating band scale to reflect that, as of April 2025, it is no longer a credit rating agency that is registered by the FCA. The PRA has also made minor changes to its draft rules and draft amendments to TS 2016/1799 to reflect that the mapping tables will now be implemented ahead of the implementation of the Basel 3.1 standards. The PRA notes that these changes do not amend the substance of the other mappings proposed in CP13/24.

3.8 As discussed in more detail in the ‘Feedback to responses’ section, having considered the responses to the proposals in Chapter 7 of CP13/24, the PRA is minded to make further changes to its draft policy published in CP13/24, alongside its implementation of the Basel 3.1 standards. However, these changes would take effect later than 1 January 2026 and the PRA will publish amendments to its near-final rules in relation to these areas in due course.

3.9 The PRA does not consider that the changes to its draft policy set out in this PS, including the further changes it is minded to make in due course, alter the PRA objectives analysis, cost benefit analysis, opinion on the impact of its proposals on mutual societies relative to other PRA-regulated firms, and consideration of ‘have regards’ set out in CP13/24. The PRA does not consider that the changes to its draft rules will have a material impact on mutuals relative to the those published alongside CP13/24.

3.10 In addition, when making CRR rules, the PRA must also publish a summary of the purpose of the proposed rules. The purpose of the rules included in CRR Firms, Solvency II Firms: Credit Quality Steps Mapping Instrument 2025 is to restate the relevant provisions in the assimilated technical standards in the PRA Rulebook, with modest updates to the mapping tables to reflect new rating scales that have come to market since the existing tables were published and minor amendments to the mapping of some specific rating categories to CQSs.

3.11 The PRA submitted the final technical standards instrument to HMT for approval and HMT approved the technical standards instrument.

Feedback to responses

3.12 The PRA has considered the representations received in response to CP13/24. This section sets out the PRA’s feedback to those responses, and its final decisions. The sections below have been structured to group related responses as follows:

• finalisation of the mapping tables;
• provision of mapping guidance; and
• interaction with the implementation of the Basel 3.1 standards.

Finalisation of the mapping tables

3.13 Three respondents supported the proposed mappings of the rating scales set out in CP13/24 and their inclusion in the PRA Rulebook. One respondent supported the PRA’s proposal to retain the existing mapping methodology when conducting this mapping exercise, noting the importance of aligning with international standards. The PRA was also asked if credit assessments produced by the Banque de France would no longer be mapped by the PRA under its proposals.

3.14 Having considered the responses to CP13/24, the PRA has decided to implement the mappings proposed in CP13/24 with two changes. Firstly, the PRA has decided to amend its draft rules to also include the Banque de France’s Global ANACOT long-term issuer credit rating scale in the mapping tables used by insurers and banks under the SA. Secondly, the PRA has decided to amend its draft rules to remove the mapping of Economist Intelligence Unit Limited’s sovereign rating band scale in the mapping tables to reflect changes that occurred after the consultation (as outlined in the ‘Changes to draft policy’ section). This will ensure that the PRA has mapped all ECAIs which may be used by UK firms.^{footnote [15]}

3.15 The PRA considers that the responses support its judgement that its approach to mapping supports a risk sensitive approach to determining capital requirements for externally rated exposures, supporting its primary objective of safety and soundness. Furthermore, the PRA agrees with respondents that it is important to use a methodology that is aligned with international standards and other jurisdictions. The PRA considers its mappings will support the competitiveness of UK firms and the availability (for regulatory purposes) of credit assessments for UK firms.

3.16 As stated in CP13/24, the PRA may consider revoking TS2016/1799 (which sets out the methodology by which the PRA determines ECAI mappings) in its entirety at a future date and set out its approach to mapping in a different form. The PRA would consult on any proposed changes.

3.17 One respondent pointed out an error in paragraph 7.13 of the CP relating to the summary of changes to the Solvency II mapping table. The PRA acknowledges that there was an error in paragraph 7.13 of CP13/24 that summarised the proposed changes to the mapping table for Solvency II firms. The paragraph incorrectly stated that the proposed update to the AM Best Europe Rating Services Limited – Financial strength rating scale, maps an ‘A+’ rating (previously omitted) to CQS 1. The correct statement is that the AM Best Europe Rating Services Limited – Long-term issuer credit rating scale and the Long-term issuer rating scale were updated to map an ‘aa+’ rating (previously omitted) to CQS 1. The PRA notes that the Solvency II mapping table published in Table 2 of Chapter 7 of CP13/24 was correct.

Provision of mapping guidance

3.18 One respondent noted the mapping tables map rating scales produced by ECAIs to CQSs but some ECAIs publish various types of credit rating which share the same rating scale (eg some produce distinct types of ratings for insurers and institutions which use the same rating scale). The respondent therefore requested that the PRA clarify which types of credit rating the mapping of each rating scale applies to. The respondent noted that reports produced by the Joint Committee of the European Supervisory Authorities describe which types of credit rating use each mapped rating scale for the purpose of assigning risk weights to various exposure classes under the SA.^{footnote [16]}

3.19 Having considered the response, the PRA has decided not to publish further guidance on how specific types of credit rating should be mapped. The PRA clarifies that the mapping of rating categories of a particular rating scale to CQSs applies to all credit ratings which use that rating scale, regardless of the type of credit rating or exposure being rated. The PRA considers that this is consistent with the previous approach to mapping under the relevant technical standards.

3.20 The PRA notes that it would expect the rating scale used by a specific credit rating to be published in a clear and public way by an ECAI, in order for the ECAI to meet its wider regulatory requirements. The PRA considers that firms should be able to assess which rating scale is used by a specific credit rating produced by an ECAI. The PRA also notes that an equivalent report is not published by the Joint Committee of the European Supervisory Authorities for the EU securitisation or EU Solvency II mappings.

3.21 The PRA clarifies that firms are able to apply the mappings to new types of credit rating that come to market after the implementation of its final rules which use an existing rating scale included in the mapping tables. The PRA notes that it would consider those new types of credit rating as part of its ongoing monitoring and review of the mappings for relevant rating scales to ensure the mappings remain prudent.

Interactions with the implementation of the Basel 3.1 standards

3.22 This section only applies to the mapping table used to assign risk weights to exposures under the SA.

3.23 Three respondents provided feedback relating to the requirement in the PRA’s near final Basel 3.1 rules that, in most cases, firms may not use credit ratings for risk weighting exposures to institutions under the SA that incorporate assumptions of implicit government support.^{footnote [17]} Respondents argued that the PRA should map new rating scales that were compliant with this requirement, or provide clarity on whether new rating scales can be used for capital requirements purposes if they have not yet been mapped.

3.24 The PRA agrees with respondents that it is important that firms have access to credit ratings of institutions that comply with the requirement to not incorporate assumptions of implicit government support, in order to support the effective implementation of the Basel 3.1 standards.

3.25 The PRA is therefore minded to amend its draft policy such that firms may use its existing mappings for new rating scales that are compliant with this requirement. The PRA is minded to only allow an existing mapping to be used where the ECAI’s methodology for assigning an exposure to a credit rating category within the unmapped rating scale is identical to that of the mapped rating scale, except for the consideration given to assumptions of implicit government support. The PRA would implement this policy alongside its implementation of the Basel 3.1 standards. The PRA will publish its near-final policy and any necessary amendments to its rules when it provides feedback to the responses to the proposals set out in CP13/24 that are not included in this PS.

3.26 The PRA considers that such a change would allow firms to use new credit ratings which use unmapped scales that meet the conditions set out above as soon as they are released, increasing ratings coverage sooner than if the PRA decided to explicitly map each new rating scale. The PRA also considers that, in requiring the difference between the methodologies of the rating scales be limited to assumptions of implicit government support, this change would ensure the mappings used by firms remain prudent and provide firms with clarity on the relation of these unmapped rating scales to those in the mapping tables. The PRA considers this would aid the consistent application of its rules. However, the PRA may consider introducing specific mappings for these rating scales if evidence of inconsistent application were to emerge in the future.

3.27 Two respondents also requested that the PRA amend its near-final policy implementing the Basel 3.1 standards to provide a transitional period for the requirement to use ratings that do not consider assumptions of implicit government support. Respondents argued that this would allow ECAIs more time to produce compliant rating products.

3.28 The PRA does not consider respondents’ request for a transitional period for this requirement to be within the scope of this PS. The PRA has already provided feedback to respondents’ feedback in PS9/24 – Implementation of the Basel 3.1 standards near-final part 2. The PRA notes that the implementation date of the Basel 3.1 standards has been delayed by a year to 1 January 2027, providing further time for new rating products to come to market.

Implementation and next steps

3.29 The mapping table rules relating to exposures risk weighted under the SA and under SEC-ERBA will come into force on 1 January 2026, as proposed in CP13/24. To coincide with the implementation of the new mapping tables, HMT has made Regulations that revoke TS2016/1801 in its entirety. The PRA will also delete the mapping table in Annex III of TS2016/1799. Alongside this, the PRA will delete supervisory expectations relating to generic mappings for long-term ratings set out in SS10/18.

3.30 The PRA notes that its mapping rules will now come into force ahead of the PRA’s implementation of the Basel 3.1 standards and the transfer of the remainder of the CRR into PRA rules. The PRA considers that this will ensure that firms benefit from up-to-date mappings as soon as possible, giving them access to a wider range of rating scales and ensuring they are holding a proportionate amount of capital.

3.31 The PRA notes that further amendments will be required to:

• its near-final Basel 3.1 rules to reflect the implementation of the updated mapping tables. These amendments were originally set out in CP13/24; and
• its final rules introducing the updated mapping tables in the PRA Rulebook and TS2016/1799 published alongside this PS, to reflect the implementation of the Basel 3.1 standards.

3.32 The PRA will publish these amendments in due course. As set out in paragraph 3.5, the PRA received generally positive feedback to CP13/24. The PRA therefore does not intend to make substantive changes in relation to the mapping tables, except to clarify how the mapping table relating to exposures risk weighted under the SA may be applied to rating scales which do not incorporate assumptions of implicit government support, as set out in paragraph 3.24.

3.33 In CP13/24, the PRA proposed that the insurance-related CQS mapping rule changes should come into force on 1 July 2025. On 8 May 2025, the PRA communicated its intention to delay the implementation date for its final rules and policy materials for Solvency II firms in an update to the PRA Solvency II webpage. The PRA now confirms that the final rules and policy material relating to mapping tables for Solvency II will be implemented on 1 January 2026. To coincide with the implementation of the new mapping table, HMT has made Regulations that revoke TS2016/1800 in its entirety.  

4: Securitisation supervisory expectations

4.1 In Chapter 3 Securitisation requirements of CP13/24, the PRA proposed to restate, and in some cases modify, the relevant securitisation provisions in the assimilated CRR in the PRA Rulebook and other policy material such as supervisory statements or statements of policy. 

4.2 This chapter will cover aspects of the following policy proposals from Chapter 3 of CP13/24:

• Proposal 3: Supervisory expectations relating to the use of unfunded credit protection in synthetic SRT securitisations; and
• Proposal 4: Other changes to supervisory expectations relating to securitisations.

4.3 The remaining proposals consulted on in Chapter 3 of CP13/24 are dependent on the finalisation of the Basel 3.1 rules and will be the subject of a subsequent policy statement.

Summary of responses 

4.4 The PRA received 14 responses to Chapter 3 of CP13/24. The names of respondents to the CP who consented to their names being published are set out at Appendix 1. As well as those who consented, we also received two responses from respondents who did not consent to us publishing their names.

4.5 Respondents generally welcomed these PRA proposals. Respondents made a number of representations and requests for further clarification, which are set out in the ‘Feedback to responses’ section below.

Changes to draft policy 

4.6 Having had regard to the representations made in response to proposals 3 and 4 in Chapter 3 of CP13/24, the PRA has decided to implement certain changes to SS9/13 with effect from 1 January 2026.

4.7 Consequently, the PRA has amended SS9/13 to add new supervisory expectations that are not dependent on the PRA rules implementing the Basel 3.1 standards. The new supervisory expectations are described later in this Chapter. There are additional non-substantive changes to SS9/13, such as updates to CRR references and terminology. The remaining amendments to PRA supervisory expectations that are dependent on the PRA rules implementing the Basel 3.1 standards will be the subject of a subsequent policy statement.

4.8 The PRA notes that the further updates to SS9/13 described in this policy statement do not materially amend the substance of proposals 3 and 4 as set out in Chapter 3 of CP13/24. The PRA considers its PRA objectives analysis, cost benefit analysis, opinion on the impact of its proposals on mutual societies, and consideration of ‘have regards’ in CP13/24 with regards to these proposals remains appropriate.

Feedback to responses

4.9 The PRA has considered the representations received in response to CP13/24. This section sets out the PRA’s feedback to those responses relevant to the policy proposals covered in this chapter, and its final decisions. The responses have been grouped as follows: 

• Proposal 3: Supervisory expectations relating to the use of unfunded credit protection in synthetic SRT securitisations.
• Proposal 4: Other changes to supervisory expectations relating to securitisations.

Proposal 3: Supervisory expectations relating to the use of unfunded credit protection in synthetic SRT securitisations

4.10 In Chapter 3 of CP13/24, the PRA proposed to clarify its supervisory approach to the use of unfunded credit protection in synthetic Significant Risk Transfer (SRT) securitisations by adding supervisory expectations to SS9/13 – Securitisation: Significant Risk Transfer (Appendix 8). The PRA takes the view that in principle it should be possible for originator institutions to use unfunded credit protection for achieving SRT where relevant requirements and supervisory expectations are met.

4.11 The PRA received seven responses to this proposal. Respondents generally welcomed the additional clarification, whilst a small number of representations were made expressing caution over the PRA’s approach.

4.12 Respondents noted the benefits of this clarification to the UK’s international competitiveness, citing the alignment of the UK with international prudential standards, notably with the EU, which has an existing unfunded SRT market. Two respondents noted the benefits of increased lending capacity to the real economy, thereby supporting economic growth.

4.13 Two respondents noted the benefit to financial stability through reduced systemic risk, as credit risk would be transferred away from the banking sector. Three respondents noted the benefit to financial stability of increased portfolio diversification of protection providers. Two respondents expressed caution over the potential for risk amongst synthetic securitisations to become systemic. The PRA will continue to monitor the development of this segment of the SRT market.

4.14 Two respondents noted that the risk of late or non-repayment by prudentially regulated insurers and reinsurers is extremely low, given that these firms are appropriately capitalised under the Solvency II regime. The PRA acknowledges the representations that the risk of non-payment in unfunded SRT is low in practice.

4.15 One respondent requested for this proposal to be implemented earlier than 1 January 2026. The PRA has considered this response and has decided to maintain the proposed implementation date of 1 January 2026. This is to ensure that firms have adequate time to prepare for the new supervisory expectations. Following the delay in implementation of the Basel 3.1 standards in the UK by one year until 1 January 2027, the PRA notes that the implementation of this supervisory expectation is before that of the remaining proposals set out in Chapter 3 of CP13/24, which will be the subject of a subsequent policy statement.

Proposal 4: Other changes to supervisory expectations relating to securitisations 

4.16 In Chapter 3 of CP13/24, the PRA proposed to strengthen supervisory expectations regarding senior management’s role in overseeing SRT transactions in SS9/13. This includes specifying that senior managers holding the Chief Finance Function (SMF 2) or relevant Prescribed Responsibilities, should be accountable for the oversight and approval of features affecting risk transfer and capital reduction. Additionally, SRT notifications should include attestations from these senior managers regarding the accuracy and completeness of information provided and that SRT has been achieved. 

4.17 The PRA received four responses to this proposal. Three respondents requested clarification as to whether the SMF would be permitted to rely on expert judgement, noting the complexity of SRT transactions. Two respondents requested a materiality threshold for the proposed SMF oversight, citing potential bottlenecks. One respondent asked for the removal of the proposed oversight expectation entirely, citing concerns consistent with the aforementioned points.

4.18 Having considered these responses, the PRA has amended the draft expectations to clarify that a Senior Manager, while retaining accountability for the oversight and approval of these transactions, may rely on expert input and/or delegate the act of signing and submitting notifications, where this is consistent with the PRA’s expectations on reasonable steps and delegation.^{footnote [18]} The PRA does not intend to introduce a materiality threshold or remove this oversight expectation, as quality of SRT documentation continues to be important for the PRA irrespective of firm or transaction size.  

4.19 One respondent requested clarification that the expectation that SRT notifications include a comparison with relevant previous transactions applies only to prior transaction(s) that are structurally very similar to the transaction for which approval is sought, if any are identified. The PRA expects firms to provide a comparison with any relevant previous transactions. The respondent further requested for the PRA to provide an option for firms to provide a statement to confirm that no such transactions have been identified. The PRA has provided the explicit option for the firm to provide a statement that no such transactions have been identified, and therefore no comparison is required.

4.20 Having considered the representations in response to the proposals in Chapter 3: Securitisation requirements of CP13/24 on enhanced supervisory expectations for senior managers in relation to their role in overseeing SRT transactions and including comparisons with relevant previous transactions in SRT notifications, the PRA has decided to amend its proposed policy in these areas as described in paragraphs 4.18 and 4.19. There are additional non-substantive amendments SS9/13, for example, updates to CRR references and, in the case of the updates to paragraph 3.1 of SS9/13, amendments for consistency with the relevant provisions of the CRR.

Implementation and next steps

4.21 The updates to SS9/13 will come into force on 1 January 2026, as proposed in CP13/24.

4.22 The PRA notes that these supervisory expectations will come into force ahead of the PRA’s implementation of the other PRA rules on securitisation requirements. The PRA considers this to be beneficial for firms, as it provides additional clarity and transparency, without imposing an undue cost.

4.23 The PRA will publish an updated version of this SS, as well as the responses and PRA feedback for the other proposals in CP13/24, in a subsequent policy statement in due course.