PS8/25 – Updates to the UK policy framework for capital buffers

1: Overview

1.1 This Prudential Regulation Authority’s (PRA) policy statement (PS) provides the PRA’s final policy in relation to amendments being made to the UK framework on capital buffers, including to streamline some policy materials to enhance usability and clarity, following consultation paper (CP) 10/24 – Updates to the UK policy framework for capital buffers. The finalised policy is set out in the following appendices to this PS:

• statement of policy (SoP) – The PRA’s approach to identifying global systemically^{footnote [1]} important institutions (G-SIIs) and setting G-SII buffers (Appendix 1);
• amendments to SoP – The PRA’s approach to identifying other systemically important institutions (O-SIIs) (Appendix 2);
• amendments to SoP – The PRA’s approach to the implementation of the O-SII buffer (Appendix 3);
• reporting instructions for the purpose of identifying and assigning GSII buffer rates (Appendix 4);
• PRA Standards Instrument: The Technical Standards (specification of the methodology for the identification of Global Systemically Important Institutions) Instrument 2025 (Appendix 5); and
• PRA Rulebook: CRR firms: capital buffers (consequential amendments) instrument 2025 (Appendix 6).

1.2 This PS is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms, and their qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, investment firms, and financial institutions that are subsidiaries of these firms, regardless of their location. It is also relevant to counterparties of the above-listed entities to the extent that counterparties have financial contracts with such entities governed by third-country law. It is not relevant to credit unions.

1.3 This PS sets out the PRA policy material relating to the amendments to the UK framework on capital buffers; consistent with the approach set out in CP10/24, HM Treasury (HMT) is also making amendments to the framework. These amendments together result in some regulatory material on the UK capital buffers framework being removed from the statute book and replaced by PRA policy material. Details on the final HMT statutory instrument (SI) can be found at: The Capital Buffers and Macro-prudential Measures Regulations (SI 2025/572). This SI will be referred to as ‘the updated Capital Buffers Regulations (CBR)’ for the remainder of this PS.

Background

1.5 ‘The Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations (SI 2014/894) as amended’ is a piece of assimilated law, retained from the EU, which sets out the UK’s statutory framework for the Countercyclical Capital Buffer (CCyB), Capital Conservation Buffer (CCoB), Global Systemically Important Institutions (G-SII) buffer, Other Systemically Important Institutions (O-SII) buffer and the Systemic Risk Buffer (SRB). The PRA and Financial Policy Committee (FPC) currently implement these buffers in line with their respective responsibilities as set out in SI 2014/894.

1.6 Under Financial Services and Markets Act (FSMA) 2023, HMT has the power to revoke assimilated law relating to financial services. Under the FSMA 2023 Regulatory Framework, financial services regulators will generally take responsibility for setting the direct regulatory requirements that were previously contained within that assimilated law, acting within a framework set by HM Government and Parliament. This means that detailed regulatory requirements that currently sit within assimilated law, and can currently only be amended by primary or secondary legislation, can move into the regulators’ rules and policy materials. This is in line with the UK’s model of operationally independent regulators and where they will be easier and less time-consuming to update.

1.7 Consistent with this agreed approach, in September 2024, the PRA and HMT published their consultations on amendments to the UK framework on capital buffers. These amendments would result in some regulatory material on the UK capital buffers framework being removed from the statute book and replaced by PRA policy material. In addition, the PRA proposed to streamline some of its policy materials on capital buffers as part of this process, to enhance usability and clarity.

1.8 The proposals included amendments to, and streamlining of, PRA statements of policy (SoPs), PRA rules that refer directly to SI 2014/894, and UK Technical Standards (UKTS), including:

• revocation of the UK Technical Standards (UKTS) on the methodology for the identification of G-SIIs;
• introduction of a new SoP setting out the PRA’s approach to G-SII identification and buffers, which will replace the aforementioned UKTS and relevant provisions to be revoked in the CBR;
• minor amendments to the PRA’s existing SoPs on O-SII designation and O-SII buffer setting to reflect proposed amendments to the CBR; and
• minor consequential amendments to PRA rules that refer directly to the SI 2014/894.

1.9 In parallel, HMT published its draft SI, which proposed amendments to other parts of the CBR, including those relating to the CCyB, CCoB and SRB. These amendments proposed a transfer of responsibilities to the PRA, including setting the scope of application of the CCyB and CCoB.

Summary of responses and final policy

1.10 The PRA received one response to its consultation, which supported the proposals set out, and so the analysis, as presented in CP10/24, remains unchanged. When making rules, the PRA is required to comply with several legal obligations. In CP10/24, the PRA published its explanation of why the rules proposed by the CP were compatible with its objectives and with its duty to have regard to the regulatory principles. As the final policy remains the same in substance as the CP proposal, the analysis presented in CP10/24 fulfils those legal obligations for this PS.^{footnote [2]}

1.11 In November 2024, the PRA received a new remit letter from HM Government. The PRA judges that this new letter does not impact the compatibility of this final policy with its duty to have regard to the regulatory principles.

Implementation and next steps

1.13 The updated CBR has been made by HMT and comes into effect on 31 July 2025. The policy material set out in this PS will therefore come into effect on the same date.

1.14 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 [3]}