PS2/26 – Retiring the refined methodology to Pillar 2A – final

1: Overview

1.1 This Prudential Regulation Authority (PRA) policy statement (PS) provides the final policy to retire the refined methodology to Pillar 2A which was published as near-final in PS18/25 – Retiring the refined methodology to Pillar 2A – near-final.

1.2 This PS contains the PRA’s final policy materials detailed below: 

• amendments to supervisory statement (SS) 31/15 – The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) (Appendix 1).

1.3 This PS is relevant to all PRA-regulated banks, building societies, designated investment firms, and all PRA-approved or PRA-designated holding companies. Therefore, this PS is also relevant to Small Domestic Deposit Takers (SDDTs), as well as firms who meet the SDDT criteria and are considering becoming an SDDT.

1.4 This final PS has been published on Tuesday 20 January 2026. Alongside this PS, the PRA has also published final policy, rules, and supervisory expectations on a number of related banking capital frameworks:

• PS1/26 – Implementation of Basel 3.1 – Final rules  
• PS3/26 – Restatement of CRR requirements – 2027 implementation – final 
• PS4/26 – The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs) – final 

Background

1.5 In consultation paper (CP) 9/24 – Streamlining the Pillar 2A capital framework and the capital communications process, the PRA proposed to retire the ‘refined methodology’ in Pillar 2A when firms implement the Basel 3.1 credit risk standards. In PS18/25, the PRA published the near-final policy to retire the refined methodology to Pillar 2A.

1.6 In determining its policy, the PRA considered representations received in response to CP9/24, publishing an account of them and the PRA’s response (‘feedback’). See PS18/25, for a general account of the representations made in response to CP9/24, and the PRA’s feedback.

Summary of responses

1.7 The PRA received 12 responses to CP9/24, of which 11 related specifically to the proposal in Chapter 2, to retire the refined methodology to Pillar 2A. Appendix 4 of PS18/25, lists the names of respondents to the CP who consented to their names being published. Paragraph 1.17 and Chapter 2 in PS18/25, summarise respondents’ comments on this proposal.^{footnote [1]}

Changes to draft policy

1.8 There have been no changes between the near-final policy and the final policy. In PS18/25, the PRA made a minor adjustment to the draft policy material, specifically to paragraph 5.12A, in the near-final SS31/15. This change related to the implementation of retiring the refined methodology for SDDTs, as the Interim Capital Regime (ICR) was no longer required. This change is explained in greater detail in paragraphs 1.27-1.28 of PS18/25. This amendment is also reflected in the final policy.

1.9 This PS takes account of how the policy advances the PRA objectives and of significant matters that the decision maker had regard to.^{footnote [2]} Statements about how the near-final policy advances PRA objectives and the regulatory principles the PRA considers most material to the near-final policy can be found in PS18/25. The PRA considers these statements remain valid for the final policy.

Implementation

1.10 In CP9/24, the PRA proposed to align the implementation date for retiring the refined methodology to Pillar 2A with the date of the PRA’s implementation of the Basel 3.1 standards. This also aligns with the implementation date for the simplified capital regime for SDDTs, as set out in PS4/26 – The Strong and Simple Framework: The simplified capital regime for Small Domestic Deposit Takers (SDDTs) – final 

1.11 The Basel 3.1 policy and rules come into effect on Friday 1 January 2027, as set out in PS1/26 – Implementation of Basel 3.1 – Final rules. Accordingly, the policy to retire the refined methodology to Pillar 2A for all firms will take effect from 1 January 2027. From this date, the refined methodology will no longer apply to all firms, including SDDTs, as they will be subject to the Basel 3.1 standardised approach to credit risk.

1.12 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]}