The Prudential Regulation Authority has published its Business Plan for 2025/26. Setting out an ambitious regulatory agenda that balances safety and soundness with a renewed focus on competitiveness and growth. For firms operating across banking, insurance, and investment sectors, understanding these priorities is essential for strategic planning and regulatory compliance.
Four Strategic Pillars
The PRA’s 2025/26 priorities are organised around four interconnected themes. Reflecting both traditional prudential concerns and the evolving regulatory landscape post-Brexit.
Maintaining Safety and Soundness: The foundation remains unchanged. Ensuring banking and insurance sectors maintain resilience through robust capital frameworks, effective risk management, and operational continuity. The PRA will continue supervising liquidity and funding risks. Particularly following lessons learned from the failure of Silicon Valley Bank’s UK operations and wider market stress in March 2023. Cyber resilience receives particular attention this year. With the PRA undertaking threat-led penetration testing as firms face escalating risks from malicious attacks and operational incidents.
Identifying Emerging Risks: The PRA commits to staying ahead of new threats. Working closely with the Bank of England’s Fintech Hub to monitor technological developments. Areas of focus include fragmentation of the value chain, novel outsourcing arrangements, and concentration risks arising from firms’ reliance on third-party technology providers. This forward-looking approach recognises that tomorrow’s systemic risks may emerge from today’s innovations.
Supporting Competitiveness and Growth: This represents the most significant evolution in the PRA’s approach. Following the Financial Services and Markets Act 2023, the PRA now operates under a secondary objective to facilitate international competitiveness and medium-to-long-term growth. The regulator is embedding this objective across its operations, from cost-benefit analysis frameworks to stakeholder engagement processes. The Independent Evaluation Office assessed the PRA’s preparedness in 2024, and implementation of those recommendations will continue throughout 2025/26.
Operating an Efficient Regulator: The PRA is committed to improving its internal processes. Maintaining strong performance on authorisation applications, and ensuring resources are deployed effectively. PRA has a budget of £343 million for 2025/26 and is making a slight reduction in headcount as major multi-year projects conclude. The PRA’s focus is now shifting toward maximising efficiency whilst preserving regulatory effectiveness.
Banking Sector Initiatives
Several significant regulatory developments will shape the banking landscape over the coming year.
Basel 3.1 Implementation
Following consultation with HM Treasury, the implementation date for Basel 3.1 standards has been delayed to 1 January 2027. This allows time for greater clarity around US implementation plans. However, transitional arrangements will be compressed to three years, ensuring full implementation by 1 January 2030. The PRA will publish final rules once Parliament revokes relevant parts of the Capital Requirements Regulation. Industry feedback during the consultation led to enhanced provisions supporting UK market competitiveness. Including lower capital requirements for small and medium-sized enterprises.
Strong and Simple Framework
The simplified capital regime for small domestic deposit takers will be finalised in 2025. We expect PRA to publish a policy statement in Q4. This initiative aims to reduce regulatory burden on smaller institutions whilst maintaining prudential standards. Additional liquidity simplifications will accompany the capital regime changes. Thereby creating a more proportionate framework for challenger banks and building societies that pose lower systemic risks.
Bank Capital Stress Test
In collaboration with the Bank of England, the PRA will conduct a comprehensive stress test involving the UK’s largest and most systemic banks. This exercise will focus on financial cycle risks. Results will be used to inform capital buffer settings both for individual participating banks and at the system-wide level. The stress testing framework remains a critical tool for assessing sector resilience and calibrating countercyclical capital requirements.
Internal Model Approvals
The PRA continues reviewing firms’ internal ratings-based approaches to credit risk. Including the “hybrid” approach to mortgage modelling and the ongoing IRB repair programme. Particular attention will be paid to post-model adjustments, ensuring these temporary measures do not mask underlying model deficiencies. The regulator expects firms to demonstrate that capital adequacy calculations appropriately capture risk.
Securitisation Rules
Following Parliament’s revocation of relevant CRR provisions, the PRA will publish rules replacing EU securitisation capital requirements. The FCA and PRA also intend to consult in the second half of 2025 on further changes. The aim is to make the securitisation framework more proportionate. Supporting market development whilst maintaining appropriate risk sensitivity.
Insurance and Cross-Sector Developments
Solvency UK
Building on the Solvency UK reforms implemented at the end of 2024, the PRA will develop new policies designed to support innovation and improve industry competitiveness. These reforms aim to make the regime more efficient whilst encouraging investment in UK markets. Life insurers should prepare for stress tests assessing resilience to financial shocks, complementing the banking sector stress testing programme.
Remuneration Reforms
Following the removal of the bonus cap and changes to enhance proportionality for small firms in 2023, the PRA and FCA published CP16/24 in November 2024. CP16/24 proposed further reforms to the remuneration regime for banks, building societies and PRA‑designated investment firms. These proposals aim to simplify and streamline remuneration requirements, adjust deferral and vesting arrangements, and strengthen the link between pay, risk‑taking and delivery against supervisory priorities, while supporting UK competitiveness and growth. PRA is expecting to publish its final policy in the second half of 2025. Ahead of which firms should assess how any changes to deferral periods, material risk taker thresholds and accountability mechanisms could affect their remuneration structures and governance.
Senior Managers and Certification Regime
The PRA and FCA intend to consult on targeted changes to the SMCR. This will build on DP1/23 and the Chancellor’s November 2024 announcement. The PRA is aiming its reforms at improving clarity, efficiency and proportionality. Including streamlining senior manager approvals. PRA is working with HM Treasury on replacing the current statutory certification regime with a more proportionate, rules‑based approach. Firms should expect closer scrutiny of governance and accountability frameworks. This sits alongside opportunities to engage on how SM&CR can better support effective leadership without unnecessary administrative burden
Climate Change Supervision
The PRA intends to publish a consultation on updated supervisory expectations for banks and insurers. The PRA intends these proposals to help firms manage climate change effects on their businesses. Thereby maintaining the essential services they provide to the economy. This represents an evolution of the PRA’s approach. Moving from initial framework development to embedding climate risk management in day-to-day supervision.
Innovation and Digital Assets
The PRA continues contributing to the Bank of England’s work on innovation in money and payments. The PRA intends developing its policy implementing the BCBS standard on banks’ cryptoasset exposures in the UK. This follows growing international consensus on how traditional financial institutions should treat digital asset exposures for capital purposes.
The PRA will also engage with international partners to assess bank-related developments in digital money and cryptoassets markets. This includes monitoring deposit takers’ innovation in deposits, e-money, and stablecoins. Which is consistent with expectations set out in the Dear CEO letter the PRA issued in 2023. As digital assets become increasingly mainstream, the PRA’s approach balances support for innovation with appropriate risk management.
The new Future Banking Data project combines the Banking Data Review and aspects of the Transforming Data Collection initiative. This ambitious programme aims to simplify banking data reporting, reducing burden on firms whilst enhancing the PRA’s supervisory capabilities. Streamlined data collection will support both the competitiveness objective and effective supervision.
International Branches and Openness
The PRA remains committed to the UK being a responsibly open jurisdiction for international branches. Following consultation in 2024, the PRA expects to finalise updates in the first half of 2025. These changes reflect lessons from the March 2023 issues. Ensuring the PRA’s framework for assessing whether branches should subsidiarise appropriately captures activities of potential concern.
Importantly, the PRA expects the vast majority of branch business to remain unaffected by these changes. Clarification around booking arrangements and liquidity reporting may provide greater certainty.
Implications for Regulated Firms
The 2025/26 Business Plan represents both continuity and evolution. Firms should recognise that prudential regulation remains demanding. Capital requirements, stress testing, operational resilience, and cyber security all require sustained attention and investment. However, the current Government’s competitiveness and growth objectives creates opportunities for proportionate implementation of international standards in the UK.
Firms should actively engage with forthcoming consultations, particularly where proposed changes affect systems, governance, or reporting frameworks. Early preparation for Basel 3.1 implementation will help make transition costs manageable and reduce operational disruption. Boards and senior management functions should ensure they understand how these regulatory initiatives align with business strategy and resource allocation.
The PRA’s emphasis on efficiency and responsiveness suggests the regulator recognises the need to balance safety with supporting dynamic markets. Firms that demonstrate robust risk management whilst engaging constructively on competitiveness considerations will be well-positioned.
The coming year will be one of significant regulatory change. Organisations that invest in understanding the PRA’s priorities, strengthening control frameworks, and preparing for new requirements will maintain regulatory confidence. Whilst positioning themselves for sustainable growth in an increasingly competitive environment.
For guidance on PRA requirements across wholesale banking, insurance, asset management, and investment sectors, contact our specialist compliance consultancy team.
