PRA Business Plan 2026/27 Sets Regulatory Priorities for Banking and Insurance Sectors

Prudential Regulation Authority Business Plan 2026/27

The 2026/27 Business Plan sets out the workplan for each of our strategic priorities and our strategy to advance our primary and secondary objectives. This year’s business plan confirms the PRA’s continued focus on safety and soundness and policyholder protection, alongside a proportionate and efficient approach to regulation.
- ## Related links Related links

• PRA annual reports and business plans
• CP7/26 – Regulated fees and levies: Rates proposals 2026/27

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Maintain the safety and soundness of the banking and insurance sectors and ensure continuing resilience

Be at the forefront of identifying new and emerging risks, and developing international policy

Support competitive, dynamic and innovative markets, alongside facilitating international competitiveness and growth, in the sectors that we regulate

Run an inclusive, efficient, and responsive regulator within the central bank

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Published on
17 April 2026

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Foreword by Chief Executive Sam Woods

Sam Woods, Deputy Governor, Prudential Regulation, Chief Executive of the PRA

This business plan sets out how the Prudential Regulation Authority will deliver its objectives in the 2026/27 financial year. It reflects our continued commitment to high prudential standards, while strengthening efficiency, streamlining supervision and supporting growth.

Our statutory objectives remain unchanged from last year – with our primary objectives to promote the safety and soundness of firms and, for insurers, to protect policyholders, alongside our secondary objectives of facilitating competition, competitiveness and growth. Recent market turbulence resulting from events in the Middle East has highlighted the importance of a resilient financial sector, and in support of this, we will maintain our forward-looking supervisory regime and our efforts to manage current and emerging risks. Our work over the next year will include embedding our recent introduction of liquidity reporting for insurers, taking forward our work on bank liquidity which aims to respond to the faster bank runs that were experienced (mainly in the US) in 2023, and steps to ensure that use of Funded Reinsurance structures by life insurers do not compromise policyholder protection or broader financial stability. Together with the FCA, we will also implement new requirements for reporting of operational incidents and third-party relationships, improving and standardising the approach.

Alongside this, we will continue to implement and embed reforms that support a more streamlined and efficient regulatory framework, reducing unnecessary cost and complexity while maintaining resilience. In January 2026, we published rules implementing the remaining elements of Basel III, ensuring that capital requirements better reflect underlying risks without increasing overall requirements for the banking sector, and implementation will proceed through 2026/27. We finalised a simplified capital regime for small domestic banks, which will be fully in place from January 2027. We are also taking forward our work to streamline regulatory reporting for banks through the Future Banking Data Programme. For insurers, we have built on the Solvency UK reforms, including through the launch of the Matching Adjustment Investment Accelerator at the end of 2025.

Over the coming year, we will engage with industry and other stakeholders as we progress our objectives and deliver our strategic priorities. This engagement will include working closely with HM Treasury on reforms to the ring-fencing regime, supporting meaningful reform while maintaining an effective ring-fence. We are currently considering responses to our discussion paper on broadening UK life insurers’ access to alternative capital, with the aim of enabling new sources of capital that support economic growth while safeguarding policyholder protection. We are also working with the FCA to develop a proportionate authorisation process and a new regulatory framework for captive insurers, and to implement reforms to the Senior Managers and Certification Regime to reduce costs for banks and insurers without diluting accountability.

Internally, we are continually focused on improving how we operate as an organisation and are making significant efficiencies as part of delivering a material headcount reduction of around 140 staff this year. The savings from this will support investment in our systems, enabling us to tackle obsolescence and make better use of data and technology to support more timely and effective supervision. As set out in our recent sector-specific priorities letters, we are moving Periodic Summary Meetings (PSMs) to a two-year cycle for all firms, with the aim of making our engagement with firms more efficient for them and us. We are also continuing to improve the timeliness of our authorisations decisions, and provide support for innovative and growing firms as well as new inbound international entrants to the UK market.

My term as Chief Executive of the PRA will conclude in June. I am enormously grateful for the professionalism, expertise and dedication of colleagues across the PRA throughout the last decade, and for all the help they have given me in fulfilling my role. I am delighted to be passing the baton to Katharine Braddick, who may wish to adapt this plan after she starts in July. I am sure PRA colleagues will welcome her warmly and I wish her the very best for her term.

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Overview of responsibilities and approach

The PRA has two primary objectives:

• a general objective to promote the safety and soundness of PRA-authorised persons; and

• an objective specific to insurance firms for the protection of policyholders.
  The PRA has two secondary objectives:

• a competition objective, to facilitate effective competition in the markets for services provided by PRA-authorised persons in carrying on regulated activities; and

• a competitiveness and growth objective, to facilitate, subject to alignment with relevant international standards: (a) the international competitiveness of the economy of the UK (including, in particular, the financial services sector through the contribution of PRA-authorised persons); and (b) its growth in the medium to long term.
  The PRA’s objectives and priorities are delivered through responsive, risk-based regulation and supervision, and by developing standards and policies that set out our expectations of firms.

The PRA’s regulatory focus

The PRA’s regulatory focus is primarily at the individual firm and sector level, with the most important decisions taken by the Prudential Regulation Committee (PRC). The PRC works alongside the Bank of England’s (the Bank) other areas and committees, including the Financial Policy Committee (FPC), which has responsibility for the stability of the entire UK financial system. The PRA also works closely with the Financial Conduct Authority (FCA), including through the Chief Executive of the PRA being a member of the FCA Board and the Chief Executive of the FCA being a member of the PRC.

The PRA’s work is also informed by HM Treasury’s (HMT) remit letter, which sets out the government’s economic policy recommendations to the PRC. The PRA's response to the latest remit letter of November 2024 emphasised its commitment to supporting sustainable economic growth and responsible risk-taking. It noted that, to support growth, regulation must be robust and proportionate, and that it would facilitate innovation both for firms regulated by the PRA and its internal operations through the delivery of its primary and secondary objectives.

Firms regulated by the PRA

The PRA regulates 1,254 firms. [1] These consist of 686 deposit-takers (banks, building societies, credit unions, and designated investment firms [2] (DIFs)) and 568 insurers of all types (general insurers, life insurers, friendly societies, mutuals, the London market, and insurance special purpose vehicles (ISPVs)).

Chart 1: PRA supervised deposit-takers, as at January 2026

Chart 2: PRA supervised insurers, as at January 2026

PRA’s strategy

Each year, the PRA is required by section 2E of the Financial Services and Markets Act (FSMA) 2000 to review, and if necessary, revise its strategy in line with its statutory objectives. In addition, the PRA’s strategy is shaped by other responsibilities, such as the requirement to implement legislation and other changes necessary to meet international standards, and to continue to adapt to market changes and risks. In practice, the PRA’s strategy is articulated through its strategic priorities. [3]

In 2026, the PRA revised its strategic priority 1 to improve clarity and readability. Looking ahead, the PRA will continue to enhance its regulatory framework to maintain and ensure the safety and soundness of the banking and insurance sectors and ensure continuing resilience.

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PRA’s strategic priorities for 2026/27

This section summarises some of the initiatives the PRA will undertake in support of its strategic priorities this year.
| | Priority 1: Maintain the safety and soundness of the banking and insurance sectors and ensure continuing resilience

• Since 2013, the PRA has delivered extensive prudential reforms that have strengthened the safety and soundness of firms, enhanced policyholder protection, and supported the resilience of the banking and insurance sectors. This is underpinned by a robust forward looking supervisory regime focused on core prudential outcomes and strong international collaboration.

• During 2026/27, supervisory work around the implementation of Basel 3.1, Strong and Simple and operational resilience requirements will aim to ensure that firms remain well-capitalised, maintain strong liquidity and stable funding profiles, and have robust operational resilience against cyber risks. |
  | | Priority 2: Be at the forefront of identifying new and emerging risks, and developing international policy

• During 2026/27, the PRA will continue to identify and monitor emerging risks from geopolitical trends, economic and financial market developments, support responsible AI adoption including through monitoring the evolving use of AI by regulated firms, and scrutinise novel outsourcing arrangements and concentration risks. The PRA will continue to support the Basel Committee on Banking Supervision’s (BCBS’s) targeted review of elements of the international standard for the prudential treatment of cryptoasset exposures.

• The PRA will also continue to monitor sector-wide resilience, including through the Bank’s second system-wide exploratory scenario, to build a clearer understanding of how private markets behave under severe but plausible stress and simulation exercises. It will also maintain both international and bilateral engagement in a range of areas. |
  | | Priority 3: Support competitive, dynamic and innovative markets, alongside facilitating international competitiveness and growth, in the sectors that we regulate

• The PRA aims to advance its secondary objectives by supporting the ability of UK firms to compete internationally and the UK’s attractiveness as a global financial centre. The PRA will ensure that its rules remain proportionate and open to innovation.

• During 2026/27, initiatives in support of this include further streamlining of regulatory reporting for banks, through the Future Banking Data (FBD) Programme. The PRA will also provide tailored support for fast-growing and innovative financial firms through its new Scale-up Unit and support the concierge service for new inbound international firms. [4] |
  | | Priority 4: Run an inclusive, efficient, and responsive regulator within the central bank

• Efficient regulation, including the timely handling of regulatory transactions, supports both regulated firms and the wider economy. In recent years, the PRA has streamlined and accelerated processes to help enable more efficient interactions with firms.

• During 2026/27, the PRA will increase its efficiency and productivity and ensure that costs are tightly managed, in line with wider Bank work and in support of investment to tackle technology obsolescence. The PRA will also increase its adoption of emerging technology tools to improve its regulatory processes for firm authorisations, the Senior Managers and Certification Regime, internal model permission application and approvals. [5] |

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Supervision priorities

In January 2026, the PRA published its annual supervisory priorities letters for banks, building societies, and insurers. The letters set out key areas of supervisory focus for the coming year and included plans to streamline the supervisory process by moving PSMs to a two-year cycle for all firms. This would enable more efficient operations and streamline interactions between firms and the PRA, while ensuring effective supervision.

The PRA’s 2026 supervisory priorities for UK deposit takers and international banks and investment firms emphasise the expectation for firms to maintain strategic risk management, operational resilience, financial resilience, and data risk management, and also highlight the PRA’s efforts to streamline regulatory reporting for firms through the FBD programme. The insurance supervision priorities focus on maintaining strong risk discipline amid competitive pressures, with particular focus on the life sector’s rapid growth in bulk purchase annuities and increased use of Funded Reinsurance (FundedRe), alongside continued implementation of Solvency UK reforms and the Matching Adjustment Investment Accelerator.

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Advancing UK competitiveness and growth

Advancing the secondary competitiveness and growth objective (SCGO) remains high priority for the PRA, alongside delivery of its primary objectives. The PRA has already made substantial progress across its regulatory foundations that underpin sustainable growth: maintaining trust in the UK prudential framework; adopting effective regulatory processes and engagement; and taking a responsive and responsibly open approach to UK risks and opportunities. This includes measures set out in PRA CEO Sam Woods’ December 2025 letter to the Prime Minister and PRA initiatives announced as part of the Government’s Leeds Reforms. Over the next year, the PRA will drive this progress further by advancing a set of priority reforms across each foundation.

The PRA will continue to pursue prudential reforms to maintain trust in the UK financial system. These initiatives help to maintain a credible regulatory framework, which remains a vital precondition for hosting a global financial centre and protecting UK financial stability. For example, following the FPC’s judgement on the level of capital needed to maintain UK financial stability, the PRA is supporting the Bank’s ongoing work to ensure that different parts of the prudential framework (including the leverage ratio and buffer usability) strike the optimal balance to deliver resilience, growth and competitiveness. In addition, the PRA will implement the criteria for recognised exchanges, enabling banks to determine eligible exchanges abroad based on clear technical standards, improving transparency and reducing barriers to market access.

The PRA continues to improve its regulatory processes to make it easier to conduct business in the UK and reduce unnecessary burden. The PRA and FCA’s finalisation and implementation of the first phase of reforms to the Senior Managers and Certification Regime (SM&CR) will enhance operational effectiveness and provide greater flexibility and clarity, reducing compliance costs and making it easier to attract talent to UK firms, while ensuring effective supervision. The PRA continues to make progress on timely authorisations, authorising its first firm using the wholesale insurer accelerated authorisation pathway and reducing the average determination time for Senior Managers Regime cases to 30 days.

From March 2026, the PRA started reporting performance against the new, shorter deadlines introduced by the Government and will continue to enhance the efficiency and speed of its processes to meet these targets. Separately, following the announcement by HMT on 15 July 2025, the PRA introduced an enhanced process for new IRB permission applications and permissions to make a material model change, effective for applications submitted on or after 1 January 2026. This process does not apply to applications already in progress before that date. With regard to supervision, the transition to a two-year PSM cycle for all firms in 2026 will allow firms and supervisors to focus resources more efficiently and reduce regulatory burden on firms. Additionally, the PRA will implement amendments to MREL reporting and make changes to the Recovery Plans review frequency to reduce burden on firms.

The PRA is improving the quality, timeliness and efficiency of its data collection, through work that will both support its primary objective of promoting the safety and soundness of banks and streamline reporting requirements to reduce administrative burden. Through the FBD programme, in 2025, the PRA delivered the first phase of 37 reporting template deletions (PS27/25). The PRA intends to consult on further potential simplifications and launch a firm engagement portal, initially to enable certain regulatory transactions to be submitted more efficiently.

The PRA will also continue work to accelerate engagement and support new and high-growth, innovative firms with dedicated services. For example, the PRA has seconded members of its staff to the Office for Investment: Financial Services (OfI:FS) unit, which provides a concierge service for firms looking to establish and expand their presence in the UK. The PRA will continue its support as the OfI:FS expands its offering and will be responsive to firm enquiries received via the unit. The PRA and FCA have also launched the joint Scale-up Unit to provide a dedicated point of contact for firms that are looking to scale up, providing support on topics including regulatory processes, product innovation, and the impact of new policy proposals on scale-up firms. The PRA announced the first cohort of banks and building societies in February 2026 and will be open to expressions of interest from a second cohort of firms later this year.

Another key way in which the PRA will facilitate competitiveness and growth is by taking a responsive and responsibly open approach to UK opportunities and risks. In these areas, the PRA intends to publish final policy on changes to securitisation rules to make capital and conduct requirements more proportionate while maintaining resilience. This is expected to lower the cost of issuing and investing in securitisations, enabling banks to lend more to UK businesses and consumers. The PRA will, with the FCA, consult on a proportionate new regime for captive insurers to support growth and international competitiveness. The PRA will also consider responses to its discussion paper on measures to broaden UK life insurers’ access to alternative third-party capital, with a view to support capital raising and innovation in the life insurance sector.

In 2026/27, the PRA will continue its collaboration and dialogue with industry around its safe adoption of artificial intelligence (AI), in light of the increasing use of AI within PRA-regulated firms. This will support firms as they continue to explore opportunities presented by new technologies without compromising their safety and soundness.

Taken together, the PRA’s strategy for reform will continue to have a significant impact on the regulatory regime and the ease of doing business in the UK. Alongside this programme of SCGO-focused work, the PRA’s continued delivery of its primary objectives of safety and soundness and protecting policyholders will also ensure the financial stability needed to support medium- to long-term growth.

Work will also continue in support of the PRA’s secondary objective to facilitate effective competition in the markets for services provided by PRA-authorised persons. This business plan provides further details on the PRA’s work on this, including work on the Mutuals sector, and implementation of the Strong and Simple framework for Small Domestic Deposit Takers.

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1: Banking

Reforms for large banks

Implementation of the Basel 3.1 standards

In January 2026, the PRA published PS1/26 – Implementation of Basel 3.1: Final rules, to implement the remaining parts of the Basel III standards in the UK. The new rules will support the resilience of the UK banking system by ensuring that the capital held by firms better reflects the risks that they take. The rules will not result in an increase in overall requirements for the sector.

The PRA will continue its supervisory work to support firms’ implementation of the final rules, including an off-cycle review of firm-specific Pillar 2 capital requirements ahead of the 1 January 2027 implementation date. The PRA will also monitor the implementation of the market risk internal model approach in other major jurisdictions ahead of UK implementation on 1 January 2028.

Ring-fencing review

As part of HMT’s Financial Services Growth and Competitiveness Strategy, announced at the 2025 Mansion House, the Government committed to uphold the ring-fencing regime to protect financial stability and safeguard depositors, while taking forward meaningful reforms. The strategy stated that HMT would work with the Bank and undertake a review of the ring-fencing regime. This review includes an examination of both the legislation and PRA rules, including how they interact, and assesses options for:

• allowing ring-fenced bodies to provide more products and services to UK businesses;
• addressing inefficiencies in how ring-fencing is applied to banking groups; and
• examining the case for allowing banks to share resources and services more flexibly across the ring-fence. The PRA, alongside the Bank, has been working with HMT on its review of the regime. The PRA will continue this close engagement as any changes are designed and implemented.

Modernising the liquidity risk framework

In light of the lessons from the events of March 2023, the PRA recently published consultation paper (CP) 5/26 – Modernising the liquidity risk framework with targeted adjustments to the existing liquidity framework to enhance firms’ resilience and promote operational readiness. The proposed policy changes also intend to support resilience as the way in which firms access sterling central bank reserves changes.

Following the BCBS progress report on the 2023 banking turmoil and liquidity risk, the PRA continues to engage internationally to strengthen supervision and identify issues that may warrant additional global guidance or policy measures.. The PRA will also continue to use its regular programme of Liquidity Supervisory Review and Evaluation Processes (L-SREPs) to assess firms’ liquidity and funding risks, and engage on firms’ access to the Bank’s Sterling Monetary Framework.

The FPC’s assessment of bank capital requirements

In December 2025, the FPC judged that the appropriate benchmark for system-wide Tier 1 capital requirements was around 13% of risk-weighted assets (down from 14%). This change reflects improved risk measurement and ensures the banking system remains resilient and capable of supporting the economy. Alongside reviewing this benchmark, the FPC identified issues requiring further work to assess whether the capital framework should be adjusted.

The PRA will support this work including in relation to the leverage ratio, capital requirements linked to domestic exposures and buffer usability.

Non-bank financial institutions and private credit

Counterparty credit risk (CCR) management remains a supervisory priority, particularly in relation to banks’ growing exposures to non-bank financial institutions (NBFIs), where relationships are increasingly complex. Recent supervisory work shows that gaps in data quality, availability and aggregation mean that many firms cannot form a complete view of the risks posed by NBFIs. The PRA has emphasised that firms must base their risk appetite decisions on prompt and thorough client disclosures and ensure these frameworks are consistently applied to all NBFI counterparties.

The PRA will continue to assess firms’ ability to maintain an accurate, timely understanding of exposures under both current and stressed conditions, with particular attention to private markets, hedge funds and other NBFIs with similar risk characteristics. The PRA has seen many firms strengthen end-of-day monitoring and stress testing, rising intraday exposures – particularly for firms providing market access, clearing, and financing to electronic market-makers. However, firms will need to remain vigilant on risks from NBFIs, and this will continue to be a key area of focus for the PRA, including through the PRA’s support of the Bank’s second system-wide exploratory scenario exercise.

Reforms for Small and Medium-sized banks

Updating regulatory thresholds

Regulatory thresholds play a key role in ensuring that prudential requirements remain proportionate. Following industry feedback and internal analysis, the PRA, alongside the wider Bank, is exploring work to develop a systematic approach for updating regulatory thresholds, including potential automatic indexation.

The PRA intends to consult on the proposed approach in 2026 H2.

Implementation of the Strong and Simple framework for Small Domestic Deposit Takers (SDDTs)

The PRA’s Strong and Simple initiative significantly simplifies the prudential framework for small, domestic-focused banks and building societies, while maintaining their resilience. This follows simplifications to liquidity and disclosure requirements for SDDTs that were finalised in 2023.

In January 2026, the PRA finalised the simplified capital regime, and additional simplifications to liquidity requirements, for SDDTs. Some simplifications took effect in January 2026 (eg a reduced frequency for updates to the Internal Capital Adequacy Assessment Process and Internal Liquidity Adequacy Assessment Process). Other simplifications will take effect on 1 January 2027 (eg simplified Pillar 2A methodologies and a simpler capital buffer framework). The PRA intends to complete an off-cycle review of firm-specific Pillar 2 capital requirements and expectations for SDDTs ahead of 1 January 2027. The reporting requirements for the SDDT capital regime will take effect from 1 January 2027.

Treatment of residential mortgage exposures under the internal ratings based (IRB) approach to credit risk

In July 2025, the PRA published discussion paper (DP) 1/25 – Residential mortgages: Loss given default (LGD) and probability of default (PD) estimation. The DP set out potential options for addressing the barriers that medium-sized firms may face in developing IRB models for LGD and PD estimation, which may constrain effective competition and the ability of firms to scale and grow.

DP1/25 closed in October 2025 and the PRA intends to consult on policy proposals later in 2026/27.

Prudential treatment of cryptoasset exposures

The PRA is committed to ensuring the safety and soundness of firms engaging with cryptoassets, recognising both the opportunities for market efficiency and the unique risks posed by this rapidly evolving sector. Earlier this year, the BCBS initiated a targeted review of elements of the international standard for the prudential treatment of cryptoasset exposures. The review takes account of recent developments in cryptoasset markets and regulation. The PRA is closely engaged in this work and will consult on the implementation of the BCBS standard once it is completed.

The PRA is committed to ensure regulatory consistency and support the UK’s position as a safe, competitive international financial centre, delivering a prudential regime that enables innovation while safeguarding financial stability and public trust.

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2: Insurance

Life insurance

Funded reinsurance (FundedRe)

As noted in the insurance supervision: 2026 priorities letter, the PRA continues to see an increase in the use of FundedRe. While FundedRe can provide access to additional capital and asset classes, it also introduces material risks that must be carefully managed. The FPC has also highlighted that the growing usage of FundedRe could, if not properly managed, lead to a build-up of systemic risk in the UK Life Insurance sector.

The PRA acknowledges firms’ participation in the roundtables held with industry participants in 2025 H2 and is reflecting on the views provided. [6] The PRA will continue to consider policy measures over the coming year on ensuring a capital treatment of FundedRe that is consistent, risk-sensitive and in line with the expectations set out in supervisory statement (SS) 5/24 – Funded reinsurance. The PRA intends to consult on the next phase of its policy approach during 2026/27.

The PRA will also continue to contribute to the work of the International Association of Insurance Supervisors, including on the growth of cross-border asset intensive reinsurance.

Alternative Life Capital: Supporting sustainable growth in the life insurance sector

A thriving UK Life Insurance sector has an important role to play in supporting economic growth. While the sector remains robust, feedback from market participants suggests that traditional sources of capital, such as listed equity and debt, are becoming less accessible or less attractive for some firms.

In November 2025, the PRA published DP2/25 – Alternative Life Capital: Supporting innovation in the life insurance sector to gather feedback on potential approaches to improving UK life insurers’ access to alternative forms of capital. DP2/25 closed on 6 February 2026, and the PRA will identify any potential changes to the existing insurance regulatory framework to facilitate and attract new forms of capital while maintaining strong protection for policyholders.

General insurance

Establishing a UK captive insurer regime

Captive insurance is a means of self-insurance and risk management by commercial entities and, in some cases, by public organisations. In July 2025, the PRA and FCA welcomed HMT's plans to grow the UK's captive insurance market. The PRA and FCA are developing a proportionate authorisation and regulatory regime to support this plan.

The PRA intends to consult later in 2026 on the policies for an effective and competitive UK captive insurance regime. This will build on the feedback received from engagement with subject expert groups on the policy options and scope of the regime.

Dynamic General Insurance Stress Test (DyGIST)

In 2026 H1, the PRA intends to conduct a Dynamic Stress Test for General Insurers (DyGIST) exercise. This is designed to assess the industry's ability to manage crises by simulating significant events and requiring insurers to respond as they would in a real crisis. The DyGIST has three objectives:

• test the UK general insurance sector’s solvency and liquidity under adverse conditions;
• assess firms’ management of event risk and the credibility of their responses; and
• inform the PRA’s future supervisory approach. The PRA will release scenario information progressively and will observe how firms mobilise data, make decisions, and communicate in a crisis scenario. The PRA will continue to engage with industry and other stakeholders to support effective preparation. The exercise will not be used to determine regulatory capital requirements and the PRA will publish sector-wide results only.

Insurance special purpose vehicles (ISPVs)

ISPVs are specialised vehicles that allow investors to provide capital to insure a variety of risks and are often used to cover losses from major catastrophes such as hurricane damage (hence they are sometimes called ‘catastrophe bonds’). In July 2025, the PRA finalised policy changes to the UK framework for ISPVs to:

• make it easier for a wider range of current global market practices to be undertaken in the UK;
• streamline and speed up the application and approval processes; and
• clarify the PRA’s expectations of UK insurers who cede risks to ISPVs, wherever they are established. During 2026/27, the PRA will continue to work with HMT on further reforms to ensure that the regulatory and legislative frameworks are aligned to support an internationally competitive sector while advancing the PRA’s objectives.

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3: Multi-sector

IMF Financial Sector Assessment Program (FSAP)

The Financial Sector Assessment Program (FSAP) is an in-depth assessment of a country’s financial sector, carried out by the International Monetary Fund (IMF). The FSAP forms a core part of the IMF’s financial surveillance.

The Bank will lead the UK authorities’ response and input into the FSAP during 2026/27. The FSAP will contribute to the PRA’s primary objectives by bolstering the resilience of the financial system proportionately, while remaining consistent with its competitiveness and growth objective. The PRA expects the outcome of the assessment to be published in mid-2027.

System-wide exploratory scenario exercise

The Bank has launched, supported by the PRA, its second system-wide exploratory scenario, to build a clearer understanding of how private markets behave under severe but plausible stress. This follows the first system-wide exercise and reflects the PRA’s wider commitment, set out in its 2025/26 Business Plan, to identify emerging risks and strengthen resilience across markets.

The PRA will work with the Bank to assess how banks, insurers and non-banks active in private markets might adjust their portfolios, funding and valuation practices in a global stress. The PRA will support analysis of amplification channels, including the interaction between leveraged finance, liquidity dynamics and interconnected exposures. It will also use insights from the exercise to inform supervisory work on credit risk, model risk management and the treatment of exposures to NBFIs.

Approach to recognising overseas regime

Overseas Recognition Regimes are legislative provisions that allow HMT, with Parliamentary oversight, to formally acknowledge the financial services regulatory framework of another country. Their purpose is to promote secure, stable cross-border financial services activities.

The PRA, along with other relevant regulators, is working with HMT as equivalence regimes in assimilated law [7] are restated and modified as Overseas Prudential Requirements Regime (OPRR). [8]

In 2026/27, the PRA intends to put in place the policy and rule changes that will facilitate HMT’s OPRR for deposit takers and designated investment firms. The PRA has already updated the relevant references to the Overseas Insurance Regime in PRA rules for insurers.

Developments in the mutuals’ regulatory framework

In response to a request from the Economic Secretary to the Treasury, in December 2025, the PRA and FCA published a joint report assessing the mutuals landscape. The report set out the important role of building societies, credit unions and mutual insurers in serving their 30 million members.

The PRA and FCA engaged extensively with mutual firms and their trade associations in preparing the report and will continue this dialogue as work progresses. The PRA will also remain closely engaged with legislative developments affecting mutuals, updating policy and guidance, including helping mutual insurers understand the simplifications that can be applied to consolidations.

During 2026/27, the PRA and FCA intend to review the credit union regulatory framework, exploring more risk‑based prudential requirements for larger, more complex firms while enhancing proportionality for smaller credit unions.

Climate change

In December 2025, the PRA published SS5/25 – Enhancing banks’ and insurers’ approaches to managing climate-related risks as part of PS25/25. SS5/25 replaces SS3/19 and enables firms to take a proportionate approach, scaling with the materiality of a firm’s size and climate-related risk exposure, consistent with the PRA’s approach to the supervision of the banking and insurance sectors.

As set out in SS5/25, firms should now review their status in meeting these expectations and, from June 2026, should be able to demonstrate a credible and ambitious timetable to address any gaps.

Alongside the FCA, the PRA will continue to support industry through chairing the Climate Financial Risk Forum, which helps firms by developing guidance and scenario analysis tools.

Operational risk and resilience: Managing cyber risks, risk from material third parties and enhancing operational resilience

This section covers the PRA’s work on operational risk and resilience, including material risks arising from: critical third parties; operational incident, outsourcing and third-party reporting; and wider industry engagements. The PRA’s operational resilience policy was fully implemented in March 2025. During 2026/27, the PRA will continue to maintain robust supervisory standards through operational and cyber resilience assessments such as CBEST, working closely with the National Cyber Security Centre.

The PRA and FCA are also working with HMT and the Department for Science Innovation and Technology on strengthening cooperation with UK network and information systems regulators. This work is being taken forward via the Cyber Security and Resilience (Network and Information Systems) Bill currently before Parliament.

The PRA will focus on firms’ dependencies on third parties in particular by assessing how SS2/21 – Outsourcing and third party risk management has been implemented. The PRA will also continue to work with the FCA to advance the new regime for Critical Third Parties to mitigate risks and vulnerabilities arising from systemic third-party dependencies. The joint PRA-industry sector-wide exercise, SIMEX26, will focus on the impacts of an extended outage at a major third-party technology provider.

Furthermore, in March 2026, the PRA published final policy on operational incidents and outsourcing and third-party reporting, which will come into force in March 2027. The policy, developed jointly with the FCA and Bank, establishes a single, standardised reporting regime that improves supervisory visibility of operational incidents and material third‑party dependencies, reducing duplication and compliance burden for firms, while advancing the PRA’s primary objective of safety and soundness.

In 2026/27, the PRA will continue to review systemic firms’ operational resilience self-assessments to assess their cyber resilience capabilities to respond and recover from severe but plausible disruptions. This will also provide supervisory insights to prioritise work in this area.

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4: Operational effectiveness of the PRA

Enhancing the PRA’s efficiency and productivity

The PRA continues to take steps to increase its efficiency and productivity and to ensure that costs are tightly managed. This covers direct investment to meet regulatory obligations in an efficient manner, drive efficiencies for both firms and supervisors, and lay the groundwork for future technological advancements. This has included faster, more streamlined regulatory authorisations, an enhanced process for new IRB applications and permissions, the transition to a two-year PSM cycle and further efficiencies across supervisory processes.

In 2026/27, the PRA will move its new internal supervisory platform from design into delivery, developing enhanced tools to support operational efficiencies within policy development and rule drafting. This will include supervisory dashboards, advanced analytics and automation, to support data‑driven and proportionate supervision. The PRA will also continue to engage with industry experts on emerging technologies. This will deepen its understanding of the regulatory implications, as it continues to streamline operations and reduce its headcount by approximately 140 FTE this year in support of important Bank-wide technology and data infrastructure investment.

Diversity, equity, and inclusion at the PRA

The Bank serves all the people of the UK. Having an inclusive Bank is crucial to delivering our mission. During 2026/27, the PRA will continue its work to support the delivery of the Bank’s inclusion priorities, aligned to its internal Inclusion Strategy 2026–29, including actions arising from the Court Review on Ethnic Diversity and Inclusion, enhancements to the Disability Inclusion Programme, and the launch of the Gender Action Plan.

Across this work, the PRA remains committed to fostering belonging and a culture where everyone can thrive, empowering and supporting leaders to champion inclusion, and building a workforce that reflects the diversity of the UK.

PRA budget 2026/27

The PRA’s provisional budget for 2026/27 is estimated at £347 million, which is £3 million (1%) lower than the previous year. This figure remains subject to final adjustments for pension service costs.

The budget consists of both the PRA's direct costs and centrally allocated costs for services provided by the wider Bank, such as central support and technology investments. Compared to 2025/26, direct costs are planned to fall by £4 million, primarily due to efficiency improvements and prioritisation.

Allocated central support costs are anticipated to drop by £12 million, reflecting savings across central functions and a reduced share of investment portfolio costs charged to the PRA Levy. These savings are partly offset by a £6 million increase in Future Banking Data and Bank-wide data investment, as well as a £7 million contingency for workforce adjustment in 2026/27. Budgeted headcount is expected to fall in 2026/27 to 1,385 FTE from 1,527 FTE in 2025/26.

Details on fee allocations are outlined in CP7/26 – Regulated fees and levies: Rates proposals 2026/27.

1. As at 1 January 2026.
2. Strictly speaking, DIFs do not accept deposits and are included under the category of deposit-takers for presentational purposes only.
3. HMT is developing legislation that would require both the PRA and the FCA to publish long term strategies on a five-year cycle (or at least once every five years). For the PRA, this would replace the current annual strategy review requirement in Section 2E of FSMA. This legislation also seeks to streamline various ‘have regards’ by elevating them to the strategic level, thereby reducing process burden while maintaining accountability.
4. The PRA has supported the launch of the Office for Investment: Financial Services (October 2025). This includes by seconding staff and coordinating regulatory engagement to provide a concierge-style single front door offering early, clear guidance on PRA authorisation and requirements for international firms looking to establish or expand in the UK.
5. Following the announcement by HMT on 15 July 2025, the PRA introduced an enhanced process for new IRB permission applications and permissions to make a material model change, effective for applications submitted on or after 1 January 2026. This process does not apply to applications already in progress before that date.
6. For more information, please see the funded realignment: balancing innovation and risk speech by Vicky White.
7. Retained EU law that continues to apply in the UK was renamed ‘assimilated law’ by section 5 of the Retained EU Law (Revocation and Reform) Act 2023.
8. See paragraph 2.18 of the Financial Services Overseas Recognition Regimes.

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