Prudential Regulation Authority Supervisory Priorities 2026

The letters summarise the themes supervisors can be expected to focus on in the coming 12 months in their engagement with firms. The letters provide further elements on the broader simplification efforts of the PRA, including moving all firms to a two-year cycle for their Periodic Summary Meeting (PSMs). This effort to streamline supervision alleviates the burden for firms and offers a more proportionate relationship with the PRA. Other efforts to streamline supervision include modernising reporting requirements through the Future Banking Data project.

These themes are consistent with the PRA’s strategic priorities:

1. Maintain and ensure the safety and soundness of the banking and insurance sectors and ensure continuing resilience.
2. Be at the forefront of identifying new and emerging risks and developing international policy.
3. Support competitive, dynamic and innovative markets, alongside facilitating international competitiveness and growth, in the sectors that we regulate.
4. Run an inclusive, efficient, and responsive regulator within the central bank.

PRA-regulated firms should pay particular attention to the following supervisory priority topics:

Risk management

• Private markets and CCR: for supervisors of international banks and UK deposit takers, a particular focus will be on ensuring firms have an accurate view of exposures with respect to Non-Bank Financial Institutions (NBFIs), including on an intraday basis. The second System-Wide Exploratory Scenario (SWES) will extend this work by testing the systemic interconnections between private markets and banks.
• Credit risk: the PRA writes that firms must ensure appropriate management of trade financing activities to deal with the increased credit risk arising from shifts in global trade flows.
• Innovation: as part of its strategy to support competitive, dynamic and innovative markets, the PRA’s letters encourage firms to participate in the digital securities sandbox while longer-term approaches to DLT and tokenisation continue to be discussed and developed by the PRA.

Operational Resilience

• Embedding: following the adoption of SS1/21, the PRA reiterates the need for firms to continue improving their operational resilience testing and integrating operational resilience considerations into their decision-making processes, including when evaluating strategic change projects.
• Cyber: cyber risk, along with geopolitical risks, remains the most cited source of risk to financial institutions, according to the PRA. Prevention, detection, and recovery of critical services within Impact Tolerances (IToLs) is key. Firms are encouraged to apply lessons from the 2024 cyber stress test and take advantage of CBEST penetration testing and/or simulated attack and response assessments (STAR-FS).

Capital requirements

• New capital regime: 1 Jan 2027 sees the implementation of both Basel 3.1 (ex-FRTB) and Strong and Simple Framework for the Small Domestic Deposit Takers (SDDTs). With preparations well-advanced, firms should by now be considering any final actions they need to take ahead of implementation. This may include submitting new applications under B3.1/SDDTs rules and converting any in-flight applications to these rules as appropriate.
• ICAAPs/ P2A: firms’ P2A variable capital requirements will be rebased by the PRA in 2026. Boards are expected to seek assurance over the accurate calculation and reporting of RWAs for this exercise. ICAAPs signed off by Boards in 2026 are expected to include an impact assessment of Basel 3.1/SDDT, with ICAAPs in 2027 to be prepared on a Basel 3.1/SDDT basis.

Data Risks

• Data quality: the PRA recognises that data continues to be a weakness in many firms, which leads to operational and prudential issues. Firms need to continue improving governance and controls, particularly given the risks of AI tools using flawed data to deliver flawed reporting and/or insights.

Competitiveness and Growth

• The PRA will transition all firms to a two-year Periodic Summary Meeting (PSM) cycle and seek to accelerate SMR applications, new firm authorisations, and IRB model change preapprovals.
• The Bank and the PRA continue to look for ways to streamline and modernise reporting requirements under the Future Banking Data (FBD) programme. Feedback and active engagement from firms is encouraged.

The PRA’s annual supervisory priorities letters for 2026/27 are intended to help firms better align their own workplans and prioritise resources to help the regulator achieve its strategic objective of a safe, competitive, innovative, and resilient financial system. The priorities for 2026 include major efforts to streamline supervisory processes, aiming to reduce regulatory reporting burden.

Sources

[1] UK Deposit Takers Supervision: 2026 Priorities

[2] International Banks Supervision: 2026 Priorities