UK PRA Business Plan 2025/26: Priorities evolving towards increasing emphasis on competitiveness and growth

The PRA’s Business Plan 2025/26 outlines the following 4 strategic priorities for the year ahead, and then sets out the regulatory initiatives that will be aimed at advancing these priorities in the banking, insurance, multi-sector and operational effectiveness sections of its Plan.

• Priority 1: Maintain and ensure the safety and soundness of the banking and insurance sectors and ensure continuing resilience: Firms’ cyber resilience is called out as a particular area of ongoing ‘critical focus’ as firms face increasing threats from malicious attacks and operational incidents.
• Priority 2: Be at the forefront of identifying new and emerging risks, and developing international policy: There is specific mention of the PRA’s plan to continue to monitor trends in the area of new technologies, with specialist input from the Bank of England’s (BoE) Financial Technology (Fintech) Hub, with relevance to risks such as fragmentation of the value chain, novel outsourcing arrangements, and concentration risks across and within firms. The AI Consortium, established by the BoE’s Fintech Hub, is referred to. The objective of the Consortium is to facilitate public-private engagement on the use of AI in UK financial services.
• Priority 3: Support competitive, dynamic and innovative markets, alongside facilitating international competitiveness and growth, in the sectors that the PRA regulates: The PRA explains that this priority is closely linked to its secondary competition objective (SCO), the secondary competitiveness and growth objective (SCGO), and how the PRA is facilitating innovation in its Approach to Policy.
• Priority 4: Run an inclusive, efficient, and responsive regulator within the central bank: As a responsive regulator, the PRA will continue to focus on its approach to proactive engagement with firms and other relevant stakeholders. Looking forward, the PRA will continue to seek to improve the efficiency of its operations, infrastructure and processes. It will also continue to invest in developing its committed workforce to ensure the delivery of its strategy, including through inclusive recruitment and ongoing training.

The PRA’s key regulatory initiatives for the banking sector include:

• Implementing the Basel 3.1 standards: There is a reminder that in January 2025, the PRA announced that, in consultation with HM Treasury (HMT), the implementation date for the Basel 3.1 standards would be delayed to 1 January 2027 to allow time for greater clarity around plans for implementation in the U.S. The transitional arrangements in the rules will be reduced to 3 years to ensure full implementation remains at 1 January 2030, as set out in the original proposals. The PRA intends to publish the Basel 3.1 standards final rules once Parliament has revoked the relevant parts of the Capital Requirements Regulation (CRR).
• Finalisation and implementation of the strong and simple framework for small domestic deposit takers (SDDTs): Challenger banks should be reassured to see that this task is on the PRA’s “to do” list for the coming year. It aims to finalise the simplified capital regime and the additional liquidity simplifications for SDDTs and SDDT consolidation entities, with a policy statement in Q4 2025. The PRA will then implement the simplified capital regime.
• Bank stress testing: The PRA and the BoE will run a Bank Capital Stress Test in 2025 in which the largest and most systemic UK banks will participate. The BoE and the PRA expect to carry out a Bank Capital Stress Test every other year. In intervening years, the BoE expects to use stress testing when appropriate to support the FPC and PRC in achieving their objectives, but in a way that is less burdensome for banks. In addition, the PRA intends to publish its final rules to replace, with modifications where appropriate, the relevant firm-facing provisions in the CRR once Parliament has revoked the relevant parts of the CRR.
• Securitisation: Most firm-facing provisions of the UK Securitisation Regulation are now set out in the FCA and PRA rulebooks, while other provisions are restated in domestic legislation by HMT. The FCA and PRA intend to consult in H2 2025 on further changes to the securitisation rules to make the existing framework more proportionate. The PRA has already consulted on draft rules to replace the CRR securitisation capital requirements. The PRA proposed substantive policy changes, for example, to the securitisation standardised approach and to the capital treatment of residential mortgages under the Government’s mortgage guarantee scheme. The PRA intends to publish its rules during 2025, once Parliament has revoked the relevant parts of the CRR.
• Internal ratings based (IRB) models & model risk, liquidity, and credit risk management: Among the initiatives here will be a continuing focus by the PRA on how banks are embedding and implementing the expectations set out in SS1/23 Model risk management principles for banks, which applies to firms with internal model approval to calculate regulatory capital requirements. The PRA will continue to engage with firms on their progress in adopting the principles and promoting the management of model risk as a risk discipline in its own right.
• Liquidity lessons learnt from the events of March 2023 involving Silicon Valley Bank (SVB) and Credit Suisse: In 2025, the way in which firms access sterling central bank reserves will change. The Bank’s operating framework for supplying sterling reserves will transition to a demand-driven repo-led framework. The stock of sterling reserves will be determined by firms’ borrowing, rather than by extraordinary monetary policy operations. In 2024, the PRA published a statement to support the change. The PRA will continue its close supervision of firms’ liquidity and funding risks in light of the lessons learnt from the events of March 2023 and as the BoE’s operating framework transitions. The PRA also intends to review the liquidity supervisory framework and consider changes, including regulatory reporting. Any proposed changes will be open for consultation in 2026. Building on the BCBS’s progress report on the 2023 banking turmoil and liquidity risk, the PRA will work with international stakeholders, including the BCBS, to strengthen supervisory effectiveness and identify issues that could warrant additional global level guidance. The PRA will work with the BCBS on additional follow-up analytical work based on empirical evidence to assess whether specific features of the Basel Framework, including liquidity risk, have performed as intended, and whether policy options are warranted over the medium term.
• Responsible openness to international branches: The PRA consulted in 2024 on targeted refinements to its approach to banks branching into the UK, reflecting lessons from the failure of SVB to ensure that the PRA’s framework for assessing whether branches should subsidiarise captures activities of potential concern. The consultation also covered clarifications to expectations around booking arrangements and liquidity reporting for branches. The PRA is committed to the UK remaining a responsibly open jurisdiction for branches and expects the vast majority of branch business to be unaffected by any changes. Updates to the approach will be finalised in H1 2025.
• Future of payments: The PRA has continued to contribute to the BoE’s work on innovation in money and payments, including through monitoring developments in deposit takers’ innovation in deposits, e-money, and stablecoins, consistent with the Dear CEO letter published in 2023. This work will continue in 2025. In 2025/26, the PRA will develop its proposed policy to implement the BCBS standard on banks’ cryptoassets exposures in the UK. The PRA will also continue to engage with international partners, including the BCBS, to assess bank-related developments in digital money and cryptoassets markets.

The PRA’s Dear CEO letter to insurers in January 2025 set out the PRA’s supervisory priorities for the year, all of which are covered in the Business Plan:

• Solvency UK: Accelerating innovation, and investment: The PRA will continue to work with industry to embed the new Solvency II regime.The PRA anticipates that the changes to the capital regime, together with improvements to the matching adjustment permission process and the introduction of the Matching Adjustment Investment Accelerator announced in April, will enable insurers to invest more widely in productive assets and support economic growth in the UK.The PRA will also continue to work with Treasury, industry and the National Wealth Fund (NWF) to help insurers access new investment opportunities in the NWF’s target sectors.

• Growth in the bulk purchase annuity (BPA) market, including funded reinsurance (Funded Re): The continuing rapid growth of the BPA market and increasing use by UK insurers of offshore reinsurers in Funded Re structures remains a key supervisory focus for the PRA.It will be monitoring market developments and assessing, through the Life Insurance Stress Test (LIST 2025), whether firms are meeting the PRA’s expectations on use of Funded Re (set out in SS5/24: Funded Reinsurance).
• Insurance stress testing: The PRA launched the LIST 2025 January 2025 and for the first time, it will publish individual firm results as well as aggregate results.Publication of results is expected in Q4 2025.For general insurers, the previously postponed dynamic general insurance stress test is now due to start in May 2026. The PRA will engage with insurers about design and logistics from September 2025.
• Insurance special purpose vehicles (ISPVs):To help improve the sector’s international competitiveness and growth, the PRA intends to finalise its proposals to improve the regulatory framework for ISPVs.
• General insurance (GI): In anticipation of more challenging conditions for certain lines of business, the PRA will be monitoring firms’ underwriting strategies and pricing actions and will work with the Society of Lloyd’s to coordinate its oversight of managing agents.The PRA will challenge those firms that have a history of projecting overly optimistic underwriting profits in their business plans and internal models. The PRA will continue to focus on cyber underwriting risk and will review and consider, in light of market developments, if changes are needed to SS 4/17: Cyber insurance underwriting risk.

A number of the PRA’s multi-sector key regulatory initiatives for the year ahead cover familiar ground in terms of overarching regulator priority areas:

• Review of the current mutuals landscape in the UK: In response to a request from the Economic Secretary to the Treasury contained in a letter to the PRA on mutuals reporting, the PRA and FCA will produce a report by H2 2025 assessing the current mutuals landscape to aid the Government and regulators’ consideration of how best to support this sector to drive inclusive growth in the UK. The report will cover building societies, credit unions, friendly societies and other mutual insurers. Together these entities represent approximately £740 billion in assets and serve around 30 million members. The findings will be informed by ongoing regulation and supervision and by engagement with mutuals and the relevant trade associations.
• Ease of entry and exit: The PRA’s ease of exit policy for banks set out in PS5/24 – Solvent exit planning for non-systemic banks and building societies will come into force on 1 October 2025, and the policy for insurance set out in PS20/24 – Solvent exit planning for insurers will come into force on 30 June 2026. The PRA will continue to engage with relevant industry bodies to support firms’ preparations before the rules and policies come into force. In the lead up to implementation, the PRA will be updating its internal processes and providing support to firms as appropriate.
• Implementation of the critical third party (CTP) regime: The PRA, BoE and FCA are reviewing third party service providers with a view to recommending to HMT those which could be designated as critical under the new regime introduced by the Financial Services and Markets Act 2023, and to support HMT as needed with their designation process after this. In November 2024, the regulators jointly published a package of documents on the CTP regulatory regime setting out their rules andfinal policy, guidance and approach to the oversight of CTPs. The PRA will continue to work with the other regulators to roll out and embed its oversight approach in readiness to oversee CTPs, once designated by HMT. To support this, a cross-authority governance forum will be established – a joint CTP Consultation and Coordination Forum – that will help the regulators to co-ordinate their CTP functions and activities. The PRA, alongside the BoE and FCA, is also working to strengthen domestic and international coordination due to the cross-sector and cross-jurisdictional nature of CTPs’ operations.
• Operational risk and resilience: The FCA, BoE, and PRA operational resilience policies came fully into force in March 2025. The PRA will continue to work closely with the FCA to assess firms’ operational resilience capabilities, including monitoring and assessing the impact of firms’ digital transformation programmes. It will also continue monitoring sector-wide risks and building firm and sector-level resilience to enhance the sector’s ability to respond to system-wide disruption. This will include engagement through the Cross-Market Operational Resilience Group (CMORG) and the G7 Cyber Experts Group (CEG). In 2025, the PRA also aims to finalise the policy that it consulted on in CP17/24 – Operational resilience: Operational incident and outsourcing and third-party reporting.
• Cyber resilience: The PRA will continue to monitor and assess firms’ ability to manage cyber threats through the ongoing use of threat-led penetration testing (CBEST and STAR-FS) and the cyber questionnaire (CQUEST). The PRA will continue focusing on the critical cyber-hygiene issues highlighted in the 2024 CBEST thematic publication. In collaboration with the FCA, including in response to known technology, cyber and third-party incidents, the PRA will continue to monitor and engage with firms on their execution of large and complex IT transformation programmes. To further enhance the sector’s resilience capabilities, the regulators intend to start consulting in H2 2025 on expectations on the management of ICT and cyber resilience risks. During 2025, the PRA will also continue to engage with standard-setting bodies and other international jurisdictions on cyber, ICT risk management, third-party risk management and CTPs.
• Implementing changes to the Senior Managers & Certification Regime (SMCR): Following discussion paper (DP)1/23 – Review of the Senior Managers and Certification Regime, the PRA and the FCA intend to consult on proposed changes to the SMCR which are aimed at improving the clarity, efficiency, and proportionality of the regime. In parallel, the PRA will continue its engagement with industry on the approach to senior manager approvals, reaffirming its commitment to improving processes for greater efficiency, proportionality and consistency, and reducing uncertainty for applicant firms. In addition, and in line with the Chancellor’s Mansion House announcement in November 2024, the PRA will work alongside HMT and the FCA to replace the certification regime with a more proportionate approach.
• Climate change: The PRA continues to assess firms’ progress in managing climate-related risks and in 2025 it intends to consult on its update to SS3/19 – Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change. The PRA will continue to support industry with the FCA through the Climate Financial Risk Forum. As part of this, and as appropriate to the PRA’s objectives, the PRA will continue to support the UK Government’s action to deliver the UK Sustainability Reporting Standards, based on the global baseline of IFRS Sustainability Disclosure Standards.

The above banking, insurance and multi-sector initiatives add to the PRA’s broader work to embed competitiveness and growth within the organisation, as explained in its recently published Approach to Policy document. The PRA is also supporting HMT on the delivery of aspects of its regulatory Action Plan aimed at enabling a regulatory system that supports innovation and economic growth (see this Our Thinking article).

The PRA’s key initiatives to maintain the UK’s financial system stability and integrity by ensuring an effective regulatory framework that adapts to new risks and opportunities include:

• Effective authorisation processes: The PRA will continue to promote open dialogue with industry to help firms navigate authorisation processes and identify further areas for potential improvement. It will also continue working with other stakeholders to deliver a ‘concierge service’ to help international firms navigate the UK when thinking about locating new businesses here.
• Enhancing the PRA’s productivity, data and technology: Over 2024/25, the PRA completed an exercise to identify and prioritise a list of operational initiatives to improve its productivity and efficiency. This includes removing duplication in operational processes and making increased use of automation for repeatable tasks. The PRA began implementing these initiatives, which cover areas of supervision, authorisation and policymaking, in 2024/25 and will continue to do so over 2025/26. Some of these initiatives will support the PRA’s delivery of its secondary objectives. The PRA will also foster innovation, eg by driving the adoption and wider roll-out of AI-enabled tools.