PRA sets out priorities for 2026/27

What does this mean?

The PRA’s strategic priorities for 2026/27 are grouped around four themes:

• maintaining the safety and soundness of the banking and insurance sectors and ensuring continued resilience

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

• supporting competitive, dynamic and innovative markets, alongside facilitating international competitiveness and growth, in the sectors it regulates

• running an inclusive, efficient, and responsive regulator within the central bank.

Banking

The PRA’s banking agenda for 2026/27 is centred on the implementation of the Basel 3.1 standards. Following publication of final rules in January 2026, the framework will take effect from 1 January 2027, with the market risk internal model approach following in 2028. The reforms are calibrated so as not to increase overall capital requirements, but to ensure capital better reflects underlying risks. An off-cycle review of firm-specific Pillar 2 requirements will be conducted ahead of implementation.

Alongside this, the PRA is progressing proportionality-focused reforms. The Strong and Simple framework for Small Domestic Deposit Takers (SDDTs) enters its final phase on 1 January 2027, introducing simplified Pillar 2A methodologies, a revised capital buffer framework and new reporting requirements. An off-cycle Pillar 2 review for SDDTs will also be conducted, and the PRA will consult on potential automatic indexation of regulatory thresholds in the second half of 2026.The PRA will also continue with its work to modernise the liquidity framework.

Supervisory focus will continue on banks’ exposures to non-bank financial institutions, with further analysis supported by the Bank of England’s second system-wide exploratory scenario exercise. Ring-fencing reform will continue in collaboration with HM Treasury, while the PRA will finalise securitisation policy and consult on the IRB treatment of residential mortgage exposures during the year. 

The PRA also has a range of other banking priorities. These include working with HM Treasury on reforms to the ring-fencing regime, supporting meaningful reform while maintaining an effective ring-fence and engaging in the Basel Committee on Banking Supervision's review of the prudential treatment of crypto-assets.  

Insurance

Funded Reinsurance (FundedRe) is a key area of focus for the PRA, reflecting its increased use in the UK life insurance sector. The Financial Policy Committee has highlighted that, if not properly managed, this could contribute to a build-up of systemic risk. The PRA will consult on the next phase of its policy approach during the year, with a focus on ensuring the capital treatment of FundedRe is consistent, risk-sensitive and in line with expectations set out in its supervisory statement SS5/24.

The PRA is considering changes to the regulatory framework to improve UK life insurers’ access to alternative forms of third-party capital while maintaining policyholder protection, following the closure of DP2/25 in February 2026.

For general insurers, the Dynamic General Insurance Stress Test (DyGIST) will be conducted in the first half of 2026. The exercise simulates a significant event in real time to assess how firms mobilise data and make decisions under stress. It will not be used to set regulatory capital requirements, and only sector-wide results will be published.

The PRA and FCA are developing a proportionate regime for captive insurers, with consultation planned for later in 2026, while the PRA will continue to work with HM Treasury on reforms to the Insurance Special Purpose Vehicle framework.

Cross-sectoral

Operational resilience remains a cross-sector priority. In March 2026, the PRA published final policy on standardised reporting for operational incidents and material third-party dependencies, which will come into force in March 2027. With the FCA, the PRA will advance the Critical Third Parties regime and conduct sector-wide testing through SIMEX26, examining the impact of an extended outage at a major third-party technology provider. The PRA will also continue CBEST assessments and review systemic firms’ operational resilience self-assessments.

The PRA will also support the Bank of England’s second system-wide exploratory scenario exercise during 2026/27, assessing how banks, insurers and non-banks active in private markets respond to severe but plausible stress. Findings will inform supervisory work on areas such as credit risk, model risk management and exposures to non-bank financial institutions.

On climate, SS5/25 - published in December 2025 - replaces SS3/19 and enables a more proportionate approach to managing climate-related financial risks, scaled to firms’ size and risk exposure. From June 2026, firms will be expected to demonstrate a credible timetable to address any gaps against the updated expectations.

At the international level, the Bank of England will lead the UK authorities’ response to the IMF Financial Sector Assessment Program, with the outcome expected in mid-2027. The PRA will also work with HM Treasury to implement the Overseas Prudential Requirements Regime for deposit takers and designated investment firms.

What do firms need to do?

Boards and senior management should focus on how their organisations manage the interaction of multiple regulatory initiatives, rather than treating reforms in isolation. This will require stronger coordination across programmes, clear ownership and effective prioritisation where timelines overlap.

Firms should ensure that data is robust, consistent and accessible enough to support both internal decision-making and increasingly data-driven supervisory engagement. As the PRA places greater reliance on analytics and more streamlined engagement, firms will need to be able to provide timely, decision-useful information on an ongoing basis, rather than through periodic reviews.

Firms should also strengthen their ability to evidence resilience in practice. This includes demonstrating effective governance over critical services, third-party relationships and incident management, supported by testing, clear documentation and the ability to respond to supervisory scrutiny.

In light of the heightened risk environment, supervisory attention is increasingly focused on areas where risk visibility remains limited. In the Plan, the PRA is clear that it will continue to focus on risks from geopolitical, macroeconomic and technological events. Firms should ensure they have robust management information and governance over exposures that are complex, fast-growing or less transparent, particularly where risks may not be fully captured through existing frameworks.

While the PRA continues to emphasise proportionality and efficiency, firms should ensure that underlying risk management and control frameworks remain sufficiently robust to meet evolving supervisory expectations.

Next steps

The Plan sets out a programme of activity throughout 2026/27. Key milestones include DyGIST in H1 2026, continued implementation of Basel 3.1 and associated supervisory reviews, finalising results from the second system-wide exploratory scenario, and the introduction of enhanced data collection and operational incident reporting from March 2027 to support more continuous, evidence-based supervision.