Video transcript: The PRA's banking supervision priorities for 2026

Transcript

Conor MacManus: On 15 January 2026, the PRA published its annual supervisory priority letters for UK deposit takers and international banks operating in the UK. The letter set out the PRA's supervisory priorities for the year ahead and should be read alongside firm specific communications, such as those coming out of the periodic summary meetings.

There's lots of continuity in areas of focus in the letter from the last year, and unsurprisingly risk management is a prominent risk and priority highlighted by the PRA. In the letter the PRA sets out a range of risks that the banking sector is facing from macroeconomic trends, geopolitical issues and technological change, and the regulator calls on firms to build their risk management capabilities to be able to mitigate these risks.

The PRA’s focus on operational resilience is also clearly entering a new phase, and the regulator calls on firms to fully embed operational resilience considerations into business decision making.

As ever, data accuracy is a key priority for the PRA in the context of regulatory reporting but also increased use of AI by banks. The PRA is very clear that if they see deficiencies in terms of data accuracy they will use all of the supervisory tools that they have, including the use of skilled person reviews to try and remedy them.

Also, unsurprisingly, the PRA is very focused on financial resilience in its letter, and in particular they call out the forthcoming implementation of Basel 3.1 and the Strong and Simple Regime on the 1 January 2027 as areas that firms should prioritise.

Finally, in the context of the growth and competitiveness objective, the PRA has confirmed that even for the largest firms, they will be moving to a bi-annual PSM cycle, moving away from the annual cycle that those largest firms are currently on.

It's clear that the PRA will take action if they detect deficiencies in data accuracy and regulatory reporting, and in the short term they have called on boards to seek assurance over the accuracy of RWAs and regulatory reporting in the context of the implementation of Basel 3.1, the Strong and Simple Regime and the ongoing Pillar 2 rebasing exercise. So, firms should prioritise this and ensure that they meet the PRA’s expectations.

It's also very clear that the PRA expects banks to continue to invest in building their risk management capability. This comes at a time when there are a number of risks facing the sector and the sector is operating in an unpredictable risk environment. It's very clear that the PRA expects firms to be investing in these capabilities to be able to anticipate and mitigate risks however they might crystallise.