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Home > Prudential Regulation Authority > Statement of Policy - The PRA’s methodologies for setting Pillar 2 capital UPDATED
 

Statement of Policy - The PRA’s methodologies for setting Pillar 2 capital UPDATED

01 February 2017
3 October 2017 – This statement of policy has been updated, see:
 
Statement of Policy - The PRA’s methodologies for setting Pillar 2 capital UPDATE
 
For information only, the original publication issued on 01 February 2017 is available below.

​Update 1 February 2017
: This statement of policy (SoP) was updated following publication of PS3/17 ‘The implementation of ring-fencing: reporting and residual matters – response to CP25/16 and Chapter 5 of CP36/16’. The updated expectations take effect from 1 January 2019. See the appendix for full details.  For more information on ring-fencing related policy see ‘Supporting materials – ring-fencing’ webpage.

This statement of policy sets out the methodologies that the Prudential Regulation Authority (PRA) uses to inform the setting of Pillar 2 capital for firms to which CRD IV (see note 1 below) applies.

Overview

Section I: Pillar 2A methodologies sets out the methodologies the PRA will use to inform the setting of a firm’s Pillar 2A individual capital guidance for credit risk, market risk, operational risk, counterparty credit risk, credit concentration risk, interest rate risk in the non-trading book (referred to as interest rate risk in the banking book (IRRBB)) and pension obligation risk.

Section II: Pillar 2B provides information on the purpose of the PRA buffer, how it is determined and how it relates to the CRD IV buffers. Section II also provides details on the PRA’s approach to tackling weak governance and risk management under Pillar 2B.

Firms are required by the Reporting Pillar 2 part of the PRA Rulebook, or may be asked, to submit data to inform the PRA’s approach to setting Pillar 2A individual capital guidance.

Note 1: The Capital Requirements Directive (2013/36/EU) (CRD) and the Capital Requirements Regulation (575/2013) (CRR), jointly ‘CRD IV’.

Statement of Policy - The PRA’s methodologies for setting Pillar 2 capital - UPDATED

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