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

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

03 October 2017

Update 3 October 2017: This Statement of Policy was updated following publication of Policy Statement 22/17, ‘Refining the PRA’s Pillar 2A capital framework’.

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 applies.

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 (hereafter referred to as interest rate risk in the banking book (IRRBB)), pension obligation risk and RFB group 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 and RFB group risk.

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.

Statement of Policy

​Date of publication Statement of Policy​ Update detail​ Effective from​​
​Current version ​ ​ ​
July 2015 The PRA’s methodologies for setting Pillar 2 capital ​Initial publication following PS17/15 - Assessing capital adequacy under Pillar 2. ​1 January 2016
​Future version ​ ​
​October 2017 The PRA’s methodologies for setting Pillar 2 capital ​This statement of policy was updated following publication of PS22/17 ‘Refining the PRA’s Pillar 2A capital framework’. ​1 January 2018.
The parts relevant for ring-fenced banks apply from 1 January 2019.
​Past versions ​ ​ ​
​February 2017 ​The PRA’s methodologies for setting Pillar 2 capital 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’. ​No longer effective (superseded by October 2017 version)
​July 2016 ​The PRA’s methodologies for setting Pillar 2 capital ​Updated following publication of Policy Statement 20/16 ‘The implementation of ring-fencing: prudential requirements, intragroup arrangements and use of financial market infrastructures’ which included final ring-fencing rules and Supervisory Statement 8/16 ‘Ring-fenced bodies (RFBs)’. ​No longer effective
 
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