PRA statement on returning to setting Pillar 2A requirements as Risk Weighted Asset percentage

This statement provides an update on the PRA’s approach to Pillar 2A requirements
Published on 08 December 2021

Overview 

On Thursday 7 May 2020, we announced that, in response to the economic shock from Covid-19, we were alleviating unwarranted pressure on firms by setting Pillar 2A requirements as a nominal amount, instead of a percentage of total Risk Weighted Assets (RWAs). 

We set Pillar 2A as a nominal amount in the 2020 and 2021 Supervisory Review and Evaluation Processes (SREPs), and allowed firms without a 2020 SREP to request this on a voluntary basis, subject to supervisory judgement. 

We believe that this regulatory measure is no longer necessary and therefore in 2022 all firms will be set Pillar 2A as a variable amount (with the exception of some fixed add-ons, such as pension risk). Supervisors will be in contact with firms that do not have a SREP assessment planned in 2022 to amend the requirements by end-2022.

Scope

This statement is relevant to UK banks, building societies, and PRA-designated investment firms, as well as UK financial holding companies and UK mixed financial holding companies of certain PRA-authorised firms.

Implementation

All firms currently with a nominal Pillar 2A requirement will be set a variable requirement in 2022. 

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