CP19/25 – CRR Definitions: restatement in PRA Rulebook

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Responses are requested by Thursday 30 October 2025.

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Responses can be sent by email to: CP19_25@bankofengland.co.uk.

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Banking Capital Policy Division
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1: Overview

Context

1.1 In July 2025, HM Treasury announced its approach for revoking the remaining provisions of the Capital Requirements Regulation (CRR). This includes the definitions set out in Articles 4, 4A, 4B, and 5.

1.2 Consistent with the UK’s established approach to financial regulation, often referred to as the ‘Financial Services and Markets Act (FSMA) model’, HMT plans to restate only the small number of those definitions in legislation that are necessary for the effective operation of the regulatory perimeter, overseas recognition regimes, or other legislation, such as the Banking Act.

1.3 In this consultation paper (CP), the PRA sets out proposed PRA Rulebook Glossary definitions that would replace definitions in Articles 4, 4A, 4B, and 5 of the CRR for the purposes of the PRA Rulebook. The PRA proposes to expressly define certain terms in the PRA Rulebook Glossary that are currently implicitly defined in other provisions of the CRR. The PRA also proposes to make consequential amendments across the PRA Rulebook that are related to the transfer of CRR definitions into the PRA Rulebook Glossary.

1.4 The PRA is proposing to restate the vast majority of the CRR definitions in the PRA Rulebook without changes in substance. The PRA does, however, in a few areas propose targeted improvements to enhance the clarity of the definitions, with no material change to policy.

1.5 The PRA considers that this proposal advances the PRA’s objectives, including by promoting the safety and soundness of PRA-authorised firms. Restating the CRR definitions in the PRA Rulebook Glossary would be consistent with the FSMA model of regulation for firms which follow the CRR. In doing so, the PRA would maintain the current function of those definitions, thereby promoting the safety and soundness of PRA-authorised firms, while clarifying drafting and deleting redundant material, reducing the burden of regulation for firms. By enabling the PRA to amend these definitions and related rules in future, this work would support a nimbler regulatory approach to support the advancement of our general objective as well as facilitating competitiveness and growth in the face of future developments.

1.6 This proposal would result in changes to the PRA Rulebook Glossary (detailed in Appendix 1, Annex B) and consequential changes across other Parts of the PRA Rulebook (see Appendix 1, Annexes A, C-AAB; the table in paragraph C of Appendix 1 lists the relevant parts). It would also result in an amendment to supervisory statement (SS)13/13 –Market Risk.

1.7 This CP is most relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms, and their qualifying parent undertakings (including financial holding companies and mixed financial holding companies). However, given the scope of some definitions that would be transferred to the PRA Rulebook Glossary and the Parts to which consequential amendments would be made, it is of potential relevance to all persons subject to PRA rules and their counterparties. We would draw the attention of UK Solvency II firms, Lloyd’s, non-directive insurers, third country insurance undertakings and insurance holding companies particularly to paragraphs 2.20 and 2.21 of this CP, although others may also be of interest.

1.8 As detailed below, this proposal would have minimal net transitional costs, even assuming no benefits from simplification and consolidation of the PRA Rulebook. In practice, the simplifications proposed here should have a modest longer-term benefit through lower costs of compliance. And, by facilitating potential future changes to the PRA Rulebook, this proposal could enable more material future benefits through more flexible rulemaking.

Statutory obligations

1.9 The PRA has a statutory duty to consult when introducing new rules (FSMA section 138J), or new standards instruments (FSMA s138S). When not making rules, the PRA has a public law duty to consult widely where it would be fair to do so. 

1.10 The Practitioner’s Panel was consulted about the proposal in this CP. The Cost Benefit Analysis (CBA) Panel was not consulted because the expected impact of these proposals is below its materiality threshold.

1.11 In carrying out its policymaking functions, the PRA is required to comply with several legal obligations. The analysis in this CP explains how the proposals have had regard to the most significant matters, including an explanation of the ways in which having regard to these matters has affected the proposals.

Implementation

1.12 The proposal in this consultation takes into consideration the proposed restatements of some CRR definitions in the draft Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2025 published by HMT on 15 July 2025. The PRA expects to consider any relevant subsequent legislative proposals and Statutory Instruments when the proposal is finalised.

1.13 The PRA proposes that changes resulting from this CP would become effective alongside the Basel 3.1 package, expected to be Friday 1 January 2027.

Responses and next steps

1.14 This consultation closes on Thursday 30 October 2025. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP19_25@bankofengland.co.uk.

1.15 When providing your response, please tell us whether or not you consent to the PRA publishing your name, and/or the name of your organisation, as a respondent to this CP.

1.16 The PRA may share responses to this CP with the Financial Conduct Authority or HMT. This means HMT and/or the FCA may review the responses and may also contact you to clarify aspects of your response.

1.17 Please also indicate in your response if you believe any of the proposals in this consultation paper are likely to impact persons who share protected characteristics under the Equality Act 2010, and if so, please explain which groups and what the impact on such groups might be.

1.18 Unless otherwise stated, any remaining references to EU or assimilated legislation refer to the version of that legislation which forms part of assimilated EU law.

2: The PRA’s proposal

Approach to restating definitions

General approach

2.1 The PRA proposes to transfer most CRR definitions from Articles 4, 4A, 4B, and 5 into the PRA Rulebook Glossary and otherwise delete terms not expected to be needed in the PRA Rulebook Glossary. The PRA’s default stance in transferring these definitions has been to take the original text, unchanged, and incorporate it directly into the PRA Rulebook where possible – 'lift and shift' for shorthand. This approach would maximise the continuity for firms, and minimise the transitional costs in moving the definitions from legislation to the PRA Rulebook.

2.2 With ‘lift and shift’ as a starting point, the PRA has, in a few areas, taken the opportunity to improve the clarity of the definitions without changing policy substance. These amendments include:

• removing legacy drafting, such as references to assimilated legislation that can be made more directly;
• making small fixes to address known technical issues with definitions; and
• adapting definitions to fit the style of PRA Rulebook Glossary definitions or align existing PRA Rulebook Glossary definitions with CRR definitions.

2.3 In the next subsections we first outline the overall approach to integrating transferred definitions into the PRA Rulebook and then highlight key definitions likely to be of interest to specific stakeholders.

Integrating CRR definitions into the PRA Rulebook

2.4 Currently, CRR defined terms are used across the PRA Rulebook in two ways: italicised and unitalicised. Italicised uses of CRR terms in the PRA Rulebook currently point to the CRR definitions. The PRA proposes that these italicised uses of terms defined in the CRR would be linked to the proposed replacement definitions in the PRA Rulebook Glossary.

2.5 However, some PRA rules (including the rules included in Policy Statement 9/24 –  Implementation of the Basel 3.1 standards near-final part 2 and the draft rules included in CP13/24 – Remainder of CRR: Restatement of assimilated law) do not italicise CRR-defined terms. Instead, the CRR definitions are applied to the rules by interpretation rules in the Interpretation Part of the PRA Rulebook. To support interpretation of non-italicised CRR terms, the PRA proposes that a CRR Terms List would be created as part of the drop-down menu under the ‘Rulebook’ tab on the PRA Rulebook landing page. Revised interpretation rules would provide that uses in CRR (and certain other) rules of unitalicised terms that appear in the CRR Terms List would take the meaning given in the PRA Rulebook Glossary.

2.6 In some cases, the PRA Rulebook Glossary already contains a conflicting definition for terms to be transferred as part of this project. Where it was not straightforward to reconcile such conflicts, the PRA proposes PRA Rulebook Glossary definitions with multiple sections, which apply in different contexts.

Key definitions

Groups definitions

2.7 HMT have proposed to restate several CRR definitions relating to groups and relationships between firms in legislation.^{footnote [1]} The PRA Rulebook Glossary definitions we are proposing generally cross-reference HMT's proposed definitions. Where we have proposed to retain existing PRA Rulebook definitions or restate CRR definitions also restated by HMT, the proposed PRA Rulebook Glossary definition is intended to be consistent with the HMT formulation.

2.8 In other cases, our proposed replacement definitions in the PRA Rulebook Glossary closely track the CRR definitions. Our proposals are intended to replicate the effect of the existing definitions relating to groups without material policy changes.

2.9 The PRA asks respondents whether they agree that these proposals maintain the effect of the CRR definitions relating to groups while improving clarity. We would welcome feedback in particular on the effect in the PRA Rulebook of the following CRR replacement definitions:

• ‘branch’, where the PRA proposes to rely on an existing PRA Rulebook Glossary definition;
• parent undertaking and subsidiary, where the proposed CRR replacement definitions refer to section 1162 of the Companies Act 2026;
• ‘participation’, where the proposed CRR replacement definition mirrors the form of the definition HMT proposes to restate in FSMA;
• UK parent institution, where the proposed definition refers to that HMT is proposing to introduce to The Bank Recovery and Resolution (No 2) Order 2014 (SI 2014/3348); and
• UK parent financial holding company and UK parent mixed financial holding company, where the proposed definitions refer to those HMT proposes to introduce in FSMA.

‘Large institution’ and ‘small and non-complex institution’

2.10 The PRA proposes to convert the currency thresholds within the definitions of ‘large institution’ and ‘small and non-complex institution’ to GBP in line with the PRA’s past approach to such conversions (EUR 30 billion to GBP 26 billion and EUR 5 billion to GBP 4.4 billion respectively). We would welcome feedback from firms on whether the changes in threshold are likely to result in changes of status.

2.11 The PRA proposes to simplify both definitions without intending any change in substance. The proposed definition of ‘large institution’ omits a subparagraph referring to the largest three institutions in the UK; these institutions are already captured by the asset threshold. The proposed definition of ‘small and non-complex institution’ omits two subparagraphs from the existing CRR definition as the PRA's powers under FSMA, including under s55M and s138A, provide for an appropriate supervisory discretion in this space.

Definition of SME

2.12 In this CP the PRA is proposing to align the definition of ‘SME’ with the definition published in the near-final Basel 3.1 rules for credit risk. Specifically, we are proposing to broaden the PRA Rulebook Glossary definition included in the near-final Basel 3.1 rules instrument so it can apply across the PRA Rulebook, and make consequential amendments to link the term 'SME' to the Glossary definition throughout. This definition is somewhat wider than that in the CRR, which the PRA is not proposing to transfer.

2.13 The PRA considers that this definition would be less burdensome for firms to implement than the existing CRR definition. There are also benefits to having a single, clear definition for this class of borrowers given their importance to the UK economy.

Credit risk terms

2.14 HMT previously indicated, in its Policy Update on applying the FSMA model to the CRR, that it would make amendments to the definitions of probability of default (‘PD’), loss given default (‘LGD’) and ‘conversion factor’ in the event that they remained in legislation at the time the PRA implements the Basel 3.1 standards.

2.15 HMT now no longer intends to restate these definitions in legislation. The PRA therefore proposes to transfer the CRR definitions to the PRA Rulebook Glossary with appropriate changes. The PRA is proposing to define PD and LGD more accurately in the context of dilution risk, introduce references to facilities where appropriate, and remove the concept of ‘unadvised limits’ from the definition of ‘conversion factor’. The proposal also clarifies the meaning of ‘lost’ in the definition of ‘expected loss’.

2.16 The PRA proposes to amend the near-final Credit Risk Mitigation (CRR) Part of the PRA Rulebook to delete an Article 229 specific definition of ‘market value’, so that the restated CRR definition would instead apply.

2.17 The PRA proposes to restate the CRR definition of ‘one year default rate’ in the PRA rulebook in an amended form that refers to defaults of facilities as well as obligors.

2.18 For the term ‘external credit assessment institution’ or ‘ECAI’, the PRA proposes to rely on the definition already in the PRA Rulebook Glossary. The PRA does not consider this a substantive change. The PRA proposes to restate the definition of ‘nominated ECAI’ in an amended form that makes explicit the rules relevant for nomination.

Trade finance

2.19 In restating the CRR definition of ‘trade finance’ in the PRA Rulebook, the PRA proposes to simplify the definition by omitting legacy CRR drafting in that provides examples of the typical characteristics of trade finance. The PRA considers that this simplification would not alter the meaning of this definition.

Insurance-related definitions

2.20 The CRR contains various definitions relating to insurance entities (in particular ‘insurance undertaking’, ‘reinsurance undertaking’, ‘third-country insurance undertaking’ and ‘third-country re-insurance undertaking’) and their capital instruments. Following the restatement of Solvency II assimilated law, these CRR definitions require updating. The PRA generally proposes to use close replacements of these CRR definitions as they stood prior to the transfer of Solvency 2.

2.21 The proposed definition of ‘financial sector entity’ is more straightforward in its inclusion of all non-directive insurers and also incorporates insurers in supervised run-off.

Recognised exchange

2.22 The PRA proposed rules on determining recognised exchanges in March. On the presumption that the proposals in CP3/25 – Recognised exchanges policy and transfer of main indices are made as consulted upon, the PRA further proposes to transfer the definition of ‘recognised exchange’ to the PRA Rulebook Glossary incorporating the relevant rules directly into the definition, with no intended change to its effect beyond what was consulted on.

Third-country investment firm

2.23 In their Policy Update, HMT have stated their intent to create Overseas Prudential Requirements Regimes and have requested feedback on a proposed definition of ‘overseas investment firm’.

2.24 In this CP, the PRA does not propose a replacement for the CRR definition of ‘third-country investment firm’. However, the PRA intends to create in the PRA Rulebook Glossary a suitable definition and to reflect appropriate consequential amendments to PRA rules once the details of the new Overseas Prudential Requirements Regimes are available.

Defined benefit pension fund assets

2.25 The PRA proposes to align the CRR definition of ‘defined benefit pension fund assets' with the existing definition in the PRA Rulebook Glossary for ‘defined benefit assets’ with no change in effect intended.

Group of connected clients

2.26 For the definition of 'group of connected clients' the proposal is to replace a reference to regional governments or local authorities referred to in Article 115(2) of the CRR with a reference to the Scottish Government, the Welsh Government or the Northern Ireland Executive, which is consistent with the near-final Basel 3.1 rules replacing Article 115(2) of the CRR.

Simplifications to definitions transferred

2.27 In several cases, PRA analysis indicates that definitions can be clarified or simplified. In particular:

• The proposed definitions of terms including ‘Annex 1 activities’, ‘collective investment undertaking’, ‘material subsidiary’, ‘control’, ‘accumulated other comprehensive income’ and ‘eligible capital’ are simplified, with no intended change to substance.
• The CRR definition of ‘competent authority’ has been incorporated in the existing Glossary definition of ‘competent authority’, which has also been clarified.
• Other proposed definitions simplify existing CRR definitions by cross-reference to legislation, eg the terms 'resolution entity' and 'resolution group'.
• The proposed definition of ‘applicable accounting framework’ is aligned with the existing PRA Rulebook Glossary definition of ‘accounting principles’.
• The definition of ‘default fund’ is removes legislative references that are unnecessary in the context in which the term is used; and
• The proposed definition of ‘global systemically important institution’ refers directly to the PRA’s published list of such firms. CRR terms not transferred to the PRA Rulebook Glossary

2.28 The PRA proposes not to transfer a number of CRR terms, listed in Annex 1 of this document to the PRA Rulebook Glossary. These terms are not expected to be required in the PRA Rulebook Glossary at the implementation date. In some cases that is because the PRA Rulebook Glossary already contains a similar term (eg the defined term ‘Bank of England’, meaning the CRR defined term ‘Bank’ is redundant) or because PRA Rulebook Parts already contain similar or identical Part-specific definitions.

Consequential amendments

2.29 The restatement of CRR definitions in the PRA Rulebook Glossary prompts a large number of consequential changes within the PRA Rulebook. These are detailed in Appendix 1, Annexes A and C-AAB.

2.30 The consequential amendments proposed fall into two categories, firstly those related to how the terms in the Rulebook should be interpreted, and secondly those relating to the substance of the rules relying on CRR definitions.

2.31 Amendments to clarify the interpretation of terms in the Rulebook include:

• as described in paragraph 2.4 a list of CRR terms and an amendment to the Interpretation Part, to support the interpretation of unitalicised uses of CRR terms once their definitions have been transferred to the PRA Rulebook Glossary; and
• the deletion of (i) most Part-specific interpretive provisions referring to the CRR and tables detailing externally defined CRR terms, (ii) deletion of a number of Part-specific definitions that we are proposing to include in the Glossary and (iii) the replacement of cross-references to Article 4 of the CRR with uses of or references to proposed Glossary definitions.

2.32 The PRA also proposes to amend PRA Rules in some cases to reflect amendments to the definitions used. This includes:

• an amendment to Article 336(4) of the near-final Market Risk: Simplified Standardised Approach (CRR) Part to replace wording referring to a regulated market in the UK or a stock exchange in a third country recognised by the UK competent authorities with clearer wording referring to a recognised exchange or an exchange that would meet the definition of a ‘recognised exchange’ in the PRA Rulebook Glossary if the asset liquidity condition were disapplied;
• replacing uses of the term ‘regulated market’ with uses of the term ‘UK regulated market’ in the Reporting (CRR) Part to link them to the proposed PRA Rulebook Glossary definition of ‘UK regulated market’ to replace the CRR definition of ‘regulated market’;
• deleting uses of the term Directive 86/635/EEC UK law and (except in the Reporting (CRR) Part) the term Directive 2013/36/EU UK law;
• linking uses of the terms ‘SME’ to the proposed Glossary definition;
• deleting references to the FCA as consolidating supervisor that are expected to be inoperative.

2.33 PRA analysis has identified two PRA statements requiring consequential changes as a result of these proposals and HMT’s restatement of CRR definitions in legislation, namely SS13/13 - Market risk, and the PRA statement on the concept of ‘durable link'.

2.34 Regarding SS13/13 Market risk, that statement provides, in Section 8, an obsolete list of stock exchanges recognised by the PRA for the purposes of interpreting Article 336(4) of the CRR.^{footnote [2]} In light of the proposed consequential amendments to Article 336 of the near-final Market Risk: Simplified Standardised Approach (CRR) Part (see section on ‘Consequential amendments’ above), we propose to delete Section 8 of SS13/13, as shown in Appendix 2 of this document. This change should be read in conjunction with the changes proposed to SS13/13 in CP17/25 – Basel 3.1: Adjustments to the market risk framework.

2.35 In October 2016, the PRA published a statement on the concept of ‘durable link', which is a key feature of the existing CRR definition of ‘participation’, relating to circumstances in which a firm does not own 20% or more of the voting rights or capital of an undertaking. As discussed in paragraph 2.9, the definition the PRA is proposing to include in the Rulebook Glossary would be broadly consistent with the definition that HMT has proposed in its draft Statutory Instrument. While that drafting omits the term ‘durable link’, the proposed definition is consistent with the PRA’s established thinking on what constitutes a participation where a firm does not own 20% or more of an undertaking.

2.36 The PRA’s thinking on what constitutes a participation has not changed. The 2016 statement explained the factors the PRA would take into account when deciding whether something is a participation, where a firm does not own 20% or more of an undertaking. Those factors include whether there is significant influence under the accounting framework as well as financial and governance factors and the intent of the firm’s management. Given no change in its thinking, the PRA does not expect to revisit supervisory decisions regarding participations.

2.37 At this time we have not done a comprehensive review of the implications of this proposal for PRA Supervisory Statements or Statements of Policy. Given the limited proposed changes to policy substance, the PRA believes that a purposive reading of those statements would remain unchanged. We nonetheless invite respondents to share with us if they identify exceptions.

PRA objectives analysis

2.38 The proposal in this CP would advance the PRA’s general objective of promoting the safety and soundness of PRA-authorised firms. Maintaining the substance of the definitions used in the CRR is vital to the effective operation of many PRA rules, which form the basis of the PRA’s regulation of banks, building societies, and designated investment firms. (For the same reason, this approach would also be compatible with advancing the insurance objective of contributing to the securing of an appropriate degree of protection for those who are or may become policyholders, to the limited extent this objective is relevant to the proposal (see paragraph 1.7).

2.39 The proposal would also advance the PRA’s secondary objectives of facilitating: (i) competition; and (ii) competitiveness and growth. Though the current definitions, and consequently regulatory requirements, would be largely maintained, the PRA anticipates a positive impact on both secondary objectives:

• Transferring CRR definitions into the PRA Rulebook Glossary would make it easier for firms to access and understand definitions used in the rules applying to them, relative to the present situation, where definitions are divided between assimilated legislation and the PRA Rulebook. The updates and simplifications that the PRA is proposing for individual definitions reinforces this channel. The proposed approach would consequently reduce barriers to entry, facilitate effective competition, and make it more attractive to operate in the UK;
• moving definitions from legislation into the PRA Rulebook would allow the PRA to be more responsive and flexible in adjusting requirements to address emerging risks or future innovation; and
• limiting substantive changes to definitions would minimise adjustment costs for firms.

Cost benefit analysis

2.40 The implementation costs for firms are likely to be small, given the intention not to make substantive changes to policy in these proposals. Balancing this cost would be benefits from simpler and clearer rules, manifesting in lower compliance costs for firms in interpreting and following CRR rules. While the cost-benefit impact of these proposals cannot be assessed with meaningful precision, an estimation of the potential costs and benefits of this proposal based on a standard costs model supports the conclusion that net costs are small.

‘Have regards’ analysis

2.41 In developing the proposals in this CP, the PRA has had regard to its framework of regulatory principles.

2.42 In the PRA’s analysis, two ‘have regard’ considerations were considered to have some significance to the proposals overall:

• The proposals would support a regulatory environment which facilitates growth through supporting competition and innovation (and connected with that sustainable growth in the economy of the UK). Transferring the relevant CRR definitions into the PRA Rulebook Glossary would allow the PRA to be more responsive and flexible in future to accommodate innovation more quickly, as rules can be changed more quickly than legislation.
• The proposals also support the proportionality of PRA regulation. There will be some short-term cost for firms in familiarising themselves with the proposals. However, simpler and clearer definitions, and deletion of obsolete material will reduce costs in the medium term, particularly for smaller firms.

2.43 The proposal will also maintain coherence of the securitisation rules by defining securitisation-related terms in the PRA Rulebook Glossary by cross-reference to legislation where appropriate.

2.44 The PRA has considered other factors as required. Where analysis has not been provided against a ‘have regard’, it is because the PRA considers that ‘have regard’ to not be a significant factor.

Impact on mutuals

2.45 The PRA considers that the impact of the proposals in this CP on mutuals as a group would not significantly differ from that on other firms.

Equality and diversity

2.46 In developing the proposals in this CP, the PRA has had due regard to the equality objectives under s149 of the Equality Act 2010. The PRA considers that the proposals do not give rise to adverse equality and diversity implications.

Annex 1 – List of CRR terms not transferred to PRA Rulebook Glossary

Under the proposed PRA Rulebook amendments in this CP, the following terms defined in Articles 4, 4A, 4B and 5 of the CRR would not be transferred to the PRA Rulebook Glossary:

• authorisation
• bail-in tool
• Bank
• the second BRRD Order
• commodity and emission allowance dealer
• defined benefit pension fund assets
• Directive 86/635/EEC UK law
• Directive 2013/36/EU UK law
• Financial Policy Committee
• funds for general banking risk
• G-SII entity
• initial capital
• internal approaches
• management body in its supervisory function
• mortgage lending value
• multilateral trading facility
• non-listed institution
• officially supported export credits
• resolution action
• Solvency II excluded operations
• speculative immovable property financing
• systemic risk
• systemically important institution
• UK parent investment firm
• UK parent credit institution

Please also refer to the discussion of the terms ‘third-country investment firm’ and ‘SME’ above.