Prudential Regulation Authority’s (PRA) Cost Benefit Analysis Panel Annual Report 2025/26

The Cost Benefit Analysis (CBA) Panel is a statutory panel established to provide advice to the PRA and the Bank on the preparation of CBA. The Panel provides independent input to the PRA’s and the Bank’s CBAs, helping to support increased transparency and scrutiny of their policymaking. This report covers the period from 1 March 2025 to 28 February 2026.

Published on 25 June 2026

Presented to Parliament pursuant to section 47 of the Financial Services and Markets Act 2023 and The Financial Services and Markets Act 2023 (Panel Remuneration and Reports) Regulations 2023.

Chair’s Foreword

On behalf of the members of our Panel, I am pleased to present the report summarising this year’s work and activities. It has been a year of evolution, both for the Panel and for the teams with which we work, as we continue to find our stride in how we can best collaborate. The Panel is a ‘critical friend’ providing independent challenge and advice to strengthen analysis before final decisions are taken, thus supporting high-quality and transparent policymaking across the Prudential Regulation Authority (PRA) and the Bank. We do not provide a ‘grading’ of Cost Benefit Analysis (CBA) or opine on the need for a policy, policy changes or the intentions of a policy, except where these points relate to the expected outcomes set out in the CBA.

The eight CBAs evaluated by the Panel this year span banking, insurance and financial markets infrastructures (FMIs). We were also consulted in the preparation of updated versions of the PRA’s approach to cost benefit analysis and the Bank’s approach to cost benefit analysis statements of policy (SoP), following the call for public feedback that closed in September 2025. Building on our feedback, transparency of the CBA toolkit has been further enhanced, including the initiative to seek external views on the PRA Standard Cost Model (SCM). We understand that the Bank is also seeking feedback on the use of the PRA’s SCM for FMIs, particularly around evidence to inform the model assumptions and benchmarks. The members of the Panel are aware that firms and their representatives have expressed some scepticism about the estimate of compliance costs; we are therefore keen that firms provide the input needed to validate or improve the SCM, which supports an important part of the operational compliance cost analysis in policymaking.

One of the key elements this past year of our ‘friendly criticism’ and subsequent support has been underscoring that CBA should never be viewed as simply a review or ‘testing’ mechanism applied when a policy is fully designed and close to finalisation. The degree to which this understanding of CBA has been incorporated is central to each of the CBA we have evaluated, and to the improvements we have encouraged and supported in various ways. The true value of CBA is derived by embedding it into the full process of policy design such that the end product has fully incorporated thinking and challenge to costs and benefits during its gestation, when options are defined and considered. This is particularly important for policies where benefits are unlikely to be quantifiable in pounds and pence, which is in fact most of the policies that have been or will be delivered by the PRA and the Bank. Some stakeholders may be disappointed that PRA and Bank policies rarely offer a CBA with a net present value or other quantification, which makes it all the more important that, when reviewing new or revised policies, stakeholders should feel confident that costs have been captured appropriately and that benefits, even if expressed in qualitative terms have been logically and holistically derived.

To support this thinking, in March 2025, we agreed a shared roadmap of work with the PRA and the Bank, which has guided our engagement over the subsequent year. This has included structured engagement on CBA models, which has deepened our understanding of precisely how CBA is applied in a prudential regulation context, and consequently helped the PRA and Bank improve their approaches. For our own more detailed understanding to better support the Panel’s work, question and answer sessions on more technical or less familiar topics have been held in advance of CBA discussions to improve our shared understanding of the policy framework relevant to each. We have also suggested approaches for scaling and contextualisation of costs and benefits, particularly where quantification is difficult.

This year the Panel has also engaged in the initial stages of CBA development in five cases, meaning the analyses were considered twice by us. This allowed the Panel to advise to the quality of the CBA throughout its development, including those for Funded Reinsurance (FundedRe), Captive Insurance and Loan to income (LTI) Flow Limits. The subsequent CBA output was, in our view, considerably stronger than those CBAs where we did not see and contribute to early thinking. I am therefore pleased to note that the recently published updated SoP14/24 – The Prudential Regulation Authority’s approach to cost benefit analysis expressly envisages early input for more complex CBAs.

We have also spent significant time supporting the PRA and the Bank in how CBA thinking is presented in consultations. In particular, we have focused on the quality of causal chain exposition to firm behaviour and outcomes, which supports meaningful engagement by external stakeholders. We have proposed clearer and more evidence-based explanation as to how judgements and conclusions are reached. We have suggested securing cost estimates from multiple sources and the use of cost ranges where uncertainty is high. Where quantification is not possible—usually a benefit-side issue, we have suggested clearer articulation of how policies deliver benefits, supported by simple examples or scenarios. We have also suggested the regular use of lessons and insights from other jurisdictions, even where their approaches cannot be directly transferred.

The Panel has no doubt that CBA in prudential and FMI regulation remains inherently challenging, but the direction of travel is positive. Impacts are difficult to estimate, given that that they are inherently long-term, indirect and often behavioural driven by factors outside PRA or Bank control. This is particularly true of FMIs, which operate in complex and less well researched markets where the benefits of avoiding systemic failure are challenging to assess. As a Panel, we believe that the PRA and the Bank should focus as part of its Rule Review process on assessing mechanisms to test whether the CBA developed for a policy has accurately captured the intended outcome but also recognise that there is no one-size-fits-all approach to doing so. We have proposed further discussions in this area in the coming year.

Looking ahead, we expect the Panel’s contribution to continue to develop as the Panel’s understanding of the prudential and FMI policy frameworks deepens and the PRA and the Bank’s experience working with the Panel increases. We will continue to promote and support greater expertise amongst policy teams in the application of CBA beyond the strict statutory requirements set for the Panel and adapt our engagement model accordingly. We have appreciated the open and responsive attitudes we have observed in what can be quite ground-breaking territory, and we remain committed to continuing to work with the PRA and Bank to support informed, more transparent and proportionate regulation to the benefit of all.

Laurel C Powers-Freeling

1: Overview

About the Panel

1.1 The PRA CBA Panel is a statutory body established to provide independent advice to the PRA and the Bank of England (the ‘Bank’) on CBA. The Panel was created in July 2024 by the PRA in accordance with section 138JA of the Financial Services and Markets Act 2000 (FSMA). Since 1 August 2024, the PRA and the Bank have been required to consult the Panel on relevant CBAs.^{footnote [1]} The PRA supports the Panel on an ongoing basis.

1.2 The Panel provides independent advice on relevant CBAs prepared by the PRA and the Bank when proposing new rules or amending existing rules for PRA-regulated firms and FMIs. In doing so, it supports greater transparency and scrutiny of the policymaking process. The Panel also keeps under review how the PRA and the Bank are performing generally in conducting CBAs more broadly and offers recommendations to strengthen their CBA methodology and approach over time. In some cases, the Panel may consider updated CBAs that form part of Policy Statements. Feedback is typically provided through regular meetings, though there are circumstances when feedback is sought in writing. These and other details are outlined in the Panel’s Terms of Reference.

1.3 While the Panel provides advice to the PRA and the Bank on individual CBAs and on their broader methodological approach, it does not assure or audit individual CBAs, nor does it make recommendations on which policies the PRA and the Bank should consult upon.

About the report

1.4 This report covers the activities undertaken by the Panel between 1 March 2025 and 28 February 2026. Previous reports are available on the Cost Benefit Analysis Panel website. The Panel is required to provide an annual report to HM Treasury (HMT).^{footnote [2]}

Panel membership

1.5 Appointments to the Panel are agreed by the Prudential Regulation Committee in consultation with the Financial Market Infrastructure Committee. The appointment of the Chair is approved by HMT. Panel members are external to the PRA and the Bank and therefore do not hold employee status.

1.6 As at 28 February 2026, the members^{footnote [3]} of the Panel are:

Laurel Powers-Freeling (Chair)
Patrick Coen
Martina Garcia
Stephen Gibson
Andrew Maclaren
Sergio Afonso (PRA firm member)
Kristy Robinson (PRA firm member)

1.7 During the reporting period, David Aikman, a member of the Panel since July 2024, stepped down in August 2025. Following an open and competitive recruitment process, in line with the Panel appointments by the PRA and the Bank of England, Patrick Coen was appointed for a three-year term commencing on 1 October 2025. Both PRA firm members were both reappointed for a further one-year term.

1.8 All Panel members are responsible for identifying and declaring any actual, potential, or perceived conflicts of interests in line with the Panel’s conflicts guide. These declarations are recorded in the Panel’s register of interests, which is reviewed ahead of each meeting. In accordance with the guidance, any actual, potential, or perceived conflicts identified are declared to the Chair, who then takes appropriate action to manage them.

2: Panel engagement with the PRA and the Bank

Summary of activities

2.1 Between 1 March 2025 and 28 February 2026, the Panel convened seven times and, in some instances, provided written feedback outside these meetings. During this period, the Panel:

Provided advice on six CBAs forming part of consultation papers (CPs), four prepared by the PRA and two prepared by the Bank. Three of the four PRA individual CBAs were considered twice by the Panel. First, at an earlier stage to provide initial input, and later as part of the formal CBA consideration to inform the CBA. One of the PRA CBAs considered at an earlier stage was formally considered in March 2026 (outside the reporting period) but is included here for completeness.
Offered early advice on two initial versions of PRA CBAs (in addition to the six CBAs referred to in the preceding bullet). One was not considered at a later stage as the impacts did not exceed the materiality threshold used to determine which CBAs the Panel is formally consulted on, and the other may be formally considered at a later stage if the expected estimated impacts exceed the materiality threshold or if, following coordination with the PRA, further Panel input would be helpful.
Was consulted on the preparation of updated versions of the SoP on the PRA’s and Bank’s approach to CBA, including a review of the PRA materiality threshold.
Continued engagement with the PRA and the Bank on CBA methodological issues and approaches, including: (i) a workshop referenced in paragraph 2.3 of the Annual Report 2024/25; (ii) recommendations relating to the Panel set out in the FSRC’s inquiry into the Financial Conduct Authority (FCA) and PRA’s secondary competitiveness and growth objective; and (iii) a discussion of methodologies for estimating incremental compliance costs.
Reviewed the 2024/25 Annual Report ahead of its publication in June 2025.

Discussions on CBA methodology and approach

2.2 The PRA presented to the Panel its current methodologies for estimating the incremental compliance costs of individual policy proposals in its September 2025 meeting – including in-house tools such as the SCM and approaches for calculating cost of capital – and how this analysis is presented in CPs. The Panel provided feedback on some underlying assumptions and parameters within these models and encouraged greater transparency of these methodologies to support clearer communication of compliance costs and associated uncertainties. In response, the PRA published a technical note outlining the methodology of the PRA’s SCM, which invites public feedback on its use, including from the Bank in its role as FMI regulator.^{footnote [4]} The Panel engaged with the PRA on further models in its March 2026 meeting (outside the period of this report) and expects this work to continue throughout 2026.

2.3 The Panel was consulted on the preparation of updated versions of the SoPs on CBA of the PRA and the Bank in its November 2025 meeting. The Panel had previously provided input on these documents in July 2024, ahead of their initial publication in December 2024 that opened a call for public feedback that closed in September 2025. These updated documents incorporated changes to address points through feedback and reflected key learnings from the Panel’s advice since its establishment.

2.4 The Panel also reviewed the calibration of the materiality threshold applied for PRA CBAs (defined as direct impacts on PRA-regulated firms of +/- £10m), concluding that it continues to operate as intended. The current threshold captures the vast majority of economic impacts arising from PRA policy proposals while avoiding the need for the Panel to review a large number of low-impact CPs, as occurred between August and December 2024 before the threshold was introduced. The current calibration of the threshold also supports the Panel’s capacity to review impactful CBAs referred by the PRA where the Panel’s input would be beneficial and consultation is not strictly required by legislation. Further details about how the threshold operates can be found in paragraphs 5.10 to 5.14 of the PRA’s approach to CBA. For CBAs prepared by the Bank as FMI regulator, the Panel continues to review all individual CBAs, as there is currently no threshold. Any change to this approach would be reflected in an updated SoP of the Bank of England's approach to CBA.

2.5 The Panel also considered in its July 2025 meeting the FSRC’s inquiry into the FCA and PRA’s secondary competitiveness and growth objective (published in June 2025). The FSRC report contained two recommendations to the PRA that also related to the CBA Panel: one relating to assessing the cumulative cost of compliance and another relating to how the PRA and FCA work together on this matter. The Panel considered the recommendations and the scope of the Panel’s remit, which is to look at the incremental impact of policy changes. The Panel noted that measuring cumulative costs would be challenging and would likely require meaningful industry input. The Panel discussed the contribution it could make by supporting improvements to the PRA’s approach to assessing compliance costs in individual CBAs, and the Panel saw the value of collaboration with the FCA on this.

2.6 All meetings of the Panel were attended by relevant senior executives from the PRA and the Bank. Key outcomes and insights from these meetings were provided to relevant decision-makers and policy leads, contributing to the transparency of the PRA’s and the Bank’s policymaking processes. The Panel’s comments on any given CBA, and the PRA’s and Bank’s responses to these comments, are summarised in the relevant CPs.

Individual CBAs considered by the Panel

2.7 The Panel is consulted on the CBAs of all proposed rule changes prepared by the PRA and the Bank (as FMI regulator)^{footnote [5]} in accordance with section 138J of FSMA 2000, except in cases where it would be disproportionate to do so. The Panel is also consulted, on a voluntary basis, for certain impactful CBAs where its input would be beneficial and there is no statutory requirement for the PRA to seek the Panel’s advice. These referrals typically follow discussion between the PRA and the CBA Panel Chair.

2.9 At the request of the PRA, the Panel provided early input on more complex individual CBAs, with the PRA briefing the Panel at an earlier stage of policymaking and enabling input into the preparation and planning of those CBAs. Where expected impacts exceeded the materiality threshold that determines whether a CBA is formally referred to the Panel, these items returned for a formal consideration, either at a subsequent meeting or through written feedback. In some CBAs involving more technical proposals, the Panel also engaged with policy teams in advance to deepen its understanding of the policy context and to raise questions that support clearer assessment of the CBA. The Panel has found these types of engagement constructive and welcomes further opportunities to contribute where its capacity allows.

2.10 To support transparency and accountability, the PRA typically notifies the CBA Panel Chair, ahead of publication, of all CPs proposing rule changes that are not referred to the Panel, either because they fall below the materiality threshold or because there is no legal requirement to consult the Panel under section138L(3) of the FSMA 2000^{footnote [6]}.

2.11 The table below lists the CBAs considered by the Panel between 1 March 2025 and 28 February 2026. For more context, this table should be read alongside the associated CPs available on the Bank’s website (links to each CP are included in the table).

Subject	Description	Panel feedback
Ensuring the resilience of CCPs	The CBA was briefly noted in the CBA Panel Annual Report 2024/25, as the policy details were not yet public (the CP had not been published). The Panel first considered the CBA at its January 2025 meeting and then in May 2025 via written feedback, following the addition of further policy areas. The CBA assessed proposals to move most of the UK EMIR requirements for CCPs into Bank rules and seven additional proposals to further strengthen CCP resilience.	The Panel advised the Bank to frame the behavioural incentives of some proposals and to use scenarios to illustrate their benefits. It noted the challenges of attempting to quantify benefits and supported the use of qualitative explanations where appropriate. In addition, the Panel recommended to provide further information on how the proposals could affect different users of FMI services, including smaller firms and the wider market, and offered suggestions on improving the presentation of the CBA. Paragraphs 3.14 to 3.38 of the CP describe this feedback.
CP21/25 – Future banking data review: Deletion of banking reporting templates	The Panel provided early advice on an initial draft of this CBA at its July 2025 meeting, and then formally considered the full version of the CBA in August 2025 via written feedback. The CBA assessed proposals to delete some regulatory reporting requirements for banks. The expected benefits include estimated annual industry cost savings of around £26.3m, reflecting reduced reporting obligations and related operational work. Implementation costs are expected to be minimal, and the associated risk in firm resilience and/or financial stability from these deletions is considered negligible.	The Panel suggested that the PRA could clarify the rationale for the proposed template deletions and add more context on the Future Banking Data (FBD) programme, noting that these deletions represent an initial step in a planned programme of further work. The Panel also encouraged the PRA to clearly set out the key assumptions behind the benefit estimates and provide greater transparency on how these estimates are derived, including differences by firm size. Paragraph 2.26 in the CP describes this feedback and how the PRA has incorporated it.
CP6/26 – High loan to income lending	The Panel provided early advice on an initial draft of the CBA at its September 2025 meeting, and then formally considered the CBA in January 2026 via written feedback. The CBA assessed proposed amendments to the PRA Rulebook to implement the Financial Policy Committee’s recommendation to adjust the implementation of the Loan-to-Income (LTI) flow limits, allowing individual lenders to increase their share of lending at high LTIs, while aiming to ensure the aggregate flow remained consistent with the limit of 15%.^{footnote [7]} The main benefits are reduced costs associated with not having to comply with a specific regulatory limit, and increased lending opportunities for firms that choose to increase their high LTI lending. Expected costs apply only to firms that decide to exceed the limit, including monitoring the aggregate high LTI measure and preparing any necessary adjustments if the market exceeds the limit.	The Panel recommended the PRA give due consideration to potential competition impacts, including how firms’ expectations about adjusting high LTI lending in future could affect, or possibly constrain, competition, as well as whether the impacts might differ between small and large firms. The Panel encouraged the PRA to review historical lending flows to understand how volatile these can be and to compare with similar policies in other jurisdictions to help assess potential market outcomes. The Panel queried whether removing firm specific limits would lead to an increase in lending volumes given that lending by unconstrained firms may have been offsetting the reduction in lending by constrained firms. The Panel also queried the potential impact of the proposed changes on firms’ resilience. Paragraph 2.39 in the CP describes this feedback and how the PRA has incorporated it.
CP2/26 – Reforms to securitisation requirements	The Panel provided early advice on an initial draft of the CBA at its October 2025 meeting, but it did not formally consider it further as the estimated impacts fell below the materiality threshold for Panel review. The CBA assessed proposals to revise general securitisation requirements to make them more proportionate, supporting the PRA’s secondary objectives while maintaining appropriate safeguards. The benefits are estimated at between £5.8 million – £7.5 million annually, driven by lower compliance costs, with no expected impact on safety and soundness. Market wide annualised costs are estimated at between £0.3 million – £0.5 million, largely reflecting implementation.	The Panel suggested the PRA could use scenario analysis to show how much securitisation activity would need to increase for the proposals to have a significant impact. It also noted that any additional liquidity for firms arising from the resecuritisation proposal should be counted as a benefit. The Panel observed that the UK market is relatively small, so benefits may take longer to materialise. It also commented that while the L-shaped risk retention proposal may attract some additional overseas investor interest, this effect is likely to be limited and should not be overstated. Paragraph 4.4 in the CP describes this feedback and how the PRA has incorporated it.
Captives^{footnote [8]}	The Panel provided early advice on an initial draft of the CBA at its October 2025 meeting, and then formally considered the CBA in its May 2026 meeting. The PRA plans to consult on new rules for captive insurance in summer 2026. The CBA sets out an assessment of the key costs and benefits of introducing a more proportionate prudential regime for captive insurers, following the Government’s consultation on establishing a UK captive insurance framework.	The Panel engaged with the PRA to understand the background to the proposals and to discuss the case for regulatory action and the overall policy intent. The Panel subsequently engaged with the PRA on the key costs and benefits of a more proportionate prudential regime for captives, including potential impacts on the market and competition. In addition, the Panel provided advice on the use of scenario analysis in the CBA where market impacts are uncertain.
CP8/26 – Funded reinsurance	The Panel provided early advice on an initial draft of the CBA at its October 2025 meeting, and then formally considered the CBA at its March 2026 meeting. Although the latter date falls outside the reporting period, full details on the engagement are included for completeness. The CBA assessed proposed rules and expectations for how firms should value funded reinsurance arrangements under UK Solvency II. The expected benefits include aligning regulatory treatment of funded reinsurance more closely with the underlying risks these arrangements pose, preventing a build-up of undercapitalised exposures that could pose threats to insurers’ safety and soundness and policyholder protections. While direct operational compliance costs are expected to be low, the proposals are expected to increase the capital required to back new bulk purchasing annuity (BPA) deals.	The Panel supported the PRA’s assessment that addressing misaligned incentives in the current treatment of funded reinsurance would help facilitate effective competition in the BPA market. The Panel suggested ways to better present estimates to better highlight the main policy features, focus on the most material elements and make the analysis clearer to all stakeholders. The Panel suggested that the CBA could more clearly explain why the benefits are expected to outweigh the costs, noting that recent life insurance stress testing results may be helpful evidence. The Panel also advised adding more context on how the use of funded reinsurance has evolved over time and on the size of the Bulk Purchase Annuity (BPA) market, to help explain the rationale for the proposed policy actions. Paragraph 4.2 in the CP describes this feedback and how the PRA has incorporated it.
CP – Exempting post-trade risk reduction (PTRR) transactions from the clearing obligation	The Panel considered the CBA in its November 2025 meeting. The CBA assessed a proposal to introduce an optional exemption to PTRR transactions from the Clearing Obligation^{footnote [9]}. The main benefits include reducing complexity and improving the efficiency of PTRR exercises. This could also support financial stability by enabling a wider range of participants to access PTRR exercises, leading to larger reductions in counterparty risk across the market. The associated compliance costs are expected to be marginal.	The Panel advised the Bank on framing the rationale for change, noting that because the exemption is optional, firms and participants would weigh the costs and benefits carefully before deciding whether to use it. The Panel also highlighted the difficulty of quantifying the benefits precisely and supported explaining them qualitatively, including using illustrative examples to show how different market participants might be affected. Paragraph 45 in the CP describes this feedback and Box A states how the Bank has addressed it.
CP5/26 – Modernising the liquidity policy framework	The Panel considered the CBA in its January 2026 meeting. The CBA assessed proportionate adjustments to the liquidity framework aimed at strengthening firms’ resilience to liquidity shocks by reducing frictions that slow or restrict the speed of monetisation of liquid assets. The expected benefits include stronger liquidity risk management and greater confidence during stress events. Operational costs across all firms are estimated at around £7.2 million one-off and £0.6 million ongoing (per year).	The Panel recommended the PRA enhance the case for action by expanding the market failure analysis, including highlighting differences between large and small firms and the potential role of moral hazard. On the counterfactual (where gaps and weaknesses in operational readiness and liquidity management at some firms continue to persist), the Panel asked how far firms already have some of the required capabilities (for example, through recovery planning) and suggested this should be reflected in both the baseline and the assessment of costs and benefits. On direct costs, the Panel requested a more detailed breakdown of the estimates and questioned the balance between one-off and ongoing costs, noting that it considered that one-off costs may be overstated. On benefits and the overall assessment, the Panel asked for more quantitative information on benefits and a clearer comparison of costs and benefits, suggesting that a breakeven analysis could help put the estimated costs in context. Paragraph 4.2 in the CP and paragraph 2 of Appendix 4 describes this feedback and how the PRA has addressed it.

Subject

Description

Panel feedback

Ensuring the resilience of CCPs

The CBA was briefly noted in the CBA Panel Annual Report 2024/25, as the policy details were not yet public (the CP had not been published). The Panel first considered the CBA at its January 2025 meeting and then in May 2025 via written feedback, following the addition of further policy areas.

The CBA assessed proposals to move most of the UK EMIR requirements for CCPs into Bank rules and seven additional proposals to further strengthen CCP resilience.

The Panel advised the Bank to frame the behavioural incentives of some proposals and to use scenarios to illustrate their benefits. It noted the challenges of attempting to quantify benefits and supported the use of qualitative explanations where appropriate. In addition, the Panel recommended to provide further information on how the proposals could affect different users of FMI services, including smaller firms and the wider market, and offered suggestions on improving the presentation of the CBA.

Paragraphs 3.14 to 3.38 of the CP describe this feedback.

CP21/25 – Future banking data review: Deletion of banking reporting templates

The Panel provided early advice on an initial draft of this CBA at its July 2025 meeting, and then formally considered the full version of the CBA in August 2025 via written feedback.

The CBA assessed proposals to delete some regulatory reporting requirements for banks. The expected benefits include estimated annual industry cost savings of around £26.3m, reflecting reduced reporting obligations and related operational work. Implementation costs are expected to be minimal, and the associated risk in firm resilience and/or financial stability from these deletions is considered negligible.

The Panel suggested that the PRA could clarify the rationale for the proposed template deletions and add more context on the Future Banking Data (FBD) programme, noting that these deletions represent an initial step in a planned programme of further work. The Panel also encouraged the PRA to clearly set out the key assumptions behind the benefit estimates and provide greater transparency on how these estimates are derived, including differences by firm size.

Paragraph 2.26 in the CP describes this feedback and how the PRA has incorporated it.

CP6/26 – High loan to income lending

The Panel provided early advice on an initial draft of the CBA at its September 2025 meeting, and then formally considered the CBA in January 2026 via written feedback.

The CBA assessed proposed amendments to the PRA Rulebook to implement the Financial Policy Committee’s recommendation to adjust the implementation of the Loan-to-Income (LTI) flow limits, allowing individual lenders to increase their share of lending at high LTIs, while aiming to ensure the aggregate flow remained consistent with the limit of 15%.^{footnote [7]}

The main benefits are reduced costs associated with not having to comply with a specific regulatory limit, and increased lending opportunities for firms that choose to increase their high LTI lending. Expected costs apply only to firms that decide to exceed the limit, including monitoring the aggregate high LTI measure and preparing any necessary adjustments if the market exceeds the limit.

The Panel recommended the PRA give due consideration to potential competition impacts, including how firms’ expectations about adjusting high LTI lending in future could affect, or possibly constrain, competition, as well as whether the impacts might differ between small and large firms. The Panel encouraged the PRA to review historical lending flows to understand how volatile these can be and to compare with similar policies in other jurisdictions to help assess potential market outcomes. The Panel queried whether removing firm specific limits would lead to an increase in lending volumes given that lending by unconstrained firms may have been offsetting the reduction in lending by constrained firms. The Panel also queried the potential impact of the proposed changes on firms’ resilience.

Paragraph 2.39 in the CP describes this feedback and how the PRA has incorporated it.

CP2/26 – Reforms to securitisation requirements

The Panel provided early advice on an initial draft of the CBA at its October 2025 meeting, but it did not formally consider it further as the estimated impacts fell below the materiality threshold for Panel review.

The CBA assessed proposals to revise general securitisation requirements to make them more proportionate, supporting the PRA’s secondary objectives while maintaining appropriate safeguards. The benefits are estimated at between £5.8 million – £7.5 million annually, driven by lower compliance costs, with no expected impact on safety and soundness. Market wide annualised costs are estimated at between £0.3 million – £0.5 million, largely reflecting implementation.

The Panel suggested the PRA could use scenario analysis to show how much securitisation activity would need to increase for the proposals to have a significant impact. It also noted that any additional liquidity for firms arising from the resecuritisation proposal should be counted as a benefit. The Panel observed that the UK market is relatively small, so benefits may take longer to materialise. It also commented that while the L-shaped risk retention proposal may attract some additional overseas investor interest, this effect is likely to be limited and should not be overstated.

Paragraph 4.4 in the CP describes this feedback and how the PRA has incorporated it.

Captives^{footnote [8]}

The Panel provided early advice on an initial draft of the CBA at its October 2025 meeting, and then formally considered the CBA in its May 2026 meeting. The PRA plans to consult on new rules for captive insurance in summer 2026.

The CBA sets out an assessment of the key costs and benefits of introducing a more proportionate prudential regime for captive insurers, following the Government’s consultation on establishing a UK captive insurance framework.

The Panel engaged with the PRA to understand the background to the proposals and to discuss the case for regulatory action and the overall policy intent. The Panel subsequently engaged with the PRA on the key costs and benefits of a more proportionate prudential regime for captives, including potential impacts on the market and competition. In addition, the Panel provided advice on the use of scenario analysis in the CBA where market impacts are uncertain.

CP8/26 – Funded reinsurance

The Panel provided early advice on an initial draft of the CBA at its October 2025 meeting, and then formally considered the CBA at its March 2026 meeting. Although the latter date falls outside the reporting period, full details on the engagement are included for completeness.

The CBA assessed proposed rules and expectations for how firms should value funded reinsurance arrangements under UK Solvency II.

The expected benefits include aligning regulatory treatment of funded reinsurance more closely with the underlying risks these arrangements pose, preventing a build-up of undercapitalised exposures that could pose threats to insurers’ safety and soundness and policyholder protections. While direct operational compliance costs are expected to be low, the proposals are expected to increase the capital required to back new bulk purchasing annuity (BPA) deals.

The Panel supported the PRA’s assessment that addressing misaligned incentives in the current treatment of funded reinsurance would help facilitate effective competition in the BPA market. The Panel suggested ways to better present estimates to better highlight the main policy features, focus on the most material elements and make the analysis clearer to all stakeholders. The Panel suggested that the CBA could more clearly explain why the benefits are expected to outweigh the costs, noting that recent life insurance stress testing results may be helpful evidence. The Panel also advised adding more context on how the use of funded reinsurance has evolved over time and on the size of the Bulk Purchase Annuity (BPA) market, to help explain the rationale for the proposed policy actions.

Paragraph 4.2 in the CP describes this feedback and how the PRA has incorporated it.

CP – Exempting post-trade risk reduction (PTRR) transactions from the clearing obligation

The Panel considered the CBA in its November 2025 meeting.

The CBA assessed a proposal to introduce an optional exemption to PTRR transactions from the Clearing Obligation^{footnote [9]}. The main benefits include reducing complexity and improving the efficiency of PTRR exercises. This could also support financial stability by enabling a wider range of participants to access PTRR exercises, leading to larger reductions in counterparty risk across the market. The associated compliance costs are expected to be marginal.

The Panel advised the Bank on framing the rationale for change, noting that because the exemption is optional, firms and participants would weigh the costs and benefits carefully before deciding whether to use it. The Panel also highlighted the difficulty of quantifying the benefits precisely and supported explaining them qualitatively, including using illustrative examples to show how different market participants might be affected.

Paragraph 45 in the CP describes this feedback and Box A states how the Bank has addressed it.

CP5/26 – Modernising the liquidity policy framework

The Panel considered the CBA in its January 2026 meeting.

The CBA assessed proportionate adjustments to the liquidity framework

aimed at strengthening firms’ resilience to liquidity shocks by reducing frictions that slow or restrict the speed of monetisation of liquid assets. The expected benefits include stronger liquidity risk management and greater confidence during stress events. Operational costs across all firms are estimated at around £7.2 million one-off and £0.6 million ongoing (per year).

The Panel recommended the PRA enhance the case for action by expanding the market failure analysis, including highlighting differences between large and small firms and the potential role of moral hazard. On the counterfactual (where gaps and weaknesses in operational readiness and liquidity management at some firms continue to persist), the Panel asked how far firms already have some of the required capabilities (for example, through recovery planning) and suggested this should be reflected in both the baseline and the assessment of costs and benefits. On direct costs, the Panel requested a more detailed breakdown of the estimates and questioned the balance between one-off and ongoing costs, noting that it considered that one-off costs may be overstated. On benefits and the overall assessment, the Panel asked for more quantitative information on benefits and a clearer comparison of costs and benefits, suggesting that a breakeven analysis could help put the estimated costs in context.

Paragraph 4.2 in the CP and paragraph 2 of Appendix 4 describes this feedback and how the PRA has addressed it.

3: Panel forward agenda

3.1 The Panel’s forward agenda is naturally shaped by the PRA’s and the Bank’s policy development pipeline. Members can influence the focus of discussions, including in relation to broader thematic matters. During the 2026/27 period, the Panel will meet regularly to review relevant CBAs relating to PRA and Bank rules.

3.2 The Panel’s 2026/27 agenda may also include time allocated to provide advice on how the PRA and the Bank can improve their methodologies and approach to the completion of CBAs. For example, the Panel expects to continue engagement on models to those described in paragraph 2.2 where capacity allows.

Annex

Costs incurred

Over the period up to 28 February 2026, costs of £189,710 have been incurred in connection to the Panel. These costs are met by the PRA and are broken down as follows:

Remuneration: £189,376 (including National Insurance and travel for members)

Other costs: £334

The PRA and the Bank have also provided the Panel with policy and secretariat support.

CBAs prepared under section 138JA(2) and 138JA(3) of FSMA.
Under section 47 of FSMA 2023.
Members are listed in alphabetical order by their type of membership (individual or PRA firm member), with exception of the Chair.
The SCM forms part of the Bank’s approach to CBA, and the Bank welcomes feedback on its application to FMIs, particularly evidence to inform model assumptions and benchmarks.
Section 138J of FSMA is applied to the Bank by schedule 17A of FSMA.
The provisions listed in subsection (4) do not apply if the regulator concerned considers that, making the appropriate comparison - (a) there will be no increase in costs, or (b) there will be an increase in costs, but that increase will be of minimal significance.
The LTI Flow Limit (introduced at 2014) states that the total number of new residential mortgages at loan to income ratios at or greater than 4.5 should not exceed 15%. Its purpose is to act as a guardrail against the build-up of household sector indebtedness during periods of rapid house price growth.
The information for this item is currently limited and follows what is set out in the Regulatory Initiatives Grid (December 2025). More detail will be available in the CP once is published.
The clearing obligation refers to a regulatory requirement under the UK European Market Infrastructure Regulation (UK EMIR). It mandates that certain classes of over the counter (OTC) derivative contracts must be cleared through a central counterparty (CCP) that is either authorised in the UK or recognised outside the UK.