PS14/26 – CRR Definitions: restatement in PRA Rulebook

1: Overview

1.1 This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses the PRA received to consultation paper (CP) 19/25 – CRR Definitions: restatement in PRA Rulebook which was published in July 2025. It also contains the PRA’s final policy, as follows:

• changes to the PRA Rulebook Glossary and consequential changes across other Parts of the PRA Rulebook (see PRA Rulebook: Definitions and Interpretation (CRR) Instrument 2026 in Appendix 1);
• corresponding provisions table (Appendix 2); and
• amendments to supervisory statement (SS) 15/13 – Groups (see Appendix 3).

1.2 This PS 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 will be transferred to the PRA Rulebook Glossary and the range of Parts to which consequential amendments have been made, it is of potential relevance to all persons subject to PRA rules and their counterparties.

Background

1.3 In July 2025, HM Treasury published a Policy Update 'Applying the Financial Services and Markets Act 2000 model of regulation to the UK Capital Requirements Regulation’.^{footnote [1]} The update set out HM Treasury’s proposed approach for revoking the remaining provisions of the Capital Requirements Regulation (CRR). It explained HM Treasury’s plans to restate only 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.

1.4 Following HM Treasury’s policy update, in CP19/25, the PRA 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 also proposed to expressly define certain terms in the PRA Rulebook Glossary that were implicitly defined in other provisions of the CRR. In addition, the PRA proposed to make consequential amendments across the PRA Rulebook that are related to the transfer of CRR definitions into the PRA Rulebook Glossary. The PRA proposed to restate the vast majority of the CRR definitions in the PRA Rulebook without changes in substance, although in a few areas proposed targeted improvements to enhance the clarity of the definitions, with no material change to policy.

1.5 HM Treasury subsequently published a Policy Update in February 2026 in response to its consultation, confirming that, in relation to CRR definitions, it would seek to introduce the legislation mentioned in the Policy Update largely as consulted on but with an amendment to the statutory definition of ‘securitisation’ for consistency with the PRA’s Basel 3.1 rules.^{footnote [2]} The commencement statutory instrument (SI) revoking Articles 4–5 of the CRR with effect from 1 January 2027 was made in February 2026 whilst the affirmative CRR Definitions SI restating a number of CRR definitions in legislation was made in April 2026.

Accountability framework

1.6 In determining its policy, the PRA considers representations received in response to consultation, publishing an account of them and the PRA’s response (‘feedback’). Details of any significant changes are also published. In this PS, the ‘Summary of responses’ contains a general account of the representations made in response to the CP and the ‘Feedback to responses’ chapter contains the PRA’s feedback.

1.7 In carrying out its policymaking functions, the PRA is required to have regard to various matters. In CP19/25, the PRA explained how it had regard to the most relevant of these matters in relation to the proposed policy. The ‘Changes to draft policy’ section of this chapter refers to that explanation, taking into account consultation responses where relevant.

Summary of responses

1.8 The PRA received three responses to the CP, all of which consented to their names being published. These are listed in Appendix 4. The respondents generally supported the objective of transferring definitions into the PRA’s Rulebook and simplifying definitions where possible. One respondent commented that the approach proposed by the PRA in CP19/25 would allow for the PRA Rulebook to be updated in a timely way in the future to keep pace with market developments, which they considered could be done more efficiently through the PRA’s rule-making processes than the previous position of changing legislation. Some respondents thought that the PRA could have taken further steps to make it easier for firms to navigate the PRA’s Rulebook, for example, through greater use of italicised definitions. In addition, respondents provided helpful and constructive feedback in relation to several individual definitions. Further detail about the feedback is set out in Chapter 2.

Changes to draft policy

1.9 The final policy is as set out in CP19/25, with the following changes:

• consistent italicisation of embedded CRR terms in PRA Rulebook Glossary definitions (see paragraph 2.5);
• change to the ‘branch’ definition in the PRA Rulebook Glossary to better align its wording with the CRR definition (see paragraph 2.9);
• additional wording in Article 229(3) of the Credit Risk Mitigation (CRR) Part to specify the meaning of ‘market value’ in that context (see paragraph 2.18);
• change to the ‘recognised exchange’ definition to reflect the policy position confirmed in PS6/26 – Recognised exchanges policy and transfer of main indices (see paragraph 2.22);
• update to the ‘securitisation’ definition in the PRA Rulebook Glossary to reflect changes to the legislative definition in the Securitisation Regulations 2024, made by the CRR Definitions SI, for consistency with the PRA’s Basel 3.1 rules (see paragraph 1.5);
• amendments to certain definitions relating to regulatory capital instruments to clarify these definitions capture all relevant provisions in the Own Funds (CRR) Part;
• further minor non-material amendments, to ensure clarity.

Further detail on the material changes is provided in the ‘Feedback to responses’ section of this PS.

1.10 In addition to the changes summarised above, the definitions of ‘conversion factor’, ‘loss given default’ and ‘probability of default’ were restated as part of PS1/26 – Implementation of Basel 3.1: Final rules – so no longer need to be restated. Further, an amendment to supervisory statement (SS)13/13 – Market Risk which was consulted on in CP19/25 (the removal of a chapter regarding qualifying debt instruments which was no longer required) was also made as part of PS1/26, so no longer needs to be made.

1.11 The PRA considers that the changes made to the draft rules and related policy materials do not substantially amend the substance of the proposals in CP19/25. In particular, the changes made to the definitions summarised above will typically serve to enhance clarity and coherence of the PRA Rulebook, without materially changing any underlying policy.

1.12 For this reason, the PRA objectives analysis and consideration of have regards for these proposals remain the same as set out in CP19/25. The changes are also judged to not have a significant impact on the PRA’s cost benefit analysis and statement on mutuals included in CP19/25.

1.13 The PRA does not consider that the impact of the final policy and rules in this PS is significantly different from the impact of the draft policy and rules on (i) mutuals or (ii) mutuals as compared with other PRA-authorised firms.

Implementation

1.14 The changes summarised in this PS will become effective alongside the Basel 3.1 package, on Friday 1 January 2027.

2: Feedback to responses

2.1 Before making any proposed rules, the PRA is required by the Financial Services and Markets Act 2000 (FSMA) to have regard to any representations made to it in response to the consultation, and to publish an account, in general terms, of those representations and its feedback to them.^{footnote [3]}

2.2 The PRA has considered the representations received in response to the CP. This chapter sets out the PRA’s feedback to those responses, and its final decisions.

2.3 The responses have been grouped as follows:

• general approach and the PRA Rulebook;
• specific definitions, which have been split into the following subcategories:
  • banking groups;
  • credit risk;
  • other definitional issues; and
• further feedback not directly related to consultation proposals.

General approach and the PRA Rulebook

2.4 Two of the three respondents considered that the PRA could have done more to simplify the PRA Rulebook to reduce the compliance burden on firms. They considered that the PRA should consistently italicise CRR terms throughout the PRA Rulebook, to improve transparency and accessibility.

2.5 In finalising the rules post consultation, the PRA has introduced consistent italicisation of CRR terms where they are embedded in PRA Rulebook Glossary definitions. This is a positive step forward and addresses the consultation feedback received to some extent. The PRA considers that it is beyond the scope of this CP to consistently italicise CRR terms across the PRA Rulebook in advance of the CRR definitions being transferred to the PRA Rulebook. The PRA will undertake further work to improve the clarity of the PRA Rulebook in due course, including consistent italicisation of defined terms.

2.6 One respondent considered that the PRA could have made it clearer in the consultation what changes to the CRR definitions were being proposed, to help stakeholders review the proposals. The PRA considers that the consultation materials were adequate, and notes that a summary of the key changes was included in CP19/25. The PRA considers that the non-legislative notes included in the rules instrument and the corresponding provisions table included with this PS will assist firms with mapping PRA Rulebook Glossary definitions to relevant CRR definitions before their revocation.

2.7 Another respondent suggested that terms which are defined in legislation should, where used in the PRA Rulebook, be defined by way of cross-reference to the relevant legislation as well as restating the legislative definition. The PRA considers it to be a more efficient drafting approach for PRA rules to cross-refer to legislation in appropriate circumstances, without additionally copying it out. Additional copy out may also require definitions of embedded terms and context to be imported from the source legislation, which would add to the size and complexity of the PRA Rulebook.

Specific definitions – banking groups

2.8 In CP19/25, the PRA proposed the restatement of various definitions relating to banking groups.

2.9 CP19/25 included a proposal to retain the existing PRA Rulebook Glossary definition of 'branch’. This definition was identical to the CRR definition of a ‘branch’ in relation to credit institutions but worded slightly differently in relation to investment firms, including designated investment firms. A respondent queried whether this might change the meaning of the CRR definition. It was not the PRA’s intention to change the meaning of the CRR definition. Therefore, to address this feedback, the PRA has amended the PRA Rulebook Glossary definition of ‘branch’ to track the wording of the CRR definition of ‘branch’ in relation to both credit institutions and designated investment firms. The PRA has not changed the PRA Rulebook Glossary definition in relation to investment firms that are not designated investment firms.

2.10 Two respondents queried the proposed definition of ‘participation’ and the relevance of previous guidance in relation to the concept of ‘durable link’. To address this feedback, the PRA has updated SS15/13 – Groups with a new chapter which clarifies the PRA’s interpretation of the concept of ‘maintaining links...on a long-term basis’. This chapter of the SS supersedes the PRA’s statement on the concept of ‘durable link’, which was originally published in October 2016, without material changes.

2.11 The PRA also received feedback in relation to the following groups-related definitions, which it does not consider requires amendments to the definitions consulted on:

• ‘Ancillary services undertaking’ definition: One respondent queried the definition of ‘ancillary services undertaking’ and suggested certain refinements. The new limb of the definition of ‘ancillary services undertaking’ cross-refers to legislation as amended by the CRR Definitions SI. The PRA does not consider it appropriate to depart from the legislative definition at this point. Furthermore, the PRA has not sought to revise the substance of other limbs of the definition as part of the transfer of CRR definitions into the PRA Rulebook Glossary. The respondent also referred to two supervisory statements which refer to the term ‘ancillary services undertaking’ and suggested that the PRA should introduce guidance to confirm how Glossary definitions should be applied to guidance documents. The PRA does not consider that such additional guidance is necessary.
• ‘Annex 1 activities’ definition: A respondent sought greater clarity in relation to the definition of ‘Annex 1 activities’. The restatement of the CRR definition of Annex 1 activities in the PRA Rulebook Glossary has not materially departed from the CRR wording and aligns with the restatement of some Annex 1 activities in FSMA. Accordingly, the PRA does not consider it appropriate to make further changes as part of this PS.
• ‘Asset management company’ definition: A respondent noted that the PRA Rulebook Glossary definition of ‘asset management company’ referred to the definition of ‘asset management company’ as restated in FSMA by the CRR Definitions SI, and that the wording of that legislative definition differed from that in the CRR. The PRA does not consider it appropriate to depart from the legislative definition at this point.
• ‘Financial institution’ definition: One respondent queried the proposed PRA Rulebook Glossary definition of ‘financial institution’, including the treatment of funds and the meaning of the embedded term ‘pure industrial holding company’. These comments also apply to the legislative definition of ‘financial institution’ as amended by the CRR Definitions SI, to which the PRA Rulebook Glossary definition of ‘financial institution’ refers. The PRA does not consider it appropriate to depart from the legislative definition of ‘financial institution’ at this point.
• ‘Group’ definition: A respondent noted that the proposed new PRA Rulebook Glossary definition includes an embedded terms ‘group’. The restated definition is consistent with the previous CRR definition and the PRA does not consider that the use of the embedded term ‘group’ is problematic.
• ‘Institution’ definition: A respondent suggested that the proposed new definition of ‘Institution’ should be expanded to include UK exchanges and investment firms. The restated definition is consistent with the previous CRR definition. The PRA has set out proposals for the future treatment of 'exposures to institutions’ in CP3/26 – PRA rule changes to accommodate HM Treasury’s Overseas Prudential Requirements Regime – which relates to the points raised.
• ‘Parent undertaking’ and ‘subsidiary undertaking’ definitions: A respondent suggested that the two definitions should be defined by reference to the same source legislation. As noted in CP19/25, the limbs of the PRA Rulebook definitions of ‘parent undertaking’ and ‘subsidiary’ that restate the CRR definitions are defined by reference to section 1162 of the Companies Act 2006.
• ‘UK parent financial holding company’ and ‘UK parent mixed financial holding company’ definitions: A respondent suggested that the proposed new definitions of these terms in FSMA, as amended by the CRR Definitions SI, excluded a limb of the current CRR definitions. The PRA notes that the CRR Definitions SI only restated the definitions of ‘UK parent financial holding company’ and ‘UK parent financial holding company’ used in limb (a) of the FSMA definitions of ‘parent financial holding company’ or ‘parent mixed financial holding company’. Limb (b) of the FSMA definitions of ‘parent financial holding company’ or ‘parent mixed financial holding company’ was not amended by the CRR Definitions SI and remains intact.
• ‘UK parent institution’ definition: A respondent considered that the proposed new PRA Rulebook Glossary definition was broader than the current definition, focusing on the treatment of a UK authorised institution with a subsidiary that is an ‘ancillary services undertaking’ or a participation in an ‘ancillary services undertaking’. The respondent focused on a change made relative to the current PRA Rulebook Glossary definition of ‘UK parent institution’ rather than a change to the separate CRR definition of ‘UK parent institution’. The new PRA Rulebook Glossary definition cross-refers to legislation as amended by the CRR Definitions SI. Further, in CP13/24 – Remainder of CRR: Restatement of assimilated law – the PRA consulted on a proposal to add a reference to ‘ancillary services undertaking’ to the PRA Rulebook Glossary definition of ‘UK parent institution’. The change to the definition was confirmed in PS3/26 - Restatement of CRR requirements – 2027 implementation – final.

Specific definitions – credit risk

2.12 In CP19/25, the PRA proposed the restatement of various definitions relating to credit risk.

2.13 In relation to the proposed restatement of the nominated ‘External Credit Assessment Institutions’ (ECAI) definition, one respondent asked for clarification regarding the acceptability of maintaining separate lists of nominated ECAIs for credit risk exposures and securitisation exposures. The PRA confirmed in PS19/25 – Restatement of CRR requirements – 2027 implementation – near-final – that ECAIs nominated under Article 270D of the Securitisation (CRR) Part for securitisation exposures are separate from the nominations of ECAIs for the purpose Article 138 of the Credit Risk: Standardised Approach (CRR) Part.

2.14 One respondent considered that the ‘public sector entities’ (PSE) definition is ambiguous and difficult to interpret in practice. In particular, the respondent argued that:

• the PRA should clarify whether all, or some, types of undertakings listed in the definition are required to have explicit guarantee arrangements as referred to in the definition to be classified as a PSE;
• the definition should explicitly include EU PSE exposures, which are deemed by EU national competent authorities to be of equivalent risk to exposures to central governments, regional governments or local authorities; and
• the definition should provide greater clarity on the treatment of other types of government-sponsored entities than those currently listed, including those engaged in commercial activities.

2.15 The PRA has decided not to make any changes to the PSE definition. The PRA considers that this is consistent with its 'lift and shift' approach to the transfer of CRR definitions (in CP19/25, the PRA explained that its default stance was to take the original CRR definition text, unchanged, and propose to incorporate it directly into the PRA Rulebook where possible) and considers this approach would maximise the continuity for firms. The PRA does not consider it appropriate to specify specific entities or further types of entities in the PSE definition given the variety of arrangements across jurisdictions. Further, the PRA considers it appropriate that firms assess entities against the definition which it is restating in PRA rules, given the definition used by other jurisdictions may change over time. The PRA also considers that it is sufficiently clear that the definition does not include government-sponsored entities that are commercial in nature. If it sees evidence of inconsistent application amongst firms, the PRA may revisit the PSE definition in the future and consider issuing further guidance.

2.16 In relation to the ‘SME’ definition, one respondent supported the alignment of the Glossary definition with the Basel 3.1 definition and recommended increasing the turnover threshold and indexing for inflation. The PRA notes that, when finalising its Basel 3.1 rules published in PS1/26, it considered feedback in relation to the ‘SME’ definition and decided to maintain the turnover threshold at a level that was aligned with international standards. Moving forward, the PRA is exploring an approach for more systematic updating of regulatory thresholds, such as through automatic indexation. The PRA intends to consult on its proposed approach – including thresholds in scope and operationalisation – later in 2026 (see paragraph 2.28).

2.17 One respondent suggested that the definition of ‘exposure’ should explicitly refer to a “commitment to issue off‑balance sheet items”, to maintain consistency with Article 111(1)(c) of the Credit Risk: Standardised Approach (CRR) Part. They also noted that this would align with the definition of ‘commitment’ and the recognition of exposures. The PRA has decided not to make any changes to the definition of exposure. The PRA considers that it is sufficiently clear from the definition when read in conjunction with Article 111 that commitments are intended to fall within the scope of the credit risk framework. Accordingly, these should be treated as exposures for the purposes of the relevant PRA Rulebook Parts.

2.18 One respondent noted that the proposed deletion of Article 229(4) of the Credit Risk Mitigation (CRR) Part creates an unintended gap in the valuation framework for physical collateral other than immovable property. In response, the PRA has amended Article 229(3) to address this point and clarify the applicable definition.

2.19 One respondent noted HM Treasury’s proposed introduction of a new Overseas Prudential Recognition Regime (OPRR), and recommended that this included a holistic review of preferential treatment frameworks relating to covered bonds. The respondent suggested this should include a new definition of ‘overseas covered bonds’ and clarification of its interaction with the existing ‘eligible covered bonds’ definition in order to extend the preferential treatments currently available to UK covered bonds in PRA rules to certain overseas covered bonds.

2.20 Since the publication of CP19/25, HM Treasury has announced that a new power relating to covered bonds will be included within its forthcoming OPRR regime, and the PRA has set out connected proposals for the treatment of overseas covered bonds within PRA rules in CP3/26. The PRA has also set out proposals in CP3/26 relating to the future treatment of exposures to institutions under the OPRR which address the feedback received. The PRA will set out its response to feedback received to CP3/26 in due course.

Specific definitions – Other definitional issues

2.21 The PRA also received feedback in relation to other specific definitions which were proposed in CP19/25, none of which have led to material changes to the rules as consulted on.

2.22 One respondent suggested amendments to the definition of ‘recognised exchange’, namely, a drafting edit to improve clarity as well as removing the asset liquidity condition. This feedback was already considered ahead of making the rules instrument published as part of PS6/26 in March 2026. The rules instrument in Appendix 1 of this PS reflects the policy confirmed in PS6/26 by transferring wording in the Recognised Exchanges (CRR) Part to the PRA Rulebook Glossary definition of ‘recognised exchange’.

2.23 One respondent queried the definitions of ‘large institution’ and ‘small and non-complex institution’, questioning why they omitted certain limbs from the CRR. Paragraph 2.11 of CP19/25 explained how PRA was proposing to simplify both definitions. In particular, the definition of ‘large institution’ omits a subparagraph referring to the largest three institutions in the UK because these institutions are already captured by the asset threshold. The 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.

2.24 In relation to the ‘reinsurance undertaking’ definition, a respondent queried whether its two limbs could be collapsed. The approach taken was appropriate because the two limbs of the definition of ‘reinsurance undertaking’ pick up two different definitions of the embedded term ‘insurance’.

2.25 One respondent queried the legislation which was cross-referenced in the definition of ‘resolution entity’. The PRA’s proposed definition of ‘resolution entity’ cross-referred to a definition of ‘resolution entity’ in the Banking Act 2009, which is more comprehensively worded than that in the Bank Recovery and Resolution (No.2) Order 2014. The Banking Act 2009 is also primary legislation whereas the Order is only secondary legislation.

2.26 One respondent suggested changing the defined term ‘non-trading book’ to ‘banking book’ for consistency with market terminology. The PRA does not consider that such a change would be practicable, considering the need for numerous consequential amendments across the PRA Rulebook.

Further feedback not directly related to consultation proposals

2.27 The PRA also received feedback about matters that were not directly related to the proposals consulted on in CP19/25.

2.28 One respondent suggested that the PRA should introduce a periodic review of Rulebook thresholds to ensure they remain relevant and suggested a policy for future exchange rate changes across the Rulebook. In December 2025, the Bank published Financial Stability in Focus: The FPC’s assessment of bank capital requirements. In that publication, the Bank explained that it is exploring an approach for automatic indexation of regulatory thresholds and that the PRA intends to consult on a proposed approach in 2026. In relation to the suggestion that the PRA introduces a policy for exchange rate changes, the PRA explained in CP19/25 that it had followed its past approach to such conversions.

2.29 One respondent suggested that the scope of the CRR definitions workstream be expanded to cover Financial Reporting (FINREP) to align the use of terms across CRR rules and FINREP. This suggestion was referenced in PS27/25 – Future banking data review: Deletion of banking reporting templates – which was published in December 2025. That PS explained the PRA would give due consideration to the suggestion in future phases of the Future Banking Data programme.

2.30 One respondent queried the definition of ‘securitisation’ in connection with mortgage guarantee schemes (MGS). The PRA is consulting on the treatment of MGS exposures under the Securitisation and Securitisation (CRR) Parts of the PRA Rulebook in CP2/26 – Reforms to securitisation requirements – which was published in February 2026.

2.31 Feedback in relation to definitions of ‘low-risk assets’, ‘recognised third country investment firm’, ‘securities or commodities borrowing or lending transaction’ and ‘third country insurance undertaking’ does not directly relate to the transfer of Article 4–5 CRR definitions into the PRA Rulebook Glossary as consulted on in CP19/25 and is outside the scope of this work.