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PRA’s 2026 Dear CFO Letter: New Findings and Evolving Expectations for IFRS 9 ECL
On 30 September 2026, the Prudential Regulation Authority (PRA) published a Dear CFO letter on IFRS 9 expected credit losses (ECL), setting out findings from its review of auditor reports covering major UK-headquartered banks and building societies. Building on its 2024 and 2025 reviews, the letter highlights areas for improvement in climate-related ECL assessments, ECL data governance, model risk management, the ongoing monitoring of securitisation-related credit protection, and the identification and assessment of private-market credit exposures.
Introducing the Katalysys Quarterly (KQ)
For years, our clients have benefited from regular discussions, practical insights and perspectives on the issues shaping their businesses and the wider regulatory landscape.
We’re now bringing those insights together in a new quarterly publication, giving clients a resource they can return to whenever they need it.
In our inaugural edition, we explore a range of important and often sensitive topics, including regulatory change, climate-related challenges and Skilled Person Reviews.
Climate Risk Consortium for small- and mid-sized banks
Katalysys had convened a consortium of non-systemic banks to jointly develop a credible, practical, and proportionate framework for climate-related financial risk assessment.
The work program is designed to fully address the immediate requirements of SS 5/25 - namely a comprehensive gap analysis, board education, and a credible & ambitious remediation plan.
SS 5/25: Approaches to managing climate related risks
The Prudential Regulation Authority (PRA) has published its final Policy Statement PS25/25 and SS 5/25 on climate-related financial risks on 3 December 2025.
We have broken down the Supervisory Statement into a set of 41 expectations that non-systemic banks will need to proportionately consider.
Evolving Climate Risk Expectations for UK Banks (SS5/25 via PS25/25)
On 3 December 2025, the PRA published its final Policy Statement PS25/25 on climate-related financial risks. The final expectations now sit in Supervisory Statement SS5/25 ‘Enhancing banks’ and insurers’ approaches to managing climate-related risks’, which immediately replaces the old SS3/19. The changes enhance requirements in areas such as governance, risk management, scenario analysis, data, and disclosure.