CP3/26: PRA Rule Changes to Accommodate HM Treasury's Overseas Prudential Requirements Regime (OPRR)
On 19 February 2026, the Prudential Regulation Authority (PRA) published Consultation Paper CP3/26, setting out proposed amendments to the PRA Rulebook to reflect the implementation of HM Treasury's (HMT) Overseas Prudential Requirements Regime (OPRR).
The OPRR is a new legislative framework designed to restate — with modifications — existing Capital Requirements Regulation (CRR) equivalence provisions. In simple terms, it governs how the UK recognises overseas regulatory frameworks when applying prudential capital requirements. HMT has also published the draft Overseas Prudential Requirements Regime (Credit Institutions and Investment Firms) Regulations 2026.
The consultation closes on 2 April 2026, with proposed changes taking effect alongside the Basel 3.1 package on 1 January 2027.
1. OPRR Designation Framework – Overview:
The OPRR Regulations create a two-track system for recognising overseas jurisdictions:
Track 1: “Deemed designated” jurisdictions (automatic)
The Schedule to the Regulations immediately designates certain jurisdictions as equivalent from day one for each major exposure category.
This mirrors existing CRR equivalence outcomes, aligning with prior EU equivalence decisions (including Commission Implementing Decision 2014/908/EU).
It applies across key exposure types, including overseas credit institutions, investment firms, exchanges, sovereigns/public sector, and intermediate financial holding companies.
Track 2: Future designations (by Statutory Instrument)
HM Treasury can add or remove jurisdictions later via a statutory instrument, subject to a compatibility test.
A new designation must be compatible with:
UK financial stability, and
the safety and soundness of CRR firms, and
at least one of: promoting effective competition (in consumers’ interests) or supporting UK international competitiveness and growth.
In making decisions, HMT may consider supervisory quality, alignment with international standards (e.g., Basel), and whether effective regulatory cooperation with UK authorities exists.
2. Key Changes: High-level Summary:
CP3/26 proposes amendments across twelve Parts of the PRA Rulebook, as well as a minor update to Statement of Policy 5/15 on Pillar 2 capital methodologies. The changes fall into three broad categories:
1. Credit Risk Designation Regimes The PRA is updating how exposures to overseas institutions, covered bonds, sovereigns, regional governments, public sector entities, and Gibraltar entities are treated under the Standardised Approach (SA) — replacing CRR equivalence references with references to HMT designations under the OPRR.
2. Large Exposures Changes to align the definition of "institution" for large exposures purposes with the OPRR framework, replacing the existing CRR Article 391 equivalence mechanism.
3. Targeted Clarifications The PRA is also taking the opportunity to improve clarity and operationalisation across the Rulebook — including a new defined term, exposures to institutions, in the Glossary, and removing redundant or superseded cross-references to CRR provisions.
The overarching objective is to maintain the substance of the current equivalence regime while ensuring coherent alignment with the new OPRR legislative structure.
3. Detailed Analysis:
3.1. Exposures to Institutions (Credit Risk)
Background: Under the current framework, CRR Article 107(3) determines when exposures to overseas investment firms, credit institutions, and exchanges can be treated as "exposures to institutions" — a classification that attracts preferential risk weights under the SA. This treatment applies only to entities in jurisdictions HMT has determined to apply equivalent prudential standards.
What's Changing: HMT will revoke CRR Article 107(3) and replace it with an OPRR designation mechanism. The PRA proposes to:
Define in PRA rules that only exposures to UK credit institutions, UK designated investment firms, and investment firms subject to Part 9C rules qualify as "exposures to institutions" by default.
Rely on OPRR designations to extend this treatment to overseas entities in designated jurisdictions.
Define the term ’exposures to institutions’ in the PRA Glossary to distinguish the SA-specific concept from broader uses of the word ’institution.’
Retain the treatment of overseas credit institutions in non-designated jurisdictions as corporate exposures.
Implications for Credit Risk Mitigation:
References to debt securities issued by institutions used as collateral are updated to specify credit institutions and investment firms qualifying as exposures to institutions, explicitly excluding exchanges.
For unfunded credit protection, the eligibility criteria for protection providers are updated to reference credit institutions and investment firms where exposures meet the exposures to institutions test.
3.2. Exposures in the Form of Eligible Covered Bonds
Background: Currently, "eligible covered bonds" are limited to CRR covered bonds — bonds issued by credit institutions with a registered office in the UK — that meet additional requirements under Article 129 of the Credit Risk: Standardised Approach (CRR) Part.
What's Changing:
Under the SA: HMT is introducing a power to designate overseas jurisdictions for covered bond equivalence. Covered bonds from designated jurisdictions meeting the non-jurisdictional Article 129 criteria will be treated as eligible covered bonds for SA purposes. The PRA is making preparatory amendments to Article 129 and updating the Glossary definition of eligible covered bonds to capture bonds that qualify by virtue of the OPRR.
Impact on Liquidity Risk Management: The CP does not address liquidity rule changes. The PRA has confirmed it will consult separately on this, aiming to implement alongside the OPRR in January 2027.
3.3. Exposures to Sovereigns, Regional Governments, Local Authorities, and Public Sector Entities
Background: Several CRR articles provide preferential risk-weight treatments for overseas sovereign exposures (Article 114(7)), regional government/local authority exposures (Article 115(4)), and public sector entity (PSE) exposures (Article 116(5)) in equivalent jurisdictions.
What's Changing:
HMT has decided to preserve the substance of these treatments in the OPRR. The PRA's proposed rule changes are largely technical — updating cross-references and ensuring coherent operation:
Sovereign exposures (Article 114): References to CRR Article 114(7) are replaced with references to OPRR Regulation 6(1) and 9(2)(c). The PRA is also clarifying that the preferential 0% risk-weight treatment only applies where collateral is denominated in the sovereign's domestic currency and the exposure is funded in that currency — for both the Financial Collateral Simple Method (FCSM) and Financial Collateral Comprehensive Method (FCCM).
Regional Governments and Local Authorities (Article 115): References to CRR Article 115(4) are replaced with OPRR Regulation 6(3). The existing equivalence test (overseas regulator treats exposures as exposures to the central government, with no difference in risk) is preserved.
Public Sector Entities (Article 116): References to CRR Article 116(5) are replaced with OPRR Regulation 6(4). Importantly, since the draft OPRR SI does not specify a risk weight for PSEs in non-designated jurisdictions, the PRA is restating in PRA rules the existing 100% risk weight requirement for such exposures. This aligns with the risk-neutral treatment of unrated corporates.
Project Finance (Article 122B): A new Article 122B(5A) clarifies that the preferential 0% risk-weight treatment for a "high-quality" project finance exposure can only apply where the main counterparty's exposure is denominated and funded in its domestic currency.
Core Market Participants (Article 227): The definition for applying the 0% volatility adjustment under the FCCM is updated to require that the denominated-and-funded condition be applied when determining 0% risk-weight eligibility.
3.4. Exposures to Gibraltar-based Entities
Background: Following Brexit, the Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 preserved the pre-exit CRR treatment of Gibraltar exposures.
What's Changing: At the point the CRR is revoked, HMT will specify in the OPRR the ongoing treatment for Gibraltar entities. The PRA is making minor amendments to align its Rulebook with this, in substance confirming:
Gibraltar credit institutions → treated as exposures to institutions for SA purposes.
Gibraltar investment firms → similarly treated where the Gibraltar competent authority treats them as credit institution exposures.
Gibraltar PSEs → treated as UK PSEs.
The Government of Gibraltar → treated as the UK Government.
3.5. Large Exposures
Background: Rule 1.3 of the Large Exposures (CRR) Part currently aligns with CRR Article 391, extending the "institution" definition to overseas entities in HMT-equivalent jurisdictions. HMT is revoking CRR Article 391 as part of the OPRR reforms.
What's Changing:
The PRA proposes to:
Delete Rule 1.3 and align the treatment of overseas entities for large exposure purposes with the SA exposures to institutions concept (excluding exchanges).
Amend Article 395(1) to reference exposures to institutions rather than institutions or investment firms.
In practice, the higher large exposure limit will now apply to overseas investment firms only where they are in an OPRR-designated jurisdiction and qualify as exposures to institutions. The treatment of overseas credit institutions is maintained. Overseas exchanges are explicitly excluded from the preferential treatment.