Looking ahead
Changes to risk management and regulatory reporting brought about by regulatory change is proceeding at a rapid pace and on an unprecedented scale. Keeping up with the changing regulatory requirements imposes a high degree of complexity and a key challenge for small- and medium-sized banks. Katalysys can be your partner in managing this change. We can assist the bank’s risk management and regulatory reporting functions to stay ahead with these changes.
Basel 3.1
The PRA has published Policy Statement 15/26, concluding the first phase of a two-stage review of its Pillar 2A methodologies and supporting guidance. This article summarises the impact for firms.
Explore how exposure sub-classifications shape risk weights under the Basel 3.1 real estate framework. Test different scenarios and see how individual factors drive the outcome.
For illustrative and educational purposes only. Not a substitute for formal regulatory analysis.
Regulatory reporting has traditionally been viewed by banks as a necessary but resource-intensive compliance exercise. However, with the introduction of Basel 3.1 and the UK’s Simplified Capital Regime, firms are now presented with a timely opportunity to re-think their approach. Rather than treating regulatory change as a constraint, firms can instead use it as a catalyst for a broader transformation that drives improvements in governance, data quality, systems, and overall operational efficiency.
Regulatory updates
The PRA has published Policy Statement 15/26, concluding the first phase of a two-stage review of its Pillar 2A methodologies and supporting guidance. This article summarises the impact for firms.
On 17 April 2026, the PRA published its Business Plan for the 2026/27 financial year, which sets out the PRA’s strategic priorities and confirms its continued focus on safety and soundness and policyholder protection, alongside a proportionate and efficient approach to regulation. Over the year ahead, the PRA will continue to embed key reforms, including the implementation of Basel 3.1, the Strong and Simple framework for smaller banks (SDDTs), and enhancements to operational resilience.
Katalysys is proud to announce its appointment to the PRA/FCA Consultancy and Skilled Person Framework for Lot T (Risk and Risk Management), following a rigorous tender process.
This appointment reflects the depth and breadth of the work we have delivered for firms across complex risk and risk management matters, demonstrates our subject matter expertise, and underscores our continued commitment to regulatory excellence.
CRR2
A common question we are asked is the basis on which own funds requirement has to be calculated for the various types of exposures on the non-trading and trading book.
The approach to evaluating risk weight for Collective Investment Undertaking (CIU) exposures has changed under the new CRR2 rules. There are three approaches outlined, and banks can select the specific approach based on the amount of information available about the underlying exposures of the CIUs.
Prudently valued software assets no longer needs to be deducted from CET-1 capital, but can be risk weighted.
The large exposure limits are set based on the bank’s Tier-1 Capital Only.
As part of Covid-19 quick fix, the existing IFRS9 transitional arrangement for CET-1 capital adjustment has been extended by 2 years and the additional adjustment for ECL provisions recognised in 2020 and 2021 has also been provided.
SME support factor of 0.7619 for exposures up to €2.5 million and 0.85 for exposures above €2.5 million, for entities with turnover of up to €50 million.
How can we help you?
Katalysys can assist in all aspects of prudential risk management and regulatory reporting requirements caused by the increasing changes to the regulatory environment and the introduction of newer rules. A few of the areas where we have assisted in the past are listed below:-
Identify changes to the bank’s capital and liquidity calculations due to the new rules (e.g. changes to SME support factor introduced in CRR2) and provide guidance as to how the bank can incorporate these in the existing processes and control environment
Advisory and workshops about the new requirement and industry benchmarks
Review of the bank’s existing policies and interpretation in light of the new changes
Analyse the impact on regulatory reporting, and assist in regulatory change management