PRA finalises large exposures framework changes for UK banks

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PRA large exposures changes

Highlights

PRA finalizes amendments to the UK Large Exposures framework, covering calculation for securities financing, trading book limits, and credit risk mitigation techniques.
The final rules differ from the original consultation after feedback on mandatory substitution, intragroup exposures, and the trading book excess allowance.
The PRA states the new measures close framework gaps, enhance Basel alignment, and refine reporting and concentration risk requirements in the PRA Rulebook.

Final rule changes and policy scope

As reported by Bank of England, citing the Prudential Regulation Authority, the regulator is issuing final amendments to the Large Exposures framework after reviewing responses to consultation paper CP14/24 and carrying out additional analysis with stakeholders.

The measures cover the calculation of exposure value for securities financing transactions, limits for trading book exposures, and the treatment of credit risk mitigation techniques. The PRA says the final package differs from the original consultation in some areas because of significant feedback, especially on mandatory substitution, intragroup exposures and the trading book excess allowance.

The policy statement also confirms amendments to the Large Exposures (CRR), Large Exposures, Group Financial Support, and Reporting (CRR) parts of the PRA Rulebook, alongside changes to supervisory statement SS16/13 and reporting instructions on large exposures and concentration risk.

Regulatory impact and Basel alignment

The large exposures regime is designed to limit excessive concentrations to individual counterparties and groups of connected counterparties, making it a core part of the PRA's prudential framework for banks. The regulator says the final measures close gaps in the existing framework, support more consistent treatment of concentration risk and improve alignment with Basel large exposures standards already implemented in other jurisdictions.

The PRA adds that the final policies are intended to strengthen the framework while addressing industry concerns over proportionality, operational practicality and financial market functioning. It also says the statement simplifies and improves the structure of the Large Exposures part of the PRA Rulebook, following an earlier phase of lower-impact changes finalised in July 2025.

Previously, we highlighted how the Bank of England is working with banks on bare metal recovery systems for severe AI-driven cyber attacks.

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