PRA CP3/26: Overseas Prudential Requirements Regime - Restating Cross-Border Equivalence for the Basel 3.1 Era
Credit: Basel Committee
Context:
On 18 February 2026, the PRA published Consultation Paper CP3/26, setting out its proposed rule changes to accommodate HM Treasury's Overseas Prudential Requirements Regime (OPRR). The consultation closed on 2 April 2026.
The OPRR is designed to restate, with modifications, several existing Capital Requirements Regulation (CRR) equivalence provisions that currently sit in legislation. HM Treasury consulted on the creation of the OPRR in July 2025 and published its response alongside the draft OPRR Statutory Instrument on 19 February 2026. The OPRR will come into effect from 1 January 2027, aligned with the broader implementation of Basel 3.1 reforms in the UK.
The policy context is the post-Brexit restructuring of the UK's prudential framework under the Financial Services and Markets Act 2023 (FSMA 2023) model, moving CRR-derived rules from retained EU law into the PRA Rulebook and primary legislation, to give the PRA and HMT greater flexibility to adapt the UK framework over time.
Rules and Guidelines:
CP3/26 proposes changes to the following parts of the PRA Rulebook to align with the OPRR framework: Credit Risk, Market Risk, Counterparty Credit Risk, Large Exposures, Reporting (Pillar 2), and the PRA's Pillar 2 capital methodology (SoP 5/15). The proposals ensure the PRA's Rulebook remains aligned with HMT's reforms and that firms do not face conflicting or duplicative requirements when the OPRR comes into force.
Specific provisions addressed include the treatment of exposures to overseas central governments, regional governments, and public sector entities under CRR Articles 114(7), 115(4), and 116(4); and the application of CRR equivalence provisions for counterparty credit risk, large exposures, and market risk. The PRA notes that the expected impact on firms from these proposals is minimal, and no material costs are anticipated.
The parallel draft Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2026, also published by HMT, restate key CRR definitions from 1 January 2027 as part of the same FSMA model transition.
Businesses Affected:
UK banks, building societies, and PRA-designated investment firms that have cross-border exposures to entities in overseas jurisdictions recognised under the OPRR equivalence framework.
Branches of third-country firms operating in the UK, for which the OPRR equivalence provisions have direct relevance to capital treatment.
Risk, regulatory capital, and compliance teams are responsible for CRR-compliant exposure calculations and Pillar 2 reporting.
Legal and regulatory advisory teams supporting UK credit institutions through the Basel 3.1 implementation programme.
Next Steps:
Review existing CRR equivalence determinations used in capital calculations and update for the OPRR framework from 1 January 2027. Ensure regulatory capital models are updated to reflect the new Rulebook structure.
Engage with HMT's OPRR SI and the parallel CRR Definitions regulations together; the two documents must be read in conjunction to understand the full effect.
Update internal regulatory reporting templates and Pillar 2 calculation methodologies ahead of the 31 December 2026 year-end reporting cycle, at which point the new taxonomy (PRA v4.0.0) comes into effect.
Engage with PRA supervisors where Pillar 2 Methodology SoP 5/15 changes interact with existing firm-specific capital add-ons or permissions.
Source | Prudential Regulation Authority | Overseas Prudential Requirements Regime
