Regulatory Alerts2026-03-17
Added · Updated
PRA Consultation Paper on Modernising the Liquidity Policy Framework
The Prudential Regulation Authority (PRA) has issued a consultation paper proposing targeted adjustments to modernize its prudential liquidity framework, focusing on Pillar 2 changes through Internal Liquidity Adequacy Assessment (ILAA) rules and supervisory expectations. These proposals aim to strengthen firms’ internal stress testing, enhance operational readiness for future liquidity shocks, and support resilience amidst the Bank of England's transition to a demand-driven, repo-led supply of reserves. Key changes include requiring firms to assess the composition of liquidity resources and monetisation risk, removing the exemption for Level 1 Assets from LCR operational requirements, clarifying the role of central bank facilities, and mandating the monitoring of pre-positioned collateral.