On 22 May 2025, the Prudential Regulation Authority (PRA) published a policy statement, PS7/25 – Update to PS9/24 on the SME and infrastructure lending adjustments.
Background
The PRA published policy statement PS9/24 in September 2024, setting out near-final rules to implement Basel 3.1 in the PRA Rulebook in relation to credit risk, the output floor, reporting and disclosure requirements.
Near-final policy
PS7/25 sets out the PRA’s near-final policy on the small and medium-sized enterprises (SME) and infrastructure lending adjustments to Pillar 2A as outlined in PS9/24. It confirms that, as set out in PS9/24, the PRA has decided to maintain its proposals to remove the SME support factor and the infrastructure support factor under Pillar 1. However, in response to concerns raised by industry, the PRA has decided to introduce the Pillar 2A lending adjustments to minimise any potential disruption to SME and infrastructure lending, and therefore growth, resulting from the removal of the support factors. Its aim is to ensure that the removal of the support factors under Pillar 1 do not cause an increase in overall capital requirements for SME and infrastructure exposures.
Next steps
The PRA does not intend to change the near-final policy set out in PS7/25 or to make substantive changes to the instruments before making the final policy material. The near-final policy will take effect on the same date as the PRA’s implementation of the Basel 3.1 standards, which is expected on 1 January 2027.