Prudential Regulation Authority finalises Pillar 3 disclosure reforms introducing standardised MREL templates and a capital distribution constraints narrative

The Prudential Regulation Authority (PRA) has published a policy statement finalising changes to UK Pillar 3 disclosures to give users clearer, more comparable information on firms’ resolvability resources and the application of capital distribution constraints (CDCs). The final package introduces standardised Minimum Requirements for Own Funds and Eligible Liabilities (MREL) disclosure templates, adds a qualitative CDC narrative within the UK CC1 template, and requires firms to state the basis on which their Pillar 3 disclosures are prepared. The reforms apply to PRA-authorised banks and building societies, PRA-designated UK investment firms and CRR consolidation entities. Four new disclosure templates (UK KM2, UK MREL 1, UK MREL 2 and UK MREL 3) replace existing free-form disclosures and are aligned with Basel Committee on Banking Supervision Total Loss Absorbing Capacity formats, adapted for the UK and expanded in scope to include mid-tier MREL firms. UK resolution entities that are G-SIIs (Article 92a firms) or O-SIIs must complete all four templates, while UK material subsidiaries of international G-SIIs are required to disclose UK MREL 2 on a legal-entity basis; disclosure of average MREL resources will apply only where an institution’s MREL requirement is constrained by the leverage ratio. For CDCs, the PRA confirms it is not implementing the BCBS quantitative CDC template and that the narrative does not require disclosure of confidential supervisory information (including Pillar 2B); instead it should describe the level of constraints under the Capital Buffers Part of the PRA Rulebook and link to it, with instructions clarifying how CET1 used to meet additional tier 1 and tier 2 requirements should be considered when assessing distribution restrictions. The PRA reports no substantive changes to the consulted policy, alongside minor corrections and clarifications to rules and instructions. All requirements take effect on 1 January 2027, with a first reference date for the period ending 31 December 2026; the first disclosures under the new templates are expected to be published from H1 2027.