The PRA buffer and Pillar 2B: how it is set and when you can use it

The PRA buffer, also called Pillar 2B, is capital a bank or building society should hold on top of its Total Capital Requirement (Pillar 1 plus Pillar 2A) and its combined buffer, to absorb losses in a severe stress. The PRA sets it after the supervisory review, mainly from the firm’s stress test results net of the capital conservation and countercyclical buffers, plus a scalar where risk management and governance are significantly weak. It is met with CET1, it is confidential, and using it in a stress is not a breach. On 1 January 2027 it is rebased for Basel 3.1, and firms in the SDDT regime replace it, and the conservation and countercyclical buffers, with a Single Capital Buffer.

Where does the PRA buffer sit in the capital stack?

At the top. SoP5/15, the PRA’s statement of policy on Pillar 2, describes it as “an amount of capital firms should maintain in addition to their total capital requirement (TCR) and the combined buffer” (paragraph 9.1).

Pillar 2A and Pillar 2B are the two halves of the PRA’s capital assessment. Pillar 2A covers risks not captured, or not fully captured, by Pillar 1 rules; Pillar 2B covers “risks to which the firm may become exposed over a forward-looking planning horizon”, such as a change in the economy (SS31/15 paragraph 5.10). Pillar 2A is a requirement; the PRA buffer is a buffer the PRA notifies after its review, which the firm should hold so it can keep meeting its requirements “even in adverse circumstances, after allowing for realistic management actions” (paragraph 5.20). The PRA buffer is held in CET1 on top of the CET1 that meets the combined buffer (paragraph 5.23), and the distribution test counts all CET1 above Pillar 1 and Pillar 2A against the combined buffer (Capital Buffers rule 4.1). So as capital falls, a firm runs through its PRA buffer before it falls below its combined buffer.

Our article on how the PRA sets Pillar 2A covers the layer underneath.

How does the PRA size the buffer?

From three assessments: the stress impact, the risk management and governance assessment, and supervisory judgement (SoP5/15 paragraph 9.3).

The stress impact is measured against a hurdle rate. For firms outside the Bank of England’s own stress test, the hurdle rate is the TCR (paragraph 9.8). Those firms run their own ICAAP stress, using scenarios the PRA publishes as a guide (paragraphs 9.16 and 9.17); the largest firms are tested in the Bank Capital Stress Test, which the Bank now expects to run every other year. The buffer is the capital needed “over and above the CCoB and relevant CCyB to withstand a severe but plausible stress” (paragraph 9.29). There is no offset for systemic buffers (paragraph 9.30), and later changes in the countercyclical buffer “will generally be additive” to the existing PRA buffer rather than a reason to reset it (paragraph 9.31).

The PRA’s own stylised example: a peak CET1 depletion in the stress of £136 million, less a capital conservation buffer of £94 million, less a countercyclical buffer of £19 million, gives a PRA buffer of £23 million, 0.6% of £3,778 million of risk-weighted assets (paragraphs 9.32 and 9.33). The example uses a 0.5% countercyclical rate. At the current UK rate of 2%, the countercyclical buffer on those RWAs would be about £76 million; with the conservation buffer that more than covers the £136 million depletion, so the stress element of the buffer in this stylised example would be nil. A firm’s own countercyclical rate is the exposure-weighted average across the countries where its credit exposures sit, so it is 2% only for UK exposures (Capital Buffers rule 3.1).

Several things can push the figure up:

• A governance scalar. Where the PRA assesses risk management and governance as significantly weak, it can add a scalar, generally of up to 40% of the CET1 needed to meet the variable part of the TCR (SoP5/15 paragraph 9.34; SS31/15 paragraph 5.22). It may first give the firm an indicative figure and time to fix the problem, a “suspended scalar” (paragraph 9.35). Weaknesses charged through the scalar would not ordinarily be charged again in Pillar 2A (paragraph 9.36).
• Doubts about the stress test. Where the PRA has concerns about the credibility of a firm’s stress results, it adjusts the results or the buffer (paragraphs 9.15 and 9.43).
• Other factors, including the largest change in capital resources and requirements under the stress, the leverage ratio and how far the firm has already used its combined buffer (SS31/15 paragraph 5.21).

The PRA reassesses the buffer every year for major UK firms and, from 2027, every two to four years for other firms (SoP5/15 paragraph 9.6). New banks, those authorised without restriction for five years or less and not yet profitable over a full year, are expected instead to calibrate the buffer to six months of projected operating expenses, net of the capital conservation buffer only (SS3/21 paragraphs 4.7, 4.8 and 4.10).

Can a bank use its PRA buffer?

Yes, in a stress. “Use of the PRA buffer is not itself a breach of capital requirements or TCs”, and the PRA expects firms to use it in times of stress (SS31/15 paragraph 5.33). It should not be used in the normal course of business or planned into the base case, and the PRA does not expect firms to hold extra capital on top so they never enter it (paragraph 5.33; SoP5/15 paragraph 9.5).

• Notify early. A firm should tell the PRA as early as possible once it sees it will need the buffer, setting out the circumstances, how the buffer will be used against its capital projections, and “the plan and timeframe to restore the PRA buffer” (paragraph 5.34).
• Expect closer supervision. A firm below its PRA buffer can expect enhanced supervisory action and should prepare a plan to restore it. The PRA judges the timetable on how far the firm has gone into the buffer, how long the stress is expected to last and what is driving it (paragraph 5.35).
• No automatic dividend block. The automatic distribution restrictions that come with the combined buffer do not apply to the PRA buffer (paragraph 5.36). Falling into the combined buffer is different: distributions are restricted and a capital conservation plan is due within five working days (Capital Buffers rules 4.3 and 4.4).
• A backstop. If the PRA is not satisfied with the plan, or with the firm’s reasons for using the buffer, it may consider using its section 55M power to require the firm to raise capital to meet the buffer (paragraph 5.35).

The direction of travel is towards more usable buffers. In July 2026 the PRA endorsed the Financial Policy Committee’s aim of a single buffer that can be released in stress and used without automatic distribution restrictions, and said it “will consider” firms’ feedback that greater clarity on using the PRA buffer outside periods of systemic stress could help usability (PRA statement on enhancing the usability and releasability of capital buffers, 7 July 2026).

What changes on 1 January 2027?

• Rebasing for Basel 3.1. The PRA committed to rebase “both variable parts of Pillar 2A and the PRA buffer” in an off-cycle review, rescaling each firm’s existing nominal Pillar 2 as a percentage of its projected Basel 3.1 RWAs (PS9/24 paragraph 5.46 and footnote 59). The PRA’s off-cycle review page says the aim is that changes to Pillar 1 RWAs do not produce “unwarranted higher (or lower) Pillar 2 requirements where the relevant risk level has not changed”, with requirements updated when Basel 3.1 goes live. The review was under way in May 2026 (PS15/26 paragraph 3.26). The results are firm-specific and are not published.
• The output floor runs through the stack. Floored RWAs are the basis for buffers, including the PRA buffer (PS9/24 paragraphs 5.42 and 5.45), and the PRA has said it will be alert to the intended effect of the output floor’s transitional arrangements when setting the buffer (paragraph 5.49).
• SDDTs leave the PRA buffer. Small domestic deposit takers in the SDDT capital regime are not subject to the PRA buffer, the capital conservation buffer or the countercyclical buffer, only the Single Capital Buffer (SS3/21 paragraph 4.10A). It is set no lower than 3.5% of RWAs before any governance scalar, is non-cyclical and met with CET1, is confidential, and carries no automatic distribution restrictions when used, though the firm notifies the PRA and prepares a capital restoration plan (SoP5/25 paragraphs 12.3, 12.11 and 12.43 to 12.46; SS4/25 paragraphs 5.20 and 5.26).
• Reviews for firms other than major UK firms move to a two-to-four-year cycle (SoP5/15 paragraph 9.6; PS15/26 paragraphs 6.10 to 6.12).

Our SDDT page covers who qualifies for the simpler regime, and updating your ICAAP for Basel 3.1 covers the capital plan the rebased figures go into.

Is the PRA buffer disclosed?

No. The PRA expects firms to treat all information about the PRA buffer as confidential unless the law requires disclosure, to share the SREP letter and the buffer with their auditors, and, for any other disclosure, to give the PRA advance notice where reasonably practicable, without delaying a disclosure the law requires immediately (SS31/15 paragraphs 5.37 and 5.38). Firms do disclose the amount and quality of their TCR (paragraph 5.37). The Pillar 3 key metrics cover Pillar 2A and the combined buffer (Disclosure (CRR) Part, Article 447), and the key metrics template has no line for the PRA buffer.

What should a board check?

• That the base case of the capital plan meets the combined buffer and the PRA buffer; the PRA expects it to (SoP5/15 paragraph 9.41).
• That the stress test would survive challenge: Pillar 2A scaled by its own risk drivers rather than total RWAs (paragraph 9.22), and only management actions the firm could and would take (paragraph 9.24).
• Whether a governance scalar, suspended or applied, is in place, and what closing it requires.
• That a notification and restoration plan for entering the buffer is drafted before it is needed.
• That the 2027 capital plan uses the rebased Pillar 2 figures from the off-cycle review.

Our ICAAP work includes the stress testing and capital planning the PRA buffer is set from, and the RisKIT stress testing models run scenarios in open Excel. Terms are defined in our glossary.

Questions readers ask

Is the PRA buffer the same as Pillar 2B?

Yes. SoP5/15 says “The PRA buffer (also referred to as Pillar 2B)” is capital held in addition to the TCR and the combined buffer (paragraph 9.1).

Does using the PRA buffer stop dividends?

Not automatically. The automatic distribution restrictions apply to the combined buffer, not the PRA buffer (SS31/15 paragraph 5.36). A firm using its PRA buffer should expect enhanced supervisory action and a plan to restore it (paragraph 5.35).

Does the countercyclical buffer reduce the PRA buffer?

When the buffer is set, yes: the stress component is the capital needed over and above the capital conservation buffer and the relevant countercyclical buffer (SoP5/15 paragraph 9.29). A later change in the countercyclical rate does not mechanically change the PRA buffer; changes are generally additive (paragraph 9.31).

How often is the PRA buffer reviewed?

Every year for major UK firms and, from 1 January 2027, every two to four years for other firms (SoP5/15 paragraph 9.6). The Basel 3.1 off-cycle review rebases it for day one of the new rules.

Sources: PRA SS31/15, the ICAAP and the SREP (current version effective 1 July 2026 and the version effective 1 January 2027), paragraphs 5.10, 5.16, 5.20 to 5.23, 5.31 and 5.33 to 5.38; PRA SoP5/15, methodologies for setting Pillar 2 capital, chapter 9; PRA Rulebook, Capital Buffers Part, rules 1.2, 2.1, 3.1 and 4.1 to 4.4; PRA Rulebook, Required Level of Own Funds (CRR) Part; PRA PS9/24 (12 September 2024), paragraphs 5.42 to 5.49 and footnote 59; PRA PS15/26 (28 May 2026), paragraphs 3.26 and 6.10 to 6.12; PRA SS3/21, new and growing banks, paragraphs 4.7, 4.8, 4.10 and 4.10A; PRA SoP5/25 (SDDTs), chapter 12; PRA SS4/25 (SDDTs), paragraphs 5.20 and 5.26; PRA statement on enhancing the usability and releasability of capital buffers (7 July 2026); PRA, Basel 3.1 data collection exercise for the off-cycle review of firm-specific Pillar 2 capital requirements; PRA Rulebook, Disclosure (CRR) Part, Article 447; Financial Policy Committee record (meeting of 25 September 2026); The Bank of England’s approach to stress testing the UK banking system (29 November 2024). Accessed 1 October 2026.