Pillar 2 liquidity

12 October 2018: The PRA confirms that it is using its new individual risk methodologies as set out in statement of policy ‘Pillar 2 liquidity’ in liquidity reviews. They are being applied at the current glide path factor.

We have previously stated our intention to set out proposals on the overall calibration of the liquidity framework in 2018. However, we have taken the decision to postpone finalisation of our proposals in order to conduct further analysis on the appropriate level of liquidity guidance. This includes the potential for some recognition in the Pillar 2 liquidity framework of the ability to draw on Bank of England liquidity facilities, where firms have access arrangements and appropriate collateral in place.

Current version

Published on 5 December 2023. Effective from 1 July 2024.

Statement of policy – Pillar 2 liquidity – December 2023 (PDF) Opens in a new window

Update: 17 June 2019

This Statement of Policy (SoP) was updated following PS13/19 ‘Pillar 2 liquidity: Updates to the framework’, and takes effect from Monday 1 July 2019.

The PRA’s approach to the publication of Solvency II technical information

Published: 17 June 2019
- Statement of Policy – June 2019 (pdf) Opens in a new window
- Following PS15/23 – The Strong and Simple Framework: Liquidity and Disclosure requirements for Simpler-regime Firms

Effective from: 1 July 2019 (superseded on 1 July 2024)

Published: 23 February 2018
- Statement of Policy – February 2018 (pdf) Opens in a new window
This Statement of Policy was published as part of PS2/18 'Pillar 2 liquidity'

Effective from: 23 February 2018 (superseded on 1 July by June 2019 version)

This statement of policy (SoP) is relevant to all UK banks, building societies and PRA-designated investment firms, referred to collectively as ‘firms’.

Chapter 2 details the PRA’s approach to the level of application of Pillar 2 liquidity guidance.
Chapter 3 details the PRA’s approach to assessing cashflow mismatch risk.
Chapter 4 details the PRA’s approach to assessing franchise viability risks.
Chapter 5 details the PRA’s approach to assessing intraday liquidity risks.
Chapter 6 details the PRA’s approach to assessing other Pillar 2 liquidity risks.

The Pillar 2 framework covers risks not captured, or not fully captured, in Pillar 1.

In publishing its approach to Pillar 2 liquidity (‘Pillar 2’), the PRA seeks to help firms understand how it assesses liquidity risks, thereby encouraging them to develop better approaches to reduce or manage these risks.