PRA LIAC02/26: Lloyd’s IMO Reporting and Liquidity Rule Changes

The Prudential Regulation Authority published consultation LIAC02/26 on 29 July 2026, opening two separate workstreams under its low impact amendments process. One removes Lloyd’s syndicates from internal model output (IMO) reporting; the other reworks the liquidity Parts of the PRA Rulebook to fit incoming UK rule changes. Both close for comment on 11 September 2026, and each lands on its own implementation date.

PRA LIAC02/26 runs through the low impact channel, but the label understates the work: syndicate managing agents must check their 2026 year-end IMO templates, and bank treasury teams must trace amended Liquidity (CRR) Part cross-references before they drive numbers on 1 January 2027.

Related reading: PRA’s LIAF02/26 low-impact rule finalisation, which finalises LIAC01/26 and includes separate minor corrections made without further consultation.

Two proposals, two implementation dates, one response window

LIAC02/26 contains two proposal workstreams within a single consultation; they share a response deadline but have different proposed implementation dates. The insurance workstream amends supervisory statements and reporting instructions to take Lloyd’s syndicates out of IMO reporting. The banking workstream amends the PRA Rulebook liquidity rules across three proposals tied to Basel 3.1, the restatement of the Capital Requirements Regulation (CRR) in the Rulebook, and the incoming Overseas Prudential Requirements Regime (OPRR). The PRA presents the insurance proposal as supporting proportionality and simplification; the liquidity proposals are framed as clarifications and consequential amendments needed to keep the Rulebook operational through the OPRR, Basel 3.1 and CRR restatement changes. The calendar is the part to pin first:

• 29 July 2026: LIAC02/26 published.
• 11 September 2026: consultation end date for both workstreams; comments to LIAP@bankofengland.co.uk.
• 31 December 2026: proposed implementation date for the SS25/15, SS26/15 and IM.03 amendments, so syndicates would not report IMO in their 2026 year-end results.
• 1 January 2027: proposed implementation date for the liquidity rule amendments, aligned with Basel 3.1 and the expected entry into force of the OPRR.
• 30 July 2026: paragraph 2.32G of SS24/15 (Appendix 5) updated to correct a publication error.

Lloyd’s syndicates leave internal model output reporting

The PRA proposes to remove Lloyd’s syndicates from the scope of IMO reporting by amending SS25/15 (Solvency II: Regulatory reporting, internal model outputs), at paragraphs 1.1 and 2.7, deleting the references to Lloyd’s syndicates. Its stated reason is that the information is no longer required for its supervisory approach and duplicates data already available through other Solvency UK reporting and information shared by Lloyd’s. Two consequential edits travel with it: SS26/15 (ORSA and the ultimate time horizon, non-life firms), at paragraph 1.6, would be clarified so the option to demonstrate consideration of the ultimate time horizon using IMO within an ORSA supervisory report is relevant only to firms expected to report IMO; and the IM.03 reporting instructions, General Comment section, would be aligned to match.

The scope is narrow, and reading it wider is the easy mistake. This is a carve-out for Lloyd’s syndicates, not a general withdrawal of IMO reporting across Solvency UK internal model firms; a solo internal model insurer expected to report IMO stays in scope. The reason to act now is the date: with a proposed effective date of 31 December 2026, IMO would drop out of the 2026 year-end return. Firms with insurance subsidiaries can track the sibling reforms in PS18/26 on Solvency UK post-implementation reporting, published the same day.

Non-UK covered bonds: the equivalence call moves to the firm

The first liquidity proposal amends Article 11(1)(d)(ii) of the Liquidity Coverage Ratio (CRR) Part. For non-UK covered bonds to qualify as level 2A liquid assets, the third country’s supervisory and regulatory arrangements must be at least equivalent to those in the UK. The amendment would make explicit that the firm is responsible for assessing those arrangements and determining whether equivalence is met, a responsibility the current text leaves unstated. SS24/15 (the PRA’s approach to supervising liquidity and funding risks) would be updated to confirm that firms, or CRR consolidation entities, carry that assessment and may take assurance from any future HM Treasury designation under the OPRR.

The equivalence criterion is unchanged; the proposal would make explicit that the firm or CRR consolidation entity is responsible for assessing and determining equivalence, drawing on a broad range of relevant information. A team that has treated equivalence as a given, with no defensible assessment, is the one with work to do. Our guide to LCR, NSFR and ALMM liquidity reporting sets out where these treatments surface in the returns.

OPRR consequentials: designations replace CRR equivalence determinations

The second liquidity proposal prepares the Rulebook for the OPRR, the regime that follows the revocation of the retained CRR. The consultation refers to the draft Overseas Prudential Requirements Regime (Credit Institutions and Investment Firms) Regulations 2026, laid before Parliament and expected to enter into force on 1 January 2027, and to the associated rule changes in PS16/26. Under the OPRR, HM Treasury designations of jurisdictions would replace the CRR equivalence determinations: for exposures to overseas credit institutions, investment firms and exchanges (regulation 4), for exposures to overseas central governments, central banks, regional governments, local authorities and public sector entities (regulation 6), and a new power to designate jurisdictions for overseas covered bonds (regulation 5). A designation for overseas covered bonds would not change their liquidity treatment, except as set out in the covered-bond proposal above.

The PRA states that elements of proposals 1 and 2 depend on the OPRR Regulations entering into force, and that it would not proceed with those elements if the Regulations are not made. So a firm cannot yet treat these amendments as settled. The restatement mechanics underneath are the ones covered in the PRA’s restatement of CRR definitions in the Rulebook.

Basel 3.1 and CRR restatement clean-up in the Liquidity Parts

The third proposal adjusts the Liquidity Parts to keep working once Basel 3.1 (set out in PS1/26) and the CRR restatement (PS3/26) take effect on 1 January 2027, with the PRA’s stated aim of preserving the current effect of the rules where possible. Four edits are worth tracing:

• Articles 411, 424 and 428 reference qualification for the retail exposure class. Because the Basel 3.1 standardised approach excludes real estate from the retail definition, the PRA proposes to clarify that, for real estate exposures other than asset development and construction (ADC) exposures, this exclusion does not apply when determining retail-class qualification.
• Article 428(1)(k) would swap its cross-references to the risk categories in Annex 1 of the CRR for cross-references to the conversion factor categories in Table 1 of Article 111 of the Credit Risk: Standardised Approach (CRR) Part, without changing the exposures in scope.
• Article 428af specifies assets carrying a 65% required stable funding factor, including unencumbered loans secured by mortgages on residential property with a residual maturity of one year or more and certain other unencumbered loans, provided they are assigned a risk weight of 35% or less. The PRA proposes to retain that 35% risk-weight criterion, so revised standardised-approach treatments will affect which qualifying loans receive the 65% factor from 1 January 2027.
• The liquidity-treatment provisions for trade-finance off-balance-sheet products would be removed from Article 111 of the Credit Risk: Standardised Approach (CRR) Part and restated in Articles 428ra and 428s of the Liquidity (CRR) Part.

These are mostly cross-reference edits meant to keep the liquidity rules working as they do today. The one substantive tail: revised standardised approach risk weights would feed the required stable funding factor for mortgages from 1 January 2027, which teams can line up against the PRA’s Basel 3.1 market-risk adjustments.

How firms respond to PRA LIAC02/26

Responses go to LIAP@bankofengland.co.uk by 11 September 2026. The PRA asks respondents to confirm whether they respond as an individual or on behalf of an organisation, and whether they agree to publication of their name, or their organisation’s name, in the PRA’s response. Respondents must also indicate whether any proposal is likely to affect persons who share protected characteristics under the Equality Act 2010, and how.

Frequently Asked Questions

We are a Lloyd’s managing agent midway through 2026 year-end preparation. Does the IMO removal affect this cycle?

The proposed implementation date is 31 December 2026, and the PRA’s stated intent is that syndicates would not report IMO in their 2026 year-end results. The proposal is still in consultation until 11 September 2026, so plan against both outcomes until it is finalised.

Does this remove IMO reporting for all Solvency UK internal model firms?

No. The scope is Lloyd’s syndicates. The consequential SS26/15 clarification confirms the ultimate-time-horizon option using IMO remains relevant to firms expected to report IMO.

If the OPRR Regulations are not made, what happens to the covered-bond and OPRR-linked liquidity changes?

The PRA states that elements of proposals 1 and 2 depend on the OPRR Regulations entering into force on 1 January 2027, and that it would not proceed with those elements otherwise. Proposal 3, the Basel 3.1 and CRR restatement clean-up, sits on a separate track.

Who decides whether a non-UK covered bond’s home regime is equivalent for level 2A eligibility?

Under the amended Article 11(1)(d)(ii), the firm, or the CRR consolidation entity, assesses the third-country arrangements and determines whether equivalence is met. A future HM Treasury designation under the OPRR can provide assurance, but the responsibility stays with the firm.

Which draft instruments should a reporting team read before responding?

The consultation carries five appendices: draft amendments to SS25/15, SS26/15 and the IM.03 reporting instructions for the insurance workstream, and the draft PRA Rulebook liquidity consequential amendments instrument plus draft amendments to SS24/15 for the banking workstream.

Related Articles

• PRA’s LIAF02/26 low-impact rule finalisation: the finalisation counterpart to the low impact amendments process, with its own effective date.
• PS18/26 Solvency UK post-implementation reporting changes: the reporting and disclosure amendments published alongside LIAC02/26.
• PRA PS14/26 CRR definitions restatement: how revoked CRR provisions are being restated in the PRA Rulebook.
• Liquidity reporting: LCR, NSFR and ALMM: where liquidity treatments surface in the supervisory returns.
• PRA Basel 3.1 market-risk adjustments: the wider Basel 3.1 package taking effect on 1 January 2027.

Key Takeaways

• Comments on both LIAC02/26 workstreams go to LIAP@bankofengland.co.uk by 11 September 2026.
• The insurance workstream would remove Lloyd’s syndicates from IMO reporting from 31 December 2026, taking IMO out of the 2026 year-end return; other internal model firms stay in scope.
• Proposal 1 puts the responsibility for assessing third-country equivalence of non-UK covered bonds onto the firm, under an amended Article 11(1)(d)(ii) of the Liquidity Coverage Ratio (CRR) Part.
• Elements of proposals 1 and 2 are contingent on the OPRR Regulations 2026 entering into force on 1 January 2027; the PRA would not proceed with those OPRR-dependent elements if the Regulations are not made.
• Proposal 3 aligns the Liquidity Parts with Basel 3.1 (PS1/26) and the CRR restatement (PS3/26) from 1 January 2027, mostly through cross-reference updates; the required stable funding factor for qualifying mortgages under Article 428af would then be driven by the revised standardised approach risk weights.

Sources and References

• Bank of England / Prudential Regulation Authority, LIAC02/26 – Low Impact Amendments Consultation July 2026 (published 29 July 2026), including Appendix 1 (draft amendments to SS25/15), Appendix 2 (draft amendments to SS26/15), Appendix 3 (draft amendments to the IM.03 reporting instructions), Appendix 4 (draft PRA Rulebook: CRR Firms: Liquidity Consequential Amendments Instrument 2026), and Appendix 5 (draft amendments to SS24/15).
• legislation.gov.uk, draft Overseas Prudential Requirements Regime (Credit Institutions and Investment Firms) Regulations 2026, laid before Parliament.
• PRA policy statements referenced in LIAC02/26: PS1/26 (Implementation of Basel 3.1: Final rules); PS3/26 (Restatement of CRR requirements, 2027 implementation, final); PS16/26 (PRA rule changes to accommodate HM Treasury’s Overseas Prudential Requirements Regime); and PS18/26 (Solvency UK: Post-implementation reporting and disclosure amendments and Own Funds permissions).

What to put on the calendar before 11 September

Two questions decide whether LIAC02/26 needs a response. For a Lloyd’s managing agent: does the 31 December 2026 removal take the 2026 year-end IMO submission off the list. For a bank treasury team: do the amended Liquidity (CRR) Part cross-references move any figure from 1 January 2027, and does the covered-bond equivalence assessment hold up as documented evidence. Responses reach LIAP@bankofengland.co.uk until 11 September 2026.

Disclaimer: The information on RegReportingDesk.com is for educational and informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice. Always consult your compliance officer, legal counsel, or the relevant supervisory authority for guidance specific to your institution.