Your response to the PRA’s latest IFRS 9 feedback will shape the relationship with regulators and the market for years to come. In the September 2025 letter, the PRA makes clear that it expects more than compliance: Boards must demonstrate active oversight.
This means demonstrating strategic leadership on risk modelling, climate integration, and data governance. And because IFRS 9 is now integral to the Bank of England’s annual stress test, this leadership is vital for optimising capital and building regulatory trust.
In this blog, we’ll look at the PRA’s areas of focus and what they mean for board-level action.
Key areas of PRA focus on IFRS 9
The PRA’s thematic feedback highlights several areas where it expects stronger governance and board-level involvement. These priorities span models, data, and climate risk, and each will demand closer oversight in the year ahead.
#1. Challenging your own models
The PRA is explicit: firms must "challenge the responsiveness of their processes to evolving risks." Boards should interrogate apparently stable ECL figures, as these may mask risk concentrations amid geopolitical and climate volatility. The letter directly calls for robust post-model adjustment (PMA) management and active challenge of scenario assumptions. Board committees must now demand evidence of rigorous model monitoring and real-time vulnerability analysis across high-risk cohorts.
Board action: Strengthen assurance by commissioning regular independent model validations and data audits, ensuring challenge is external as well as internal.
#2. Getting data governance right
Regulatory and audit attention is focused on the integrity of data controls. UK banks with EU operations face immediate DORA obligations. While purely UK-centric firms are not directly bound, they should proactively review the PRA’s stance as they have signalled ambition to align with the EU. Boards must ensure clear accountability for outsourcing and operational resilience.
Board action: Review oversight arrangements to ensure they are tailored to the group’s specific UK and EU structure, while horizon-scanning for evolving UK resilience standards.
#3. Making climate risk a priority
The PRA’s CP10/25 consultation, while not yet final, sets clear board-level expectations for embedding climate risk into loan-level decisions. Progress must be shown in risk driver identification, quantitative analysis, scenario adaptation, and advanced loan-level modelling. Credible climate integration is now directly linked to a firm's ability to access ESG funding pools.
Board Action: Oversee and challenge the design of climate scenario models, particularly given heightened macroeconomic uncertainties and the need to integrate them with capital management.
These areas underline the PRA’s expectation that boards play an active role in how firms manage IFRS 9, moving from passive compliance to visible, informed oversight.
IFRS 9: Board action plan to meet PRA expectations
To respond effectively to the PRA’s feedback, boards should focus on both near-term actions and longer-term shifts in governance. The following priorities provide a practical framework for discussion at the next appraisal cycle.
Immediate priorities for the next board appraisal:
- Assign clear ownership: Appoint a Senior Manager for a gap analysis against PRA findings, ensuring direct SMF accountability for model performance and data integrity.
- Demand better information: Require management reporting that tracks PMA reductions and vulnerabilities flagged by dynamic scenario stress tests.
- Schedule deeper dives: Plan board-level reviews on operational resilience, third-party exposure, and readiness for mandatory climate transition plans.
- Integrate complex risk: Evaluate how exposures to securitised assets and complex collateral are captured in ECL, monitoring for divergence with ECB/EBA standards.
Priorities for 2026 and beyond:
- Link governance to incentives: Ensure governance across models, climate, and data is embedded in the risk appetite framework and clearly connected to remuneration.
- Benchmark your performance: Align scenario analysis with PRA ‘better practice’ examples and learn from external stress tests to pre-empt capital drag.
- Invest in culture & training: Champion continuous board-level education on IFRS 9, data, and climate to defend against a "box-ticking" culture.
- Strengthen stakeholder communications: Use improved disclosures on risk and climate governance to build market trust with both regulators and investors.
These steps show supervisors that the board is taking an active role in IFRS 9, moving oversight from process compliance to meaningful governance.
IFRS 9 and the PRA: What Boards should expect in 2026
The PRA has already signalled where its attention will fall next year. Boards should expect scrutiny in four key areas:
- Post-model adjustments (PMAs): whether overlays remain justified and responsive to emerging risks.
- Data quality and governance: how source data, aggregation and third-party dependencies are controlled.
- Recovery assumptions and LGD models: testing whether strategies are realistic for vulnerable sectors.
- Securitisation exposures: how complex or illiquid collateral is reflected in ECL estimates.
Climate risk will also remain high on the agenda, with supervisors expecting further integration into loan-level modelling and scenario design.
Boards that act early on these priorities will be better placed to demonstrate resilience, satisfy supervisory expectations, and reduce the risk of capital strain.
At Jaywing, we work with boards and senior risk leaders to interpret regulatory expectations and put the right frameworks in place. If you’d like to discuss how these findings affect your firm, please get in touch.
