The Prudential Regulation Authority (PRA) has published a series of proposals designed to ensure UK banks can rapidly convert liquid assets into cash during fast-moving financial stress events.
The consultation, published on 17 March 2026, aims to modernise liquidity standards and focuses on ensuring firms are operationally prepared to manage sudden, large-scale outflows — rather than simply mandating that banks hold more liquid assets.
Central to the proposals is a requirement that firms conduct internal stress tests examining how they would respond to rapid deposit outflows within a single week — a significant tightening from the current monthly reporting window. The PRA also proposes to remove an existing exemption for sovereign bonds and other “level 1 assets” from annual testing of the ability to monetise non-liquid assets, providing greater assurance that firms can quickly raise liquidity when needed.
At the same time, the regulator has sought to limit the administrative burden on firms by reducing data requests in related areas, ensuring the overall reporting load does not increase as a result of the changes.
Firms will also be encouraged to be operationally prepared to draw on central bank facilities when required — a key lesson that emerged from the speed at which SVB experienced deposit outflows. According to the Basel Committee, SVB would have seen 85% of total deposit outflows over just two days, while Credit Suisse experienced 25% of total deposit outflows over seven days — underscoring just how rapidly liquidity can evaporate in a modern digital banking environment.
The PRA has been explicit that the proposals are not about forcing banks to hold greater quantities of liquid assets, but about ensuring the assets they already hold can actually be deployed when it matters most. The regulator’s focus is squarely on preparedness for stress, minimising additional work for firms while providing stronger assurance around the usability of liquid resources.
The consultation closes on Wednesday 17 June 2026, with the PRA inviting feedback on the proposals and the proposed implementation date.
PRA deputy governor for prudential regulation and CEO Sam Woods said, “This proposed update of our liquidity requirements takes forward key lessons we’ve learnt from the past few years. We’ve focused the changes not on increasing the amount of liquid assets banks have to hold, but instead on making sure that those assets do what they say on the tin and really are usable in the event of a run.”
The proposals reflect the significant technological changes in banking, payments and communications that have occurred since the current liquidity framework was last substantively updated following the 2008 financial crisis. The speed at which information now travels, combined with the ease of digital fund transfers, means that the old assumptions underpinning liquidity stress timelines are no longer sufficient.
The liquidity consultation forms part of a broader programme of regulatory reform the PRA has been pursuing to maintain financial stability while promoting growth and competitiveness. This has included the removal of the Building Societies Sourcebook alongside new measures to support the mutuals sector, the simplification of capital requirements for smaller firms through Strong and Simple, and the simultaneous introduction of Basel 3.1 for larger institutions.
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