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PRA's Upcoming Climate Risk Rules: What CP10/25 Means for UK Lenders
Under the PRA’s new CP10/25, UK banks and insurers face a stricter climate risk regime. Replacing SS3/19 by early 2026, the rules demand stronger governance, better data, and robust scenario analysis.
The Prudential Regulation Authority (PRA) has set its sights on strengthening how banks and insurers manage climate-related risks. With the release of Consultation Paper CP10/25 in April 2025, firms are being called to a higher standard — and the clock is ticking.
The update, which will replace Supervisory Statement SS3/19 in late 2025 or early 2026, brings more detailed and actionable expectations across governance, scenario analysis, data, risk appetite, and disclosures. Firms will have just six months to fully comply once the final rules take effect.
What’s Changing Under CP10/25?
The PRA has signalled that climate risk is no longer a “nice to have” on the agenda. It is now treated as a core financial risk, with regulators expecting clear governance, robust measurement, and evidence of integration into day-to-day decisions.
Key proposals include:
- Board accountability: Senior leadership must own climate-related risk appetite and ensure it is integrated into decision-making.
- Scenario analysis & stress testing: Banks must conduct robust climate scenario analysis, including reverse stress testing, at a level of granularity regulators have yet to demand.
- Data-driven risk management: Firms are expected to identify and fill data gaps — particularly around asset-level exposures — and embed climate risk into ICAAP and broader risk frameworks.
- Transparency in reporting: Climate risk disclosures must be credible, consistent, and backed by reliable data, not broad assumptions.
In short, the PRA expects climate risk to be treated as a material financial risk impacting capital adequacy and resilience.
How Can SkenarioLabs Help?
Meeting these new expectations will be a challenge for many. Our experience shows that most banks still lack the granular data and forward-looking modelling capabilities the PRA now expects. That’s where SkenarioLabs can help.
We support firms by:
- Providing asset-level data: Including EPC ratings, flood exposure, and transition risk metrics — ready for Board-level MI and ICAAP planning.
- Delivering climate scenario modelling: Property-level stress projections under multiple transition and physical risk pathways.
Supporting governance & oversight: Enabling measurable thresholds to operationalise climate risk appetite.
Supplying regulatory-ready reporting: Dashboards that connect property-level risk exposures through credit risk and ICAAP into PRA-aligned disclosures.
- Providing asset-level data: Including EPC ratings, flood exposure, and transition risk metrics — ready for Board-level MI and ICAAP planning.
Why Acting Early Matters
Firms that move now will not only avoid a last-minute scramble once the final supervisory statement is published — they’ll also gain a capital efficiency advantage by quantifying risks more precisely and reducing the need for overly conservative capital buffers.
At SkenarioLabs, we’re already working with leading UK lenders to help them align with PRA expectations and build more resilient portfolios.
If your institution is preparing for CP10/25, we’d welcome a conversation on how our data and modelling can strengthen your approach.
