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Sunday, 4 October 2026

Compiled with AI from public news sources. Folio is editorial commentary for commercial-awareness practice, not legal advice. Verify any detail against the linked sources before relying on it professionally.

All M&A Regulation AI & Law

Top Story/Regulation

PRA Publishes Thematic Feedback on IFRS 9 Credit Loss Accounting, Flags Data Governance and Climate Risk Gaps at Major UK Banks

The Prudential Regulation Authority (PRA) published on 30 September 2026 a letter from Executive Director David Bailey to chief financial officers of selected PRA-regulated deposit-takers, setting out thematic feedback from its review of written auditor reports covering IFRS 9 (International Financial Reporting Standard 9) expected credit loss (ECL) accounting. ECL accounting requires banks to recognise likely future loan losses early, before they actually default, rather than waiting for defaults to occur. The PRA's review focused on three areas. First, data governance: while auditors broadly found effective controls, the maturity and consistency of firms' frameworks varied. Better-practice firms used sensitivity analysis to identify critical data elements and applied quantitative thresholds to assess potential materiality. Second, model risk: firms continue to redevelop models and improve monitoring tools, but implementation has been uneven, and the PRA wants to see more responsive identification of emerging risks and more complete post-model adjustments. Third, climate risks: the PRA acknowledged continued progress in firms' ability to assess climate-related credit risks in line with its supervisory expectations, but called for more granular assessments, stronger links between scenario analysis and ECL judgements, and better underlying data. The PRA noted that aggregate ECL coverage across firms and asset classes is at its lowest since before Covid. It stressed this does not in itself indicate under-provisioning, but said that economic and geopolitical uncertainty, combined with limited recent default experience for some portfolios, makes timely incorporation of new risks into ECL models especially important. In a forward-looking addition to this year's review, the PRA has also asked auditors to assess firms' processes for identifying and monitoring credit risks in private market exposures, reflecting concerns about the complexity, leverage and interconnectedness of those risks.

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Bigger Picture

Sector Watch

UK Energy Crisis Escalation

The convergence of the October Ofgem price cap rise, Cornwall Insight's forecast of a further 16% January increase, and G7 governments' talks on a further strategic oil reserve release marks a second energy cost shock for UK households and a direct political test for the government ahead of the October Budget. Energy UK's formal call for intervention, backed by EDF's public crisis warning and the £5bn customer debt figure, puts Ofgem's proposed debt relief scheme and any new Budget measures at the centre of energy regulatory practice this autumn. Lawyers advising suppliers, regulated networks, and government on the legal mechanics of intervention will see sustained demand through November, when Ofgem announces the final January cap. The Middle East supply disruption shows no sign of resolving, meaning the pressure on the regulatory framework will extend well into 2027.

One to Follow

Ofgem's late-November announcement of the final January 2027 energy price cap, which will determine whether the 16% forecast rise materialises and trigger any Budget-linked government support measures

The final cap figure will set the legal and regulatory parameters for any government intervention mechanism, whether a targeted support scheme, a debt relief programme, or further levy removals, all of which require either primary legislation or a formal Ofgem direction. Energy regulatory, public law, and government advisory practices will all be activated simultaneously when the announcement is made.

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