Modernising the Liquidity Policy Framework | PRA CP5/26 Explained
18 March 2026·11 min
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The Bank of England and Prudential Regulation Authority have released a major consultation on the future of liquidity regulation and it could significantly change how banks manage liquidity risk.
In this video, I break down Consultation Paper CP5/26 – Modernising the Liquidity Policy Framework, published by the Bank of England in March 2026. The consultation reflects lessons from recent banking stress events and signals a shift in regulatory thinking from the quantity of liquidity to the usability of liquidity.
As someone working directly in liquidity risk and treasury management, I share my perspective on what this consultation really means for banks, treasury teams, and the future of liquidity regulation.
Rather than simply requiring banks to hold larger liquidity buffers, the PRA is increasingly focused on whether banks can actually mobilise liquidity quickly during a crisis. This has important implications for treasury operations, collateral management, monetisation readiness, stress testing frameworks, and central bank facility access.
In this discussion we explore the key themes from the consultation, including monetisation risk, operational liquidity readiness, early phase stress scenarios, and the evolving role of central bank facilities in the liquidity framework.
If you work in bank treasury, liquidity risk, ALM, banking regulation, or financial markets, this consultation is an important development to understand.
What this video covers
• The key proposals in PRA Consultation Paper CP5/26
• Why regulators are shifting toward liquidity usability
• Lessons from the 2023 banking stress events
• The growing importance of monetisation readiness
• Why the first few days of a liquidity crisis matter most
• Proposed changes to the treatment of Level One assets
• The evolving role of Bank of England liquidity facilities
• Practical implications for treasury teams and liquidity risk managers
• Additional considerations including stigma, cross border liquidity, and intraday liquidity risk
If you work in treasury, liquidity risk, or banking regulation, I would genuinely be interested in your perspective.
What do you think about the PRA's focus on liquidity usability and monetisation readiness?
Share your thoughts in the comments.
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Keywords
- Bank of England liquidity consultation
- PRA CP5/26 explained
- Modernising the Liquidity Policy Framework
- Liquidity risk management banking
- Treasury liquidity regulation
- Liquidity Coverage Ratio explained
- Bank treasury management
- Bank regulation explained
- Central bank liquidity facilities
- Banking stress events analysis
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