Pillar 2
Banking - regulation.
(P2).
Pillar 2 is the aspect of banking supervision which addresses firm-wide governance and risk management, among other matters.
Additional capital requirements may be imposed by bank supervisors under Pillar 2, depending on their evaluation of banks' internal assessments of their risks and capital requirements.
UK Pillar 2 supervisory reviews
The UK supervisor is the Prudential Regulatory Authority (PRA).
There are two main areas that the PRA considers when conducting a Pillar 2 review:
(i) Risks to the firm which are either not captured, or not fully captured, under Pillar 1 capital requirements, referred to as Pillar 2A; and
(ii) Risks to which the firm may become exposed over a forward-looking planning horizon - e.g. due to external stresses - referred to as Pillar 2B.
IRRBB
Most regulators treat Interest Rate Risk in the Banking Book (IRRBB) as a Pillar 2 risk.
