C4 - 2026 - Capital treatment of Bank investments

By replacing C4/2013 and C5/2013, Circular 4/2026 signals that banks should re-examine legacy capital treatments, deduction methodologies and reporting mappings rather than rely on prior circulars. Compliance teams should prioritise a gap assessment across direct and indirect holdings, including equity and debt exposures, and confirm how the new circular interacts with prudential consolidation, capital adequacy and existing reporting returns. Actionable steps include updating capital calculation policies and data dictionaries, validating that regulatory reporting captures the revised treatment, refreshing controls and governance sign-offs, and briefing finance, risk and treasury teams.

Firms should also check whether the circular sets an effective date or transitional treatment, and document any interpretation questions for the PA. The main business impact is potential recalibration of capital resources and holdings, which may affect limits, profitability and balance-sheet optimisation. Banks that move quickly can reduce reporting risk and identify capital-efficiency opportunities, while delayed implementation could create inconsistent returns, supervisory scrutiny and unexpected capital volatility.