The Bank of England is pushing back the start date for a key chunk of reforms to bank capital requirements by a year to 2028, saying delays in implementation in the US means it wants to coordinate rules for cross-border trading activities.
The delay affects changes to a new internal model approach for market risk, known as the fundamental review of the trading book. It is seen as the latest move to try to ease regulations for UK banks and make them more competitive.
"Given continued uncertainty over the timing of the implementation of the FRTB in some other jurisdictions," the BoE's Prudential Regulation Authority is delaying implementation of the its internal model approach until January 1 2028, it said on Tuesday.
"The internal model approach is predominately used by major trading firms, including international groups engaged in cross-border trading activity," the PRA said in a consultation paper. "It is therefore the most relevant part of the FRTB for cross-border coordination, given the costs and complexity of running different models across jurisdictions. A delay to January 1 2028 would allow additional time for coordination."
It marks another delay to the capital plans. The UK had planned to introduce all Basel 3.1 rules – also known as Basel III endgame – at the start of 2026, but in January it announced a one-year delay until the start of 2027 because of delays in the US, where proposals have been watered down and pushed back after fierce lobbying by the banking industry. It is not yet clear when they will be implemented in the US.
The EU implemented most parts of the Basel 3.1 package at the start of 2025 but last month delayed the introduction of FRTB rules by a year until the start of 2027.
Tougher Basel rules are being introduced after the 2008 financial crisis showed major flaws in bank capital requirements, in particular how the riskiness of assets is calculated. More stringent Basel 2.5 capital rules were introduced in 2009 and the next iteration is meant to address areas such as trading risk; Basel 3.1 is due to limit variances in internal risk-weighting models and more strictly delineate between positions in the trading book and outside.
The PRA announced several other changes on Tuesday, including trying to make it easier for smaller banks to compete in the mortgage market. It plans to reduce barriers for mid-sized banks to gain permission to build internal ratings-based models for residential mortgages.
It also announced changes to the UK’s resolution framework, including raising the bar for when banks need to hold additional MREL. MREL is a requirement for firms to maintain a minimum level of equity and eligible debt so they can be ‘bailed in’. The PRA plans to raise the MREL threshold from £15bn–£25bn in total assets to £25bn–£40bn.
“Today’s announcements will give certainty to firms of all sizes about the future capital framework, bring in a simpler regime for smaller banks, make it easier for mid-sized banks to scale up in the mortgage market and allow an extra year for part of the implementation of new investment banking rules," Sam Woods, CEO of the PRA, said in a statement.