The Bank of England has published a Policy Statement on the Implementation of the Basel 3.1 standards in the U.K., taking account of responses to its Consultation Paper 16/22 published in November 2022. The Basel 3.1 changes introduce the as yet unimplemented Basel reforms to banks' regulatory capital frameworks, intended to restore credibility in the calculation of risk-weighted assets and improve the comparability of banks' capital ratios.
The Policy Statement includes near final rules on the following aspects of Basel 3.1:
The BoE plans to publish a further Policy Statement with near final rules on the remaining aspects of Basel 3.1 in Q2 2024, namely:
The final rules will be published once HM Treasury has revoked the relevant parts of the CRR. The rules will take effect from July 1, 2025, with a 4.5-year transitional period requiring firms to fully implement the standards by January 1, 2030. The EU proposes to implement Basel 3.1 from January 1, 2025, while the US anticipates an implementation date of July 1, 2025.
The PRA estimates that the U.K.'s proposals for Basel 3.1 implementation will require a 3.2% increase in U.K. firms' Tier 1 capital requirements once the regime is fully in force. This compares favorably to both the US and EU implementation, where requirements will increase more substantially (by 9.9% for Tier 1 requirements in the EU and, for Common Equity Tier 1, up to 16% in the US).
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