The Bank of England’s Prudential Regulation Authority (PRA) announced on Friday it would delay the implementation of the Basel 3.1 rules to 1 January 2027 due to “uncertainty around the timing of implementation of the […] standards in the US”.
The Basel 3.1 regime, which went into effect on 1 January in the EU, would likely affect the capital requirements of credit insurance providers, while keeping standards for trade finance largely the same.
Basel 3.1 is a set of regulations intended to increase the amount of equity kept by banks in order to make them more resilient to times of stress and avoid the bailouts and collapses of 2008. The announcement of the regulations by the US Federal Reserve in 2023 faced a strong backlash from the US banking sector, leading the American regulator to announce less restrictive standards and delay setting a timeline for their implementation. The PRA also modified the rules to reduce the burden on banks and financial institutions last year.
This is the second postponement of the rules, which were originally meant to come into effect in July of this year but were delayed by 6 months, to January 2026, in September. The delay comes amid worries about how and when the incoming Trump administration will implement the rules. In the announcement, the Bank of England cited concerns around “competitiveness and growth considerations” if implementing the rules in the US differed significantly from that in the UK, as this might give US institutions a competitive advantage.
It is feared that the Trump administration, which has signaled its unfriendliness to financial regulation that could restrict growth, might further water down the rules or scrap them altogether. UK regulators may be waiting to see the US’s next move as they balance limiting risk and complying with international standards with maintaining competitiveness.
The EU implemented the regulations this January with some changes, raising concerns about the UK falling out of step with its neighbours; however, laxer regulations could give UK institutions a competitive edge in the next two years, giving the nation’s financial industry a welcome boost.
The Bank of England announced that the final date for full implementation of the regulation, 1 January 2030, will remain unchanged, and the transitional periods in the rules will be reduced to make up the difference accordingly.
The data collection exercise on Pillar 2 capital requirements, announced by the PRA in September, will also be halted and its deadline extended, as will the deadline to join the Interim Capital Regime, previously set to 28 February 2025.
