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Quick Summary
The UK’s Prudential Regulation Authority (PRA) will implement most of Basel III market risk reforms, including FRTB, on January 1, 2027, but will delay the internal models approach (FRTB‑IMA) by one year to January 1, 2028, while proposing adjustments to simplify implementation and maintain competit
UK Proposes Adjustments to Basel Bank Trading Rules, Keeps 2028 Timeline
Overview of Proposed Basel III Trading Rule Adjustments in the UK
LONDON, June 19 (Reuters) – Britain’s Prudential Regulation Authority on Friday proposed extending a key accuracy test on banks’ internal risk models, among other measures, in the final step of the country’s implementation of banking reforms post the financial crisis.
Timeline for Basel III Implementation
The BoE had said it would delay implementation of the part of the Basel III rules that affects how banks calculate risks in their trading books – known as the Fundamental Review of the Trading Book (FRTB) – until January 2028. The rest of the Basel regulatory package comes into force in January 2027.
Regulatory Coordination and Competitiveness
Regulators wanted to see how other jurisdictions proposed to change and introduce the rules to ensure British-based firms remained competitive.
PRA’s Position and Proposed Adjustments
The PRA said implementation in other countries had become clearer and it was sticking to its 2028 date, but it now wanted to propose some adjustments to the internal model approach (IMA). This allows banks to use their own approved risk models, rather than a standardised method, to work out how much capital they need to hold against trading risks.
Targeted Adjustments for Proportionality and Effectiveness
“The monitoring has identified a number of areas where targeted adjustments could improve the proportionality and operational effectiveness of the framework, while maintaining robust prudential standards,” the PRA said.
International Developments
The U.S. Federal Reserve in March issued a revised Basel III “endgame” proposal that made significant changes to these trading risk rules, easing some of the constraints on the use of internal models.
European Union’s Temporary Relaxation
The European Union in June said it would temporarily relax parts of the framework, citing the need to protect EU banks’ international competitiveness.
(Reporting by Yamini Kalia in Bengaluru and Phoebe Seers in London; Editing by Harikrishnan Nair and Emelia Sithole-Matarise)