Prudential Regulation Authority consults on delaying UK FRTB internal model rules to 2028 and simplifying market risk implementation

The Prudential Regulation Authority (PRA) has published a consultation proposing targeted changes to its near-final Basel 3.1 market risk rules, centred on the Fundamental Review of the Trading Book (FRTB). The main proposal is to delay implementation of the FRTB internal model approach (FRTB-IMA) by a further year to 1 January 2028, while implementing the rest of the FRTB package and wider Basel 3.1 reforms from 1 January 2027. Under the proposal, firms with existing market risk internal model permissions could continue using current models during 2027, or move to the new standardised approaches, while positions not covered by existing permissions would transition to the Advanced Standardised Approach (ASA) or Simplified Standardised Approach (SSA) as applicable. The PRA also proposes operational simplifications for collective investment undertakings (including a 90% de minimis threshold affecting trading book allocation and ASA look-through treatment), a permissions regime to allow alternative methodologies where the ASA Residual Risk Add-On would be disproportionate, and consequential changes to reporting and disclosure. An interim version of Supervisory Statement SS13/13 on market risk would apply before the finalised SS13/13 takes effect with FRTB-IMA. The consultation applies to PRA-authorised banks, building societies, PRA-designated investment firms, and relevant holding companies. Responses are requested by 12 September 2025, extended from 5 September 2025, with the proposed operational and reporting changes taking effect from 1 January 2027 and the FRTB-IMA-specific framework taking effect from 1 January 2028.