The Bank of England announced a package spanning prudential, market risk and resolution policy, including a Prudential Regulation Authority (PRA) consultation to adjust the UK’s Basel 3.1 market risk implementation and a set of updates to the UK resolution framework. The package is intended to keep most of Basel 3.1 on track for 1 January 2027 while deferring a key element of the Fundamental Review of the Trading Book (FRTB), alongside changes designed to reduce burdens for smaller and mid-sized firms. Under the PRA’s proposals, the new internal model approach for market risk would start on 1 January 2028, with firms that have internal model permission able to continue using existing models until 31 December 2027, while all other aspects of Basel 3.1 would proceed on 1 January 2027. The same date is also proposed for the Strong and Simple capital regime, which the PRA notes would remove the need for the Interim Capital Regime if both start together. The consultation also proposes minor FRTB refinements, including added flexibility for investments in funds and a permissions regime for capitalising complex risks under the standardised approach. Separately, the PRA signalled a forthcoming Discussion Paper in mid-summer 2025 on options to adjust barriers to gaining permissions to build Internal Ratings Based models for residential mortgages. On resolution, the Bank published a final updated policy on setting the minimum requirement for own funds and eligible liabilities (MREL), raising the indicative total-asset thresholds for a transfer or bail-in preferred resolution strategy to GBP 25–40 billion from GBP 15–25 billion and stating that firms with a transfer strategy would no longer need to hold MREL above minimum capital requirements; the thresholds are to be updated every three years from 2028. The PRA also consulted on lifting the Resolution Assessment Threshold for resolution reporting and disclosures to GBP 100 billion of retail deposits from GBP 50 billion, alongside proposals to update recovery plan review frequency and amend MREL reporting and disclosure requirements. The PRA consultation on the Basel 3.1 FRTB adjustments closes on 5 September, and HM Treasury indicated it intends to make statutory instruments related to resolution that were considered in finalising the MREL policy.
Bank of England 2025-07-15
Bank of England advances Basel 3.1 and Strong and Simple for 1 January 2027, delays FRTB internal models to 2028 and raises MREL thresholds
The Bank of England announced a policy package addressing prudential, market risk, and resolution frameworks, including a Prudential Regulation Authority (PRA) consultation on UK Basel 3.1 market risk implementation adjustments. Key proposals include deferring the new internal model approach for market risk to 2028, raising MREL thresholds, and updating resolution reporting requirements. The package aims to ease burdens for smaller firms while maintaining Basel 3.1 timelines.