Implementing Basel 3.1: Strategies for Meeting the Upcoming Requirements

June 06, 2024 11:00 am BST |19:00 pm HKT|12:00 pm CET | 6:00am EST

Duration: 1 hour

The webinar focused on the implementation of Basel 3.1 and strategies for meeting the upcoming requirements. The moderator was Ronan Donnelly, an SME at Suade. The panelists were Steven Hall from KPMG’s risk and regulatory advisory team and Simon Hills from UK Finance.

Main Topics Discussed:

Overview of Basel 3.1:

Basel 3.1 includes updates impacting credit risk, the output floor, and market risk. The Prudential Regulation Authority (PRA) is in the process of finalising the rules, with significant elements like credit risk and the output floor yet to be published.

Panelists' Backgrounds:

Steven Hall has extensive experience in regulatory advisory work, focusing on Basel regulations, credit risk model development, stress testing, IFRS 9 implementation, and more. Simon Hills leads the prudential capital and risk team at UK Finance, dealing with capital and liquidity requirements, governance, operational resilience, and various banking instruments.

Current Status and Timeline:

The first instalment of near-final rules was published in December last year, covering market risk, credit valuation adjustment (CVA), counterparty credit, and operational risk. The second instalment, covering credit risk and the output floor, is awaited. There are concerns about the timelines for finalising these rules, especially with the upcoming UK general election affecting the schedule.

Challenges and Considerations:

The implementation timeline is crucial, with firms needing adequate time for compliance and strategic planning. There are uncertainties due to potential changes in the final rules and delays caused by the pre-election period. The PRA might face challenges in issuing the final rulebook due to political and regulatory processes.

Key Issues and Industry Concerns:

There is the potential removal of the SME supporting factor and the introduction of new risk-weighted classes for SME exposures. A transition period is needed to phase out the SME supporting factor to avoid sudden impacts on banks' capital requirements. Accurate regulatory reporting and avoiding rushed implementations are essential to ensure quality and compliance.