Finding the right RegTech partner as Basel 3.1 preparation begins

UK banks face a January 2027 deadline for Basel 3.1 implementation. The Prudential Regulation Authority published final rules in January 2026 (PS1/26), ending years of uncertainty but leaving institutions with around 12 months to rebuild risk-weighted asset calculations, recalibrate capital buffers and overhaul reporting systems. For many firms, the question is no longer whether to invest in regulatory technology but which vendor can deliver compliant infrastructure before the deadline.

The challenge is acute. Basel 3.1 introduces standardised approaches for credit, operational and market risk that differ materially from current UK frameworks. Risk-weighted assets (RWAs) will shift significantly for most portfolios under the revised credit risk standardised approach. Smaller institutions face the Strong and Simple regime, a parallel set of requirements designed to reduce complexity but still demanding new data flows and calculations. Legacy systems built for previous iterations of Basel cannot simply be patched. Banks must decide whether to build, buy or partner, and most are concluding that specialist RegTech platforms offer the only realistic path to compliance at speed.

What is changing

Basel 3.1 final rules (PS1/26) implement the Basel Committee's post-crisis reforms for the UK. The standardised approach for credit risk replaces the existing methodology with more granular asset classes (e.g., real estate, corporates, sovereigns) and revised risk weights. Operational risk adopts the new Standardised Measurement Approach (SMA), combining a Business Indicator Component (BIC) with an Internal Loss Multiplier (ILM). Market risk adopts the FRTB, overhauling how banks calculate exposure to price movements, with internal models delayed to 1 January 2028. For UK institutions, this means reconfiguring risk engines, reconciling outputs with existing capital planning processes and preparing submissions that meet PRA expectations on data quality and auditability.

Strong and Simple adds another layer. Small Domestic Deposit Takers (SDDTs) under Strong and Simple (PS4/26) benefit from simplified rules but still require new calculations and data flows. The regime may reduce some burdens but it does not eliminate the need for robust data governance or transparent reporting workflows. Both sets of changes arrive in 1 January 2027.

Why it matters

The operational impact extends beyond compliance teams. Finance functions must integrate new risk-weighted asset figures into capital forecasts and balance sheet management. Treasury teams will adjust liquidity planning as capital requirements shift. Technology departments face demands to connect risk engines with core banking systems, data warehouses and reporting platforms, all while maintaining existing regulatory obligations.

Institutions that rely on manual processes or outdated infrastructure are discovering the scale of the problem. Spreadsheets cannot handle the granularity Basel 3.1 requires. Custom-built solutions from previous regulatory cycles lack the flexibility to adapt quickly. Vendors offering generic reporting tools struggle with the specifics of PRA templates and validation rules.

This creates a clear dividing line. Banks that choose agile, purpose-built RegTech platforms can automate data ingestion, apply regulatory logic consistently and generate auditable reports with minimal manual intervention. Those that stick with legacy approaches risk missing the 1 January 2027 deadline, producing unreliable figures or spending heavily on consultant-led remediation projects that deliver limited long-term value.

The debate

Not everyone agrees that RegTech is essential. Some larger banks argue they have sufficient in-house capability to build bespoke solutions, maintaining control over proprietary risk models and avoiding vendor dependence. This view holds that regulatory requirements, while complex, are ultimately deterministic problems that internal teams can solve given enough time and resource.

Others point out that building from scratch is slow and expensive. Basel 3.1 is not the final regulatory change banks will face. Climate risk disclosures, digital operational resilience requirements and evolving AML standards are already on the horizon. A vendor with a proven track record can deliver tested infrastructure faster than most internal projects, freeing scarce technical talent for strategic initiatives rather than regulatory firefighting.

A third perspective focuses on vendor selection. Not all RegTech platforms are equal. Some lack depth in specific jurisdictions or struggle with performance at scale. Others promise flexibility but require extensive customisation that delays implementation. Banks need proven technology that turns final rules into compliant returns, not experimental tools that require further development.​

What to watch next

The critical period runs through Q2-Q3 2026, with key milestones including the PRA's Pillar 2 data collection (due 31 March 2026). Banks must complete vendor selection, begin data mapping and test calculations against sample portfolios. Parallel runs comparing new and existing approaches will reveal gaps in data quality or model assumptions. Firms should watch for PRA guidance on supervisory expectations, particularly around documentation, model validation and audit trail requirements.

Implementation timelines matter. Vendors able to deploy in 6-9 months offer a meaningful advantage over those requiring longer projects. Look for evidence of live deployments, not just demonstrations. Reference clients in similar institutions provide the best signal of whether a platform can handle real-world complexity under deadline pressure.

Bottom line

Basel 3.1 final rules have compressed preparation timelines to a point where strategic choices on regulatory infrastructure cannot wait. Banks that select the right RegTech partner now will enter 2027 with confidence in their capital calculations, transparent audit trails and platforms capable of adapting to future requirements. Those that delay risk scrambling to meet deadlines with inadequate tools and incomplete data.