What does the PRA’s decision mean for UK Banks in the era of Trump 2.0?
The Prudential Regulation Authority (PRA) announced on 17 January 2025 a one-year postponement of Basel 3.1 implementation, shifting the effective date to 1 January 2027.
The PRA said: “Given the current uncertainty around the timing of implementation of the Basel 3.1 standards in the US, and taking into account competitiveness and growth considerations, the PRA, having consulted with HM Treasury, has decided to further delay implementation of the rules.”
What is the Basel Framework?
The Basel framework is a set of global banking regulations established by the Basel Committee on Banking Supervision (BCBS) to improve oversight, risk management, and financial stability within the banking industry. Introduced in response to the 2007–2009 financial crisis, its objective is to strengthen banks' resilience to economic and financial stress, minimising the potential impact on the wider economy.
What is Basel 3.1?
Basel 3.1 marks the final stage of the Basel III reforms, focusing on refining the measurement of risk-weighted assets (RWAs) to improve the credibility of banks' capital ratios. Key components include revisions to the standardised approach for credit risk, constraints on internal models, and the introduction of an output floor to ensure that RWAs calculated by internal models do not fall below a certain percentage of the standardised approach.
Timeline of Basel 3.1 implementation
2017
The final phase of the Basel III framework was introduced by the BCBS, with an initial implementation timeline of January 1, 2022.
2020
Due to the COVID-19 pandemic, the BCBS postpones the implementation date to January 1, 2023.
2024
The PRA releases Policy Statement 9/24, pushing the UK’s implementation date to January 1, 2026, citing alignment with international timelines and industry feedback.
2025
The PRA further delays the UK implementation to January 1, 2027, allowing more time for clarity around U.S. regulatory plans under the Trump 2.0 administration.
What does the delay mean for UK banks?
The PRA’s decision to postpone Basel 3.1 implementation presents both opportunities and challenges for UK banks.
Opportunities:
Enhanced preparation: The extra time allows banks to thoroughly test and implement the changes required by Basel 3.1, reducing the risk of errors and ensuring smoother transitions.
James Bowpitt, Suade’s Head of Regulatory Reporting, remarked: “The delay eases the immediate pressure to deliver this project, but most teams are maintaining momentum. With project plans already in place and work underway, this extra time is an opportunity to refine strategies and ensure a smoother implementation.”
Technological investment: Institutions can use the extended timeline to invest in regulatory technology (RegTech) solutions including automation, data standardisation and advanced analytics, to manage the increased complexity of Basel 3.1.
Global competitiveness: Delayed alignment with international standards may help UK banks avoid competitive disadvantages compared to U.S. counterparts, who could benefit from lighter regulatory requirements under Trump 2.0.
Challenges:
Prolonged uncertainty: Regulatory delays can disrupt strategic planning, with banks having to navigate shifting timelines and evolving requirements.
Potential divergence: Differences in implementation timelines between the UK, EU, and U.S. could create operational complexities for multinational banks operating across these jurisdictions.
The role of the US in the Basel 3.1 delay
The PRA’s decision to delay Basel 3.1—its third postponement—reflects ongoing uncertainty around the US regulatory approach. The new administration’s stance on deregulation and upcoming changes in Federal Reserve leadership will play a key role in shaping global financial standards. By delaying implementation, the PRA is taking a cautious approach, allowing time for greater clarity on US policy to ensure international alignment and maintain the competitiveness of UK banks.
Key factors to watch in the US:
FED leadership changes: Michael S. Barr’s departure as Vice Chair for Supervision creates uncertainty about the direction of U.S. regulatory policy. His successor’s appointment, subject to Senate approval, will be pivotal.
Deregulation trends: Signals from the new administration suggest a pro-deregulation agenda, resulting in modifications to U.S. Basel 3.1 implementation.
Global competitiveness: If U.S. banks face reduced regulatory requirements, other jurisdictions may be forced to reconsider their own timelines and standards to remain competitive.
Preparing for the road ahead with Suade
The delay to Basel 3.1 may provide the UK with extra time, but it should not lead to complacency. Regulatory expectations remain high, and firms must use this period wisely to refine their compliance strategies, upgrade systems, processes and ensure a seamless transition when the new standards take effect.
Bowpitt, explains: “When firms go live with the actual Basel 3.1 implementation, regulators will show less leniency. With a two-year pushback, regulators will expect flawless execution.”
With Suade’s technology in place, financial institutions can turn this delay into an opportunity. By eliminating manual inefficiencies, ensuring full data traceability, and adapting to evolving regulatory requirements in real time, Suade will ensure full preparedness for the implementation of Basel 3.1 reforms.