BoE delays the Basel Bank Trading Rule to 2028 in alignment with the US and global jurisdictions.
A crucial component of new international regulations controlling banks’ trading activity was postponed by the British central bank on Tuesday until 2028 to gain clarification on what other countries, notably the US, will do.
The Bank of England also made the anticipated announcement to relax capital requirements for mid-sized banks as part of a set of measures aimed at assisting British institutions.
The decisions come after the Labour administration called on regulators to adopt a more growth-oriented approach to the banking sector in place of one that is risk-averse.
To strengthen the financial services sector and the economy, UK Finance Minister Rachel Reeves also unveiled a strategy on Tuesday to increase savers’ share investments and control regulators.
The BoE stated that it will continue to implement the majority of the Basel 3.1 rules in January 2027, but it will delay the implementation of the Fundamental Review of the Trading Book (FRTB) requirements until 2028.
Importantly, the FRTB regulates capital and reporting requirements for banks’ trading assets, including how risk should be assessed using either the banks’ estimates or a standard technique.
The BoE stated that it had suggested postponing the internal models approach to give businesses more time to get ready and to address the “continued uncertainty” surrounding its implementation in other places.
“Today’s announcements will give certainty to firms of all sizes about the future capital framework … and allow an extra year for part of the implementation of new investment banking rules,” Sam Woods, Deputy Governor of the Bank of England, stated.
Supervisors around the world have been postponing the full implementation of Basel 3.1 banking reforms to better understand what the United States would do under Donald Trump after the president promised to deregulate and to avoid burdening their companies with additional regulations before other nations have implemented them.
The European Union stated that it would examine its options when the BoE announced in January that it was postponing the implementation of the more comprehensive Basel standards by one year, until January 2027.
A few months later, the EU postponed FRTB regulations until 2027.
Following the global financial crisis, the Basel Committee of bank regulators from the major financial centers of the world released the first set of Basel III rules.
The full set of rules, known as Basel 3.1 by the BoE, was scheduled to go into effect in January 2025.
MIDDLE-SIZED BANKS
To guarantee that banks can be “bailed in” rather than “bailed out,” the BoE also increased the minimum asset threshold at which banks must issue loss-absorbing debt, or MREL, from 15 billion to 25 billion pounds to a range of 25 billion to 40 billion pounds ($53.73 billion).
Compared to the 20 billion to 30 billion pounds range that was suggested during a consultation last year, the current range is marginally more generous.
While banks in the new band will be evaluated on an individual basis, those with assets over 40 billion pounds will be expected to establish comprehensive bail-in preparations.
Among those anticipated to gain are mid-sized institutions like OneSavings Bank and Metro Bank, which have long criticized the post-crisis regulations as being unduly harsh.
OneSavings Bank’s stock increased 0.62%, marginally outpacing the overall market, while Metro’s shares increased 0.5%.
When the BoE raised the MREL capital requirement threshold, Chief Executive Nigel Terrington praised the move, calling it a “strong step in harnessing the full potential of this sector.”
