On 12 September 2024, PRA published PS9/24 – Implementation of the Basel 3.1 standards near-final part 2
Overview:
This policy statement (PS) is the second of two nearly final PSs related to Basel 3.1. The first PS, called Near-final PS17/23 - Implementation of the Basel 3.1 standards near-final part 1, was published by the PRA on 12th December 2023. This near-final PS from the Prudential Regulation Authority (PRA) provides feedback on responses received for various chapters of the consultation paper (CP) 16/22 - Implementation of the Basel 3.1 standards. The chapters covered in this PS include Credit risk - standardised approach, Credit risk - internal ratings based approach, Credit risk mitigation, Output floor, Disclosure (Pillar 3), and Reporting.
Proposed changes:
Based on the feedback received, the PRA has made several changes to the draft policy. These changes include:
- Simplifying the rules for lending to small and medium-sized enterprises (SMEs) to make it easier for firms and reduce the amount of capital they need to hold.
- Adjusting the rules for lending to infrastructure projects to lower the capital requirements.
- Updating the calculations for off-balance sheet items to better reflect the actual risk involved.
- Simplifying the valuation of residential real estate when assessing credit risk.
- Improving consistency in how the output floor is calculated for different approaches.
- Making some smaller changes and clarifications to the policy, which are outlined in the near-final PRA Rulebook.
Implementation and next steps:
After reviewing the timelines and considering the implementation progress in other jurisdictions, the PRA has decided to extend the implementation date for the Basel 3.1 standards. The new implementation date will be 1 January 2026, with a transitional period of 4 years. This will ensure that the standards are fully implemented by 1 January 2030, as originally proposed in CP16/2.
