Changes in Basel 3.1, as it is known in the UK, represent complex regulatory challenges for banks, but most seem to have started work on it well ahead of the July 2025 implementation date.
According to a survey published by Grant Thornton this month, 60.6 per cent of British lenders have begun working on impact assessments and planning.
The consultancy surveyed 33 banks and building societies of different sizes and complexities.
Around 43 per cent of surveyed firms said credit risk is the element most affected by the new rules. Disclosure and reporting is the second-most affected factor.
Moreover, almost half of the banks surveyed (42 per cent) responded that their current regulatory reporting system will be able to handle the additional reporting requirements, while 45.5 per cent are in discussion with their reporting solution provider to see if that is possible. Only 12.1 per cent of them are planning to change their systems and improve automation.
Basel 3.1 is nearing its final implementation stage. Last December, the Prudential Regulation Authority published the first of two policy statements covering the implementation of the Basel 3.1 standards.
In the second quarter of this year, the PRA aims to publish a second policy statement with specifications on the remaining elements: credit risk, the output floor and reporting and disclosure requirements.
The PRA estimates that the impact of Basel 3.1 requirements will be low and result in an average increase in Tier 1 capital requirements for UK firms of around 3 per cent once fully phased in in 2030. This is lower than the European Banking Authority’s estimate of a Tier 1 increase of around 10 per cent in the EU, and US agencies’ estimate of a Tier 1 increase of around 16 per cent for US lenders.
The rules are known as Basel Endgame in the US.
