Understanding Basel 3.1
On 1 January 2026, the Prudential Regulation Authority (PRA) is implementing the biggest changes to the capital regime for banks in over a decade. This reform package is commonly known as Basel 3.1.
Basel 3.1 implementation: Key submissions before January 2026
9 October 2024
On 12 September 2024, the Prudential Regulation Authority (PRA) released the long-awaited near final rules for Basel 3.1 on Credit Risk, Output Floor, disclosures and regulatory reporting. As firms finalise their implementation plans, there are key submission dates they will need to work towards to ensure they are ready for Day 1 compliance on 1 January 2026.
Basel 3.1 permissions
Firms should make permission requests as soon as possible to increase likelihood of approvals ahead of 1 January 2026. This includes permission to use the risk sensitive approach in the Credit Risk Standardised Approach to unrated exposures, which will bring very significant risk weight benefits. The PRA recommended that firms discuss their intentions to make permission requests with the regulator before applying. The dates for permission applications can be found below:
Risk Category | Permissions | Best Before |
Credit Risk SA | Risk-sensitive approach for unrated corporates | 31 March 2025 |
Credit Risk IRB | IRB Model Permissions | 31 March 2025 |
Market Risk | IMA Permissions | 1 January 2025 |
| SA-CVA Permissions | 1 January 2025 | |
Output Floor | Overseas Groups to be Treated as International Subsidiaries | 1 March 2025 |
Basel 3.1 data collection exercise for off-cycle review of firm-specific Pillar 2 capital requirements
The PRA has now confirmed it will conduct an off-cycle review of Pillar 2 capital requirements through data collection from firms in the scope of the Basel 3.1 changes. The regulator’s aim is twofold:
- Firstly, any necessary adjustments must be made to prevent the duplication of capital requirements across Pillar 1 and Pillar 2.
- Secondly, to establish new variable Pillar 2A requirements and PRA buffers in instances when the Basel 3.1 changes may result in higher or lower than prudent Pillar 2 capital requirements.
For the collection, the PRA has drafted two data submission templates which firms should complete and indicate any permissions they will seek to apply for, and the timing of these applications. The dates and additional information for the data collection can be found below:
| Submission | Data required | Reference date | Best before |
Submission 1: Total Basel RWAs template | Breakdown of credit, CVA, market and operational risk RWAs which have been calculated based on rules in PS17/23 and PS9/24 | Firms should use data from 31 December 2024 | 31 March 2025 |
Submission 2: SME lending adjustment and infrastructure lending adjustment template | Breakdown of relevant credit risk exposures, by applicable risk weight and sub-exposure class based on rules in PS9/24 | Firms should use data from 31 December 2024 | 31 March 2025 |
For further insight on your Basel 3.1 implementation plan, watch our recent webinar on Basel 3.1 operational priorities.
Get in touch
To speak to one of our Prudential Risk experts about any aspect of Basel 3.1, including your implementation plan, get in touch using the button below.
Bank of England’s Basel 3.1 Policy Statement
The Policy Statement (PS9/24) contains the long-anticipated near-final policy proposals for Credit Risk and Output Floor under the forthcoming Basel 3.1 framework. We have outlined the key points from this Policy Statement for firms.
Basel 3.1 - Bitesize
In this series of short bitesize articles, our Prudential Regulation Consulting team delves into the implications of Basel 3.1 changes on banks.
Key contacts
Huseyin Sahin Partner - Banking Risk Consulting London
Anindya Ghosh Chowdhury Director - Financial Services Consulting London
