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The Bank of England has delayed the start of new capital controls for British banks by a year while it waits to see how the incoming Trump administration implements the global Basel accord in the US.
The Bank of England Prudential Regulation Authority’s announcement on Friday that it would delay the start of tougher capital regimes in the UK until January 2027 comes as regulators around the world wait to see how Donald Trump will affect financial regulation. It highlights how nervously they are paying attention to whether or not to give.
It also comes as UK regulators are under pressure from the government to ease regulations that could limit growth.
The Basel III system was first created more than a decade ago to increase the amount of capital available to banks to absorb stress and avoid a repeat of state bailouts after the 2008 financial crisis.
The PRA announced last year that it would amend so-called Basel 3.1 rules to reduce the additional capital required for UK banks and delay implementation until January 2026. The PRA had previously postponed the start date of the new capital regime by six months. 2023.
The Federal Reserve has already watered down plans to apply so-called late-Basel rules to U.S. banks after intense lobbying by the sector. Regulations are expected to be further weakened or eliminated under the Trump administration.
PRA said in a statement: “Given the current uncertainty surrounding the timing of implementation of the Basel 3.1 standards in the United States, and with competitiveness and growth considerations in mind, the PRA, in consultation with the Department of the Treasury, has decided to further delay” the implementation of the rules. ”
British bank stocks rose on Friday morning, with Barclays up 1.7%, Lloyds up 1.2% and NatWest 1%.
The move reflects increasing pressure from the UK government on regulators to find ways to reduce bureaucratic burdens to support the country’s economic growth and competitiveness. Prime Minister Keir Starmer told overseas investors last year that he would “tear down the bureaucracy that prevents investment” in the UK.
Chancellor Rachel Reeves will meet with the heads of a number of Britain’s main regulators this month, including PRA chief executive Sam Woods, to push for rule changes that could spur growth in Britain’s flagging economy.
Mr Woods told a House of Lords committee last week that the PRA plans to reduce regulatory burden by allowing insurers to seek permission to invest retrospectively, rather than forcing them to seek permission in advance. . He said reporting requirements for insurance companies had already been cut by a third and that the government was also aiming to reduce reporting requirements for banks this year.
The PRA announced on Friday that it had paused plans to start collecting data on the additional capital buffers it sets for banks, known as the Pillar 2 requirement, which were due to be completed by the end of March.
However, even if the UK postpones the start of stricter Basel capital rules by a year, the ultimate end point when they come into full effect will remain the same. The PRA said the transition period would be shortened as the final enforcement date remained at January 2030.
Britain’s move follows the EU’s decision last year to postpone part of the package covering investment banks’ trading books for another year, but to move forward with implementing some Basel rules from this month.
The UK financial industry body welcomed the PRA’s “pragmatic” announcement, saying: “Given the cross-border nature of banking, international alignment on capital controls is important.”
Stephen Hall, a partner at consultancy KPMG, said the PRA’s delay would put the EU “further out of sync” with the UK and the US. “For UK banks, this leaves time to choose between ‘getting things right’ or letting off the gas in anticipation of further delays in the future.” said.
U.S. bank executives said last year that the Fed cut its plan to raise capital requirements for the sector in half to 9%, but later failed to get the necessary approvals from other regulators. celebrated.
Michael Barr, who oversaw the Basel Endgame proposal as the Fed’s vice chair for oversight, will step down this month while remaining the Fed’s governor, paving the way for more pro-business officials to be appointed under the Trump administration. said.
