Basel 3.1 PRA Policy Statement - Key Points and Implementation Dates

What’s this about?

On 20 January, PRA issued PS 1/26, setting out final rule instruments, revised Supervisory Statements (SS), Policy Statements (PS) and templates to complete the last material steps in the implementation of the Basel 3.1/CRR reforms.    

The PS re-emphasises the PRA’s priorities of ensuring the safety and soundness of the institutions it supervises and also notes that the secondary objective of ensuring international competitiveness and orienting its regulatory policy to assist growth, while strongly considered, does not apply directly to its CRR reforms.  Financial prudence is the order of the day and the PRA has held the line on some of the more sensitive (and criticised) areas where industry was hoping for some loosening.    

On the implementation timetable, the PRA has also held the line on timings already announced, with a firm date of 1 January 2027 for the coming into effect of the great majority of changes, the FRTB Internal Model Approach effective date remaining at 1 January 2028 (with certain provisions added to ease the transition).

Refined guidance regarding real estate exposures emphasises the need for firms to be making the operational and process changes they will need in a timely fashion to ensure their real estate due diligence and valuations are reasonably current.

Simultaneously with the issue of PS 1/16, the PRA issued:

• ‍PS 2/26 confirming the termination of the refined methodology for Pillar 2A on January 1 2027 on the grounds that it will become largely redundant as the Interim Capital Regime will not operate, the Basel 3.1 changes will apply and there will have been a general refinement of Pillar 2A methodology; ‍
• PS 3/26 setting out how the remainder of CRR and other small elements of retained EU law would be restated in the PRA Rulebook, noting that there were no material changes to policy substance; and ‍
• PS 4/26 setting out the final rules flexing PRA Rulebook provisions to create the Strong and Simple Framework - the simplified capital regime for small domestic deposit takers (SDDTs).

With these policy statements (and all the documents in their appendices) we now have the great bulk of final-form rules, policy and guidance (and reporting templates) to allow affected firms to ramp up their implementation and drive their preparedness for 1 January 2027.

Politically, the PRA has made it clear that it regards the timely implementation of the Basel 3.1 reforms as important, not only for general reasons of ensuring the soundness of the institutions it supervises but also to ensure that the UK can continue to present itself as a jurisdiction where the financial regulatory framework is consistent with Basel changes, adopted in a proportionate way and with deltas to other core blocks (primarily, at this juncture, the EU) that are reasoned, based where possible on empirical evidence and reasoning.

Our Financial Regulation Partner, Andrzej Wieckowski says...

"The PRA confirmed its commitment to implementing Basel 3.1 without further delays from 1 January 2027. It's a welcome clarification amidst the geopolitical uncertainty and the absence of a clear implementation path for the US Basel endgame. Whilst the PRA provided some clarifications, there is still a lot of work for banks to do to prepare for the revised regime going live in less than twelve months."

The points not to miss...

PS 1/26 sets out, in follow up to issues discussed in PS9/24:

• Targeted measures to address concerns with respect to the risk-weighting of exposures to unrated corporates to increase risk-sensitivity under the credit risk standardised approach
• Confirmation of the introduction of SME and infrastructure lending adjustments to Pillar 2A capital requirements to ensure that the removal of existing Pillar 1 support factors does not cause an increase in overall capital requirements for SME and infrastructure exposures
• Delay of the FRTB internal model approach (FRTB-IMA) by one year to 1 January 2028, with firms able to continue using existing market risk models in the interim period and existing IMA reporting and disclosure templates retained until Friday 1 January 2028; FRTB-IMA reporting and disclosure templates delayed until Friday 1 January 2028
• De minimis threshold for LTA eligibility lowered to 50% for collective investment undertakings
• Introduction of a permissions regime for the residual risk add-on (RRAO) where firms can demonstrate that the RRAO capital requirement is disproportionate

PRA observations on Real Estate – Revaluation and determinations of whether a real estate exposure is “materially dependent on the cash flows generated…”:

• The PRA have refined their valuation guidance,  that for existing exposures where the most recent value at origination was obtained more than five years ago (or three years ago in certain circumstances), firms may use the most recent valuation obtained prior to 1 January 2027 but should be considering updating “within a reasonable time” and that
• firms must carry out an assessment of whether a real estate exposure is materially dependent on the cash-flows generated by the property for all residential and commercial real estate exposures by 1 January 2027 for all existing exposures at that date.

At a glance...

If you have any questions or would like a discussion on the PS, Basel 3.1 or the CRR framework please contact Andrzej Wieckowski or James Greig.

Authors: Andrzej Wieckowski and James Greig.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2026. Specific advice should be sought for specific cases. For more information see our terms & conditions.