Mark Your Calendar: Key Dates for Basel 3.1 and SDDT. It has been approximately three months since the PRA released the second part of its near-final rules for implementing the Basel 3.1 standards in the UK. With the official implementation date of 1 January 2026 less than a year away, the clock is ticking for firms to ensure compliance. While the implementation date of 1 January 2026 is top of mind for many, it is essential not to overlook several key milestones in 2025. These will be particularly relevant both for firms seeking SDDT status and banks navigating Basel 3.1 requirements.

The Prudential Regulation Authority (PRA) published Consultation Paper 8/24 ‘Definition of Capital: restatement of CRR requirements in PRA Rulebook’ (CP8/24) covering various matters relating to own funds including revocation by HM Treasury (HMT) of related rules set out in inter alia Regulation (EU) No 575/2013 (the CRR) and transferring them, with certain modifications, into the PRA Rulebook.

On 12 September 2024, the Prudential Regulation Authority (PRA) published the second part of its near-final rules on the implementation of Basel 3.1 standards through Policy Statement 9/24 (PS9/24). This article focuses on the key changes in comparison to the PRA’s earlier consultation paper(s), in each of the major risk areas.

This article outlines the key changes to the calculation of market risk capital requirements as part of the implementation of Basel 3.1 standards (PS17/23).

In December 2023, the Basel Committee on Banking Supervision (BCBS) published a Consultative Document on the recalibration of shocks for the measurement of IRRBB. Following the consultation period, on 16 July 2024, the BCBS published the final Recalibration of Shocks in the Interest Rate Risk in the Banking Book Standard.

We recently sponsored a webinar - hosted by UK Finance - focussing on the key requirements of which banks must take account with respect to their current or planned relationships with deposit aggregators. Download a copy of the slides here.

In this webinar, we will provide an overview of the key requirements banks must take account of with respect to their current or planned future relationships with deposit aggregators. Specifically, this will include: Prudential risk: liquidity risk management and liquidity stress testing implications; Liquidity regulatory reporting: implications for calculation and treatment of deposits; and, Depositor protection (Financial Services Compensation Scheme coverage), and third party and outsourcing risk.

NMD are liabilities whereby the depositor is free to withdraw their deposit at any time since there is no defined contractual maturity date. Similarly, banks are typically able to adjust the interest rate attached to NMD on a unilateral basis. Despite the contractually short-term nature (using a repricing basis) of NMD, certain NMD or portions thereof may behave like longer-term, interest rate-insensitive positions. The inherent characteristics of NMD create complexities from the perspective of measuring, and in turn managing, IRRBB, meaning that a more involved approach is necessary.

Interest Rate Risk in the Banking Book (IRRBB) relates to both present and future risks to a bank’s capital and earnings arising from fluctuations in market interest rates. In recent years, IRRBB has become an area of increased focus for regulators: this has coincided with significant changes in the interest rate environment across major economies, the ending of an extended period of near-zero rates, high inflation, and industry events such as the failure of Silicon Valley Bank.

Effective 1 January 2022, the PRA implemented new requirements and expectations for banks, including creation of a regulatory limit for IRRBB and implementation of a Standardised Framework (SF) that banks may elect to follow.

Management of liquidity risk and IRRBB in the current climate.

The PRA set out its approach to its new objective in the DP, stating that it intends to centre its attention on facilitating economic activity in the medium- to long-term, and steer clear of activities that might create short-term economic booms at the cost of long-term stability and economic resilience.