HM Treasury is progressing work to apply the UK’s established model of regulation for financial services, known as the FSMA model, to the law the UK inherited from the EU (known as assimilated law) on the capital framework for banks, building societies and investment firms. FSMA refers to the Financial Services and Markets Act 2000.

This policy update confirms the legislative approach for implementing the final post-crisis reforms to banks’ capital requirements, known as Basel 3.1. It explains how HM Treasury will revoke certain parts of the Capital Requirements Regulation (“the CRR”, which is the central piece of assimilated law on bank capital requirements), which the Prudential Regulation Authority (PRA) will then replace with rules implementing the new Basel standards.

The update also outlines the proposed legislative approach for revoking the remainder of the CRR and for revoking and restating with modifications the Capital Buffers Regulation. Completing the application of the FSMA model to this area of assimilated law will pave the way for a number of further reforms to the prudential regime proposed by the PRA, including a proportionate prudential regime for smaller banks and building societies.

HM Treasury has published three pieces of draft legislation alongside the policy update and would welcome technical comments on the proposed legislative approach within the next 6 weeks. The PRA has also published a number of corresponding policy documents that set out the final Basel 3.1 package and further reforms the PRA proposes to make to the prudential regime.

The Prudential Regulation Authority (PRA), in consultation with HM Treasury, has decided to delay the implementation of Basel 3.1 in the UK by one year until 1 January 2027. Read the press notice for more information.