The capital framework that was supposed to make big banks look the same the world over is, in Britain at least, now settled. In January 2026 the Prudential Regulation Authority published its final Basel 3.1 rules, policy statement PS1/26, confirming a start date of 1 January 2027 for the last major tranche of the reforms built after the 2008 crisis. The date matters less than the company Britain now keeps. On the two questions that decide how much capital a bank must hold against its loans and its trading positions, the United Kingdom, the United States and the European Union have stopped moving in step.
Basel 3.1 is the closing instalment of the standards drawn up in Switzerland by the Basel Committee, the club of banking supervisors that sets the global baseline. Its purpose is to stop banks using their own internal models to flatter their capital requirements, and to make risk weights, the figures that translate a loan into a capital charge, more consistent from one bank and one country to the next. That was always the point: a level field, so that a mortgage or a corporate loan attracted broadly the same capital in London, New York and Frankfurt. Three years of political weather have pulled that ambition apart.
What Britain has actually signed up to
The centrepiece is the output floor. It sets a hard limit on how far a bank’s own models can cut its capital requirement below the level the standardised rules would produce. The PRA has kept the floor at its fully loaded 72.5 per cent, phased in over a transitional period that runs to the end of the decade, so that from 2030 no bank using internal models may calculate a requirement lower than 72.5 per cent of the standardised figure. Around that sit reworked credit-risk rules that reset the risk weights on mortgages, corporate lending and other exposures, including a loan-splitting method for residential property that ties the charge more closely to the loan-to-value ratio.
One piece has been held back. Firms will not be allowed to use their own models for market risk, the trading-book regime known as the Fundamental Review of the Trading Book, until 1 January 2028, a year after the rest of the package goes live. Until then they fall back on the standardised market-risk approach. And the smallest deposit-takers largely sit outside all of it: the PRA runs a separate, deliberately simpler regime for its Small Domestic Deposit Takers, so the full Basel 3.1 machinery lands on the larger banks and building societies rather than on every firm in the country.
Where Washington went
When American regulators unveiled their version, the so-called Basel III endgame, in July 2023, it was expected to raise capital at the largest US banks sharply. It never survived contact with the industry. After sustained lobbying and a change in the political climate, the proposal was pulled back, and in March 2026 US regulators re-proposed a substantially lighter package. There is still no confirmed implementation date. The country that hosts the world’s biggest banks has, in effect, reopened the very question the Basel Committee believed it had closed, and no one can yet say where American capital requirements will land.
Where Brussels blinked
The European Union wrote Basel 3.1 into its CRR III and CRD VI legislation and began phasing the rules in from 2025. But on the trading book it lost its nerve. The European Commission has twice postponed the market-risk rules, most recently to 1 January 2027, and at the end of 2025 it consulted on temporary measures, including a possible multiplier to soften the capital impact, to apply from 2027 to 2029. Its stated reason was candid. With the United States uncertain and the United Kingdom shifting to a 2027 start, imposing full market-risk capital on EU banks first would leave them at a competitive disadvantage on their trading desks. Brussels, in other words, delayed a Basel rule explicitly because London and Washington were out of line.
Why the divergence is the story
This is where a technical timetable becomes a strategic one. One framework now runs on three clocks and three calibrations. For the City, a finalised rulebook is genuinely an asset: banks and their investors know what the rules are and when they bite, which is more than can be said in Washington, or, on market risk, in Brussels. Since 2023 the PRA has carried a secondary objective to support the competitiveness and growth of the UK economy, and it has leaned on that to trim some of the harsher edges of the international standard for British circumstances while keeping the aggregate capital impact modest. Certainty, the regulator argues, is itself a form of competitiveness.
The counter-argument is that certainty is worth less when your rivals are holding less capital against the same risks. A global bank operating in all three jurisdictions must now run parallel sets of numbers, reconciling a finalised UK regime, an EU version with a softened trading-book charge, and an American package that does not yet exist. The operational cost of that fragmentation is real, and it falls hardest on exactly the large, internationally active firms Basel 3.1 was written to discipline.
What to watch
The next eighteen months are about readiness and resolve. Through 2026 UK firms have to finish building and testing for a January 2027 switch, with the market-risk models following a year later. The open questions sit abroad: whether the United States ever lands a final rule, and whether the EU’s temporary market-risk relief quietly becomes permanent. If Washington stays soft and Brussels keeps extending, Britain could end up the strictest of the three on precisely the parts of Basel 3.1 it chose to implement first. That would be an odd destination for a set of rules whose whole promise was that everyone would arrive at the same place.
Sources: Prudential Regulation Authority policy statement PS1/26, Implementation of Basel 3.1: final rules (January 2026), confirming a 1 January 2027 implementation date and the fully loaded 72.5 per cent output floor phased in to 2030; Bank of England news release announcing the delay of Basel 3.1 implementation to 1 January 2027; PRA near-final policy statement PS9/24 on the output floor, credit risk and disclosure; the PRA’s deferral of the market-risk internal models approach to 1 January 2028 and its Small Domestic Deposit Takers regime for smaller firms; the United States Basel III endgame proposal of July 2023 and the re-proposed package of March 2026; European Commission implementation of Basel 3.1 through CRR III and CRD VI, its postponement of the Fundamental Review of the Trading Book market-risk rules to 1 January 2027, and its end-2025 consultation on temporary relief from 2027 to 2029.
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