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The Bank of England has delayed the start of new capital rules for British banks by a year while it waits to see how the incoming Trump administration will implement the global Basel agreement in the US.
The announcement by the BoE’s Prudential Regulation Authority on Friday that it would postpone the start of the stricter capital regime in the UK until January 2027 underlines how regulators around the world are nervously watching to see what impact Donald Trump will have on financial regulation.
It also comes as regulators in the UK are under pressure from the government to ease rules that might restrict growth.
The Basel III regime was first drawn up more than a decade ago to increase the amount of equity available to absorb stress in banks and to avoid a repeat of the state bailouts that followed the 2008 financial crisis.
The PRA said last year it was modifying the so-called Basel 3.1 rules to reduce the extra capital required for British banks and to delay the implementation until January 2026. It had previously pushed back the start date for the new capital regime by six months in 2023.
The US Federal Reserve has already watered down its plans for applying its so-called Basel Endgame rules on American banks after heavy lobbying by the sector. The regulations are expected to be further diluted or even abandoned under the Trump administration.
In a statement, the PRA said: “Given the current uncertainty around the timing of implementation of the Basel 3.1 standards in the US, and taking into account competitiveness and growth considerations, the PRA, having consulted with HM Treasury, has decided to further delay implementation of the rules.”
Shares in UK banks rose at the open on Friday morning, with Barclays up 1.7 per cent, Lloyds 1.2 per cent and NatWest 1 per cent.
The move reflects mounting pressure from the UK government on regulators to find ways of reducing the burden of bureaucracy in a push to support British economic growth and competitiveness. Prime Minister Sir Keir Starmer told international investors last year he would “rip up the bureaucracy that blocks investment” in the UK.
Chancellor Rachel Reeves is meeting the heads of many of the UK’s main regulators this month, including PRA chief executive Sam Woods, to call for rule changes that will boost growth in the stagnant British economy.
Woods told a House of Lords committee last week that the PRA planned to ease the burden of regulation by allowing insurers to seek retrospective permission for their investments, rather than forcing them to ask beforehand. He said it also aimed to cut banks’ reporting requirements this year, having already cut them by a third for insurers.
The PRA said on Friday it had paused its plans to start collecting data on the extra capital buffers it sets for each bank, known as Pillar 2 requirements, which had been due to be completed by the end of March.
But the UK’s one-year delay to the start of the stricter Basel capital rules will not change the ultimate end point for when they fully come into force. The PRA said the transition period would be compressed to keep the final implementation date at January 2030.
The UK move follows the EU’s decision last year to press ahead with introducing some of the Basel rules this month, while postponing the part of its package that covers investment banks’ trading books by a further year.
The UK Finance trade body welcomed the PRA’s “pragmatic” announcement, saying: “Given the cross-border nature of banking, international co-ordination on capital rules is important.”
Steven Hall, a partner at consultancy KPMG, said the PRA’s delay would leave the EU “further out of line” with the UK and US. “For UK banks, this leaves them time to either ‘do things properly’, or take their foot off the gas, expecting further delays down the line,” he said.
US bank bosses celebrated last year after the Fed cut in half the planned increase in capital requirements for the sector to 9 per cent, and was then unable to win necessary approval from other regulators even for this.
Michael Barr, who oversaw the Basel Endgame proposals as vice-chair for supervision at the Fed, said this month he was stepping down from the role while remaining a governor, opening the door for a more business-friendly official to be appointed under Trump.
