In a press release on the 27th of September, the Bank of England (BoE) announced its intention to delay the implementation of the Basel III banking rules by six months, making the new date for implementation July 2025.
Originally, the UK was set to implement the new rules in January 2025 along with the EU but now implementation in the UK will follow suit with the US Federal Reserve. The BoE has labelled this a move to give firms more time to prepare, but members of UK finance (a banking industry body) claim that their members have already dedicated plenty of resources to prepare for the change.
What exactly is Basel III?
The Basel Committee on Banking Supervision came up with these rules after the 2008 financial crisis. To avoid a repeat of that debacle, they told banks to beef up their defences. Basel III introduced stricter requirements for capital and liquidity, making sure banks have enough money in reserve to weather economic storms. This set of international banking regulations is about making the foundations of banking stronger, aiming to limit the amount of risks banks take on to promote stability. The three pillars of Basel III are market discipline, supervisory review process, and minimum capital requirement.
The move to delay implementation will push the UK further out of sync with the EU, which will favour with the current government. This has led some to question the motivations of the BoE in delaying the implementation. However, there are calls in the EU to also delay their implementation, this would mean a uniform date for the UK, US and EU which would be beneficial to banks which operate globally.
The move to delay implementation will push the UK further out of sync with the EU, which will favour with the current government.
Deloitte has stated that whilst multinational banks have made good progress with meeting implementation requirements, most banks still have considerable work to do. This delay will allow banks more time to build their reserves, so they are in line with, or above, regulatory and market expectations.
