Basel 3.1 – Redefining the credit risk landscape

On 30 November 2022, the Prudential Regulation Authority (PRA) published Consultation Paper (CP) CP16/22 – Implementation of the Basel 3.1 standards, which sets out the proposed implementation of the Basel III standards in the UK (referred to as the 'Basel 3.1 standards'). The CP covers the remaining components of internationally agreed reforms in response to the 2008/09 financial crisis, including extensive reforms across credit risk, market risk and operational risk, and sets an implementation date of 1 January 2025 (with some additional transitional arrangements).

In particular, the proposals include extensive changes to the credit risk regulatory requirements. These changes are set to fundamentally alter competitive dynamics within the market, requiring firms to review their strategic portfolio composition to ensure optimal use of capital. At the same time, firms will also need to ensure robust and efficient approaches to achieving compliance in a cost-effective manner.

Download our thought leadership paper, Basel 3.1 – Redefining the credit risk landscape, which discusses the wider market and strategic implications of the PRA’s proposals and how their implementation represents much more than just a compliance exercise.