PRA speaks on implementation of Basel 3.1

Phil Evans of the PRA has given a speech at UK Finance entitled “Implementing Basel 3.1 in the UK” providing an overview of the approach in PRA’s consultation paper CP 16/22. In it he notes the momentousness of the first prudential rules to be implemented by the PRA since Brexit. As such, PRA is conscious of the need to maintain the high standards in keeping with the UK’s position as a global financial centre.

The speech also identifies the two central elements of Basel 3.1:

• improving the robustness of risk weighted assets by increasing risk-sensitivity and reducing excessive variability; and
• introducing an output floor to backstop modelled risk weights.

In implementing the measures PRA has followed the international approach but made adjustments to suit the UK market where it deems appropriate.