Bank of England moves to ease Basel III trading capital rules

The proposal focuses on the Fundamental Review of the Trading Book, a framework designed to ensure bank capital accurately mirrors market risks. By easing constraints on internal modeling, the regulator intends to provide banks with greater operational flexibility. The PRA estimates that these adjustments will return between £1.9 million and £3.8 million in annual capital to each participating firm. This pivot follows similar relaxations in the U.S. and EU, where authorities cited the need to preserve lender competitiveness against global peers.

Sam Woods, the PRA’s chief executive, described these measures as the final chapter of post-2008 financial crisis reforms. The regulator is extending the timeline for a critical test to gather more practical data before the rules become fully binding. While the broader Basel package arrives in January 2027, the specific trading book provisions remain slated for January 2028, ensuring UK-based institutions remain adequately capitalized while mirroring the risk-sensitive frameworks adopted by international counterparts.