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The Bank of England has announced a one-year delay to key provisions in the post-financial crisis banking reforms as part of a raft of changes designed to ease capital requirements for UK lenders.
The central bank said on Tuesday it would delay from 2027 to 2028 the application of the part of the so-called Basel III package that applies to the wholesale trading activities of investment banks, to allow more time for the US to decide how to apply them.
The delay, which comes only weeks after the EU’s decision to push back its introduction of the trading book rules by a year until 2027, adds to uncertainty over the implementation of the rules that were agreed in the wake of the 2008 financial crisis.
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 crisis.
The US has already watered down plans for applying its version of the rules — known as Basel Endgame — after heavy lobbying by the banking sector.
The BoE also announced several other changes to rules for small- and mid-sized banks on Tuesday, including making it easier for them to compete in the mortgage market by removing hurdles on the use of internal models that will lower capital requirements on home loans.
The central bank has also bowed to pressure from the sector to lift the threshold that determines when smaller banks have to start raising expensive loss-absorbing debt, easing pressure on fast-growing digital lenders.
Banks will only need to raise the debt known as MREL — minimum requirement for own funds and eligible liabilities — once they have assets of £25bn to £40bn, up from the current threshold of £15bn-£25bn. The criteria will be adjusted every three years to take account of the pace of economic growth.
Sam Woods, the BoE’s deputy governor for prudential regulation, said the changes would “bring in a simpler regime for smaller banks, make it easier for mid-sized banks to scale up in the mortgage market, and allow an extra year for part of the implementation of new investment banking rules”.
