Executive Overview
The publication of the UK’s final Basel 3.1 rules in January 2026 has brought long-awaited clarity to the regulatory agenda, while also confirming a delay to implementation. The UK authorities have now confirmed that Basel 3.1 will come into force on 1 January 2027, aligning more closely with US and supporting the competitiveness of the UK financial services sector.
While this delay offers welcome breathing space, it also introduces a complex transitional period for banks—particularly across Market Risk and Counterparty Credit Risk (CCR)—where regulatory expectations, capital outcomes, and operating models will continue to evolve in parallel. For firms that act decisively, the period between now and 2028 represents a strategic window to strengthen frameworks, optimise capital, and address long-standing structural inefficiencies.
The most significant market risk implication of the revised timeline is the phased implementation of the Fundamental Review of the Trading Book (FRTB).
From 1 January 2027, UK banks will be required to calculate capital under the FRTB Standardised Approach (FRTB-SA). However, in a critical development, the implementation of the FRTB Internal Model Approach (IMA) has been deferred by a further year, with go-live now scheduled for 1 January 2028.
This one-year delay to FRTB-IMA is arguably the single most impactful change for UK banks’ market risk frameworks. During 2027, firms with existing internal model permissions will continue to operate under Basel 2.5 IMA, rather than transitioning immediately to the new FRTB-IMA regime.
While the deferral reduces immediate delivery pressure, it also creates a dual-regime burden throughout 2027. Banks will be required to:
This parallel running significantly increases operational complexity, data lineage challenges, and capital management uncertainty. Firms will need to reconcile materially different risk sensitivities, aggregation methodologies, and capital drivers across the two regimes—often with limited alignment between front-office, risk, and finance functions.
Despite these challenges, the delay presents a valuable opportunity. Banks that use 2026–2027 to:
will be materially better positioned for FRTB-IMA approval in 2028 and beyond. Early movers can reduce the risk of capital shock while building more scalable and transparent market risk infrastructures.
In the Counterparty Credit Risk space, the Basel 3.1 delay does not equate to reduced regulatory impact. Instead, it reinforces the growing centrality of the Standardised Approach for Counterparty Credit Risk (SA-CCR) across the capital framework.
Under Basel 3.1, SA-CCR is now embedded in multiple components, including:
As a result, even banks with Internal Model Method (IMM) approval are increasingly constrained by SA-CCR outcomes.
Regulatory expectations are shifting. IMM and IRB approval is no longer viewed in isolation, but is increasingly benchmarked against SA-CCR RWA (output floor uses SACCR EADs and standardised riskweights) levels over time. Material divergence between IMM and SA-CCR outputs is likely to attract heightened supervisory scrutiny, model recalibration requirements, or capital add-ons.
This dynamic places pressure on firms to:
The direction of travel is clear: SA-CCR is becoming the binding constraint for many banks, regardless of modelling sophistication.
The delayed Basel 3.1 implementation should not be viewed as a pause button. Instead, it represents a compressed transformation window and a compressed window for output floor transition in which firms must balance regulatory compliance, capital efficiency, and operational resilience.
Across Market Risk and Counterparty Credit Risk, successful firms will:
Engage early and proactively with the Prudential Regulation Authority on implementation strategy and supervisory expectations.
The UK’s decision to delay Basel 3.1 implementation to 2027 provides short-term relief, but introduces medium-term complexity—particularly through the staggered rollout of FRTB and the growing dominance of SA-CCR. For banks that respond strategically, this period offers a rare opportunity to modernise risk frameworks, improve capital efficiency, and enter the next regulatory cycle from a position of strength.
Firms that wait risk finding themselves navigating dual regimes, rising capital pressure, and intensified supervisory scrutiny with insufficient preparation. The time to act is now.
Brickendon is a specialist consulting firm supporting financial institutions across risk, regulation, data, and transformation. We work with banks, investment firms, and regulators to strengthen governance, enhance control frameworks, and deliver complex regulatory change.
Our team brings deep, hands-on experience across valuation control, prudent valuation, market data governance, model risk, and supervisory inspections. We combine regulatory insight with technical delivery capability, enabling clients not only to meet supervisory expectations, but to build valuation frameworks that are robust, transparent, and sustainable.
Brickendon is trusted by leading institutions to support high-stakes regulatory engagements, including ECB inspections, remediation programmes, and target operating model design.
Brickendon has supported global banks through every major regulatory change initiative since 2010, including Basel III, FRTB, SA-CCR, CVA, and the evolving prudential agenda across the UK, EU, and US. Our specialists combine deep regulatory expertise with hands-on delivery experience across Market Risk and Counterparty Credit Risk, helping firms translate regulatory text into practical, scalable operating models. As the UK Basel 3.1 timeline resets, we work with senior stakeholders to use the transition period strategically—strengthening frameworks, optimising capital outcomes, and addressing structural weaknesses that regulators have long signalled as priorities.
If your institution is facing challenges with Basel 3.1, Brickendon can help.
Contact us to discuss how our Risk and Regulatory Change specialists can support your organisation either via this email: [email protected]
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