UK regulator delays new capital regime for banks to 2026

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The Bank of England has watered down proposals for tougher capital rules for UK banks and delayed the introduction of the new regime until the start of 2026.

In a statement on Thursday, the BoE’s Prudential Regulation Authority said that the changes include easing capital requirements on small business lending, mortgages, trade finance and infrastructure loans.

As a result, the key capital thresholds for the main banks would be “virtually unchanged”, rising less than 1 per cent, the PRA said. That is a reduction from its earlier estimate of a 3 per cent increase.

The revised plans are part of the Basel III regime, a package of reforms set out in the wake of the 2008 financial crisis that required certain banks to have a larger cushion of equity to absorb unexpected losses in the event of financial stress.

Sam Woods, head of the PRA, said the resulting package would “support growth and competitiveness while also ensuring that the UK aligns with international standards”.

The regulator had initially planned to implement the new rules in the middle of next year.

“In some cases, we have made changes where the evidence suggested too much conservatism in our original proposals,” said Phil Evans, the PRA’s director of prudential policy. “We have also made changes where the proposals would have been too difficult or costly to implement in practice.”

The move comes days after the Federal Reserve cut a proposed increase to capital requirements for the largest US banks by more than half after a backlash from the industry and politicians.