Basel 3.1 and the Small Domestic Deposit Takers (SDDT) Regime

The Prudential Regulation Authority (PRA) issued Final Policy Statements 1-26 and 4-26 on 20^th January. Both statements confirm that the Basel 3.1 and SDDT rules will be effective from 1^st January 2027. The related final versions of the taxonomies are to be published shortly. Whistlebrook will update its regulatory reporting solution to accommodate the new taxonomies.

 

Basel 3.1

Policy Statement 1-26 is introducing minor changes / clarifications. Of note are those listed below.

 

Currency Mismatch Multiplier: The multiplier is to be applied to risk weighting of exposures to individuals in the Retail and Residential Real Estate classes, when both of the following conditions are met:

• The currency of the loan differs from that of the relevant income source.
• The exposure is not sufficiently hedged in the lending currency. Sufficient is understood to mean that at least 90% of the loan service amount is hedged. Further detail is in paragraph 2a of Article 123B in the PRA Rulebook.

 

COREP template C 15.00 CR IP Losses: This template is to be withdrawn when Basel 3.1 is implemented. Please refer to PS 1-26 paragraph 2.15.

 

Market Risk ‘Collective Investment Undertakings De-minimus Thresholds’:  These thresholds to be used in exposure allocation to either the trading or banking book in the Advanced Standardised Approach, were confirmed. To use the Look Through Approach, at least 50% (rather than 90%) of holdings must be capable of a ‘look through’. Further details are in PS 1-26 paragraph 3.15.

 

Individual is an SME: Where an individual meets the definition of an SME, an exposure to them must be treated according to the Basel 3.1 rules for SMEs. Please refer to PS 1-26 paragraph 2.6.

 

Real Estate Valuation: Where the origination value is more than five years old (or three, if the amount of the loan is above £2.6million or greater than 5% of the firm’s own funds), institutions can use the most recent (rather than origination) valuation obtained before 1^st January 2027. Please refer to PS 1-26 paragraph 2.6.

 

Whilst not part of policy statement 1-26, the Off Cycle Reviews are to be submitted for report reference 31^st December 2025, by 31^st March 2026. These reviews are for the Basel 3.1 Pillar 2 Lending Adjustments. The relevant templates are in Whistlebrook’s regulatory reporting software.

 

Leverage Ratio Framework and Retail Deposits Threshold

The threshold that is used to determine if an institution is to be subject to the UK Leverage Ratio Framework has been increased from £50bn to £75bn. A three-year moving average will be used to determine qualification. The change is effective from 1^st January 2026. Further details are in PRA Policy Statement 22-25.

 

Pillar 2A Capital Framework – Pension Obligation Risk

Template FSA081 will have the two pension obligation scenarios removed in accordance with the proposal in PRA Consultation Paper 12-25. The change will be effective from 1^st July 2026.

 

Retail Deposit Threshold for Resolution Assessment

PRA Consultation Paper 14-25 (also referenced in the Financial Conduct Authority’s Initiatives Grid of December 2025), proposed that the level of retail deposits that triggers when a firm becomes subject to the Resolution Assessment Framework, be increased from £50bn to £100bn.

A policy statement is expected in the first half of 2026.

 

 

WIRES Releases

 

ID	Content	Estimate Date
7.2	Taxonomies and related changes for Basel 3.1 and the Small Domestic Deposit Takers Regime	c. 30 June 2026

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This regulatory update is Whistlebrook’s understanding of the position as at 24th January 2026.