BASEL 3.1

It has been widely communicated that the implementation of BASEL 3.1 is delayed by six months until 1^st July 2025. That delay does mean that the phase-in time of the transitional arrangements is reduced by six months, to four and a half years. That reduction will affect several areas including the Output Floor and credit risk weighting associated with Equity exposures.

 

The policy statement for credit valuation adjustment; market, counterparty credit and operational risks, will be provided in Q4 of 2023.

In Q2 of 2024, a policy statement will be issued for the final parts of credit risk, output floor, reporting and disclosures.

 

Developments to be made to WIRES will be planned in accordance with the revised timetable.

 

Strong & Simple Regime

Whistlebrook has not seen comment on a change to the date on which a firm will be assessed for qualification for the Strong & Simple Regime. Prior to the delay to BASEL 3.1, firms were to be assessed on their position as at 1^st January 2024. That timing may be subject to alteration.

 

A third consultation paper on the capital requirements under this regime, is expected in Q1 of 2024.

 

Consumer Credit Product Sales Data Collection

The Financial Conduct Authority issued a consultation paper (23-21) that proposes to introduce new reporting of Consumer Credit lending. The effective date will be 1^st January 2025.

Data required will cover sales, performance and the back book (i.e. sale made prior to commencement of the regulation and still active at the report reference date).

 

Submissions will be needed from providers of consumer credit lending products (excluding overdrafts and agreements secured on land), but only when the thresholds have been exceeded. Of note is the scenario that even where a firm has exceeded and later falls below the thresholds, it will be expected to continue with its reporting.

 

Submission of data will be on a quarterly basis, with the back book being a one off exercise.

 

Ring Fencing Regime

HM Treasury has proposed to make the Ring Fencing Regime applicable to banking groups, more proportionate. Currently, institutions with retail deposits of more than £25bn, are subject to ring fencing i.e. those core retail activities are separated from operations deemed more ‘risky’. It is proposed that the aforementioned threshold be raised to £35bn. The regime will be applicable where the £35bn is exceeded and UK “Trading Assets” (excluding those held for hedging purposes), are more than 10% of Tier 1 capital (both at the highest UK consolidated level)

The latter point about trading assets will not be relevant where a firm is globally systemically important.

 

The effective time of these changes may be late 2024.

 

WIRES Planned Releases

Whistlebrook is planning to make the following releases of its WIRES software.

 

 

Planned Time of Release	Content
Mid-late October 2023	·        Issuing Paying Agent form IPA, under Bank of England Statistical taxonomy 1.3.0 ·        Contingent leverage ratio templates, under Bank of England Banking taxonomy 3.6.0.
Next release	Date not yet determined.

 

This regulatory update is Whistlebrook’s understanding of the position as at 18th October 2023.