Basel 3.1: Difference between revisions
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Basel 3.1 has particular significance in relation to the calculation of Risk Weighted Assets by banks, and related costs for their corporate customers. | Basel 3.1 has particular significance in relation to the calculation of Risk Weighted Assets by banks, and related costs for their corporate customers. | ||
:<span style="color:#4B0082">'''''UK implementation of Basel 3.1 delayed to 1 January 2027'''''</span> | |||
:"The Prudential Regulation Authority (PRA), in consultation with HM Treasury, has decided to delay the implementation of Basel 3.1 in the UK by one year until 1 January 2027. | |||
:This allows more time for greater clarity to emerge about plans for its implementation in the United States." | |||
:''PRA press release - January 2025.'' | |||
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:The proposal is to increase this from 20% CF to 50% CF. | :The proposal is to increase this from 20% CF to 50% CF. | ||
:The CF defines the probability that a contingent liability exposure (such as a performance guarantee) will convert to an on balance sheet | :The CF defines the probability that a contingent liability exposure (such as a performance guarantee) will convert to an on balance sheet item for the bank... | ||
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* [[Credit rating]] | * [[Credit rating]] | ||
* [[Guarantee]] | * [[Guarantee]] | ||
* [[HM Treasury]] | |||
* [[Obligor]] | * [[Obligor]] | ||
* [[Off balance sheet risk]] | * [[Off balance sheet risk]] | ||
* [[Performance guarantee]] | * [[Performance guarantee]] | ||
* [[Prudential Regulation Authority]] | * [[Pillar 1]] | ||
* [[Pillar 2]] | |||
* [[Pillar 3]] | |||
* [[Prudential Regulation Authority]] (PRA) | |||
* [[Retention bond]] | * [[Retention bond]] | ||
*[[Risk Weighted Assets]] (RWAs) | |||
* [[Standard & Poor's]] (S&P) | * [[Standard & Poor's]] (S&P) | ||
==Other | ==Other resources== | ||
[https://www.treasurers.org/hub/technical/trade-finance-update-february-2023 Potential rise in the cost of performance guarantees due to Basel 3.1 - ACT] | *[https://www.bankofengland.co.uk/news/2025/january/the-pra-announces-a-delay-to-the-implementation-of-basel-3-1?utm_source=Bank+of+England+updates&utm_campaign=da758c9acd-EMAIL_CAMPAIGN_2025_01_17_09_08&utm_medium=email&utm_term=0_-da758c9acd-111026481&_cldee=FAjAIqc2Yym7a_m5z0P5Uzw_eYUs7rFIS58Cz05tLCZnzm1EpL3k9ebQ9EySXeIx&recipientid=contact-61e01a18fd04e61180d1000d3ab15408-1d100a4342ce4455a29da8125090f716&utm_source=ClickDimensions&utm_medium=email&utm_campaign=NEWS-MEM-20&esid=3547f998-dde2-ef11-9342-000d3a7f76f1 PRA press release - January 2025] | ||
*[https://www.treasurers.org/hub/technical/trade-finance-update-february-2023 Potential rise in the cost of performance guarantees due to Basel 3.1 - ACT] | |||
[[Category:Accounting,_tax_and_regulation]] | [[Category:Accounting,_tax_and_regulation]] | ||
[[Category:Corporate_finance]] | [[Category:Corporate_finance]] | ||
[[Category:Financial_products_and_markets]] | |||
[[Category:Identify_and_assess_risks]] | |||
[[Category:Investment]] | [[Category:Investment]] | ||
[[Category:Long_term_funding]] | [[Category:Long_term_funding]] | ||
[[Category:Manage_risks]] | [[Category:Manage_risks]] | ||
[[Category:Risk_reporting]] | |||
[[Category:Risk_frameworks]] | [[Category:Risk_frameworks]] | ||
[[Category: | [[Category:The_business_context]] | ||
[[Category:Trade_finance]] | [[Category:Trade_finance]] | ||
Latest revision as of 04:34, 9 February 2025
Bank supervision - UK.
In the UK context, Basel 3.1 means the elements of Basel III that had not already been implemented in the UK by 2021.
Basel 3.1 has particular significance in relation to the calculation of Risk Weighted Assets by banks, and related costs for their corporate customers.
- UK implementation of Basel 3.1 delayed to 1 January 2027
- "The Prudential Regulation Authority (PRA), in consultation with HM Treasury, has decided to delay the implementation of Basel 3.1 in the UK by one year until 1 January 2027.
- This allows more time for greater clarity to emerge about plans for its implementation in the United States."
- PRA press release - January 2025.
- What is changing?
- "One key change which will impact corporates is the conversion factor (CF) associated with performance guarantees (incl. bid bond, advance, performance & retention guarantees).
- The proposal is to increase this from 20% CF to 50% CF.
- The CF defines the probability that a contingent liability exposure (such as a performance guarantee) will convert to an on balance sheet item for the bank...
- The capital that the bank is required to keep for performance guarantees is linearly proportional to the CF and it is likely that banks will need to pass on this additional capital charge.
- For example, for a corporate with an external S&P rating of ‘A’, if the existing pricing for such a performance guarantee was 0.4%, this would increase to 1%."
- Naresh Aggarwal, Associate Director, Policy & Technical, ACT - February 2023.
See also
- Advance payment bond
- Bank supervision
- Basel III
- Basel IV
- Beneficiary
- Bid bond
- Capital
- Capital adequacy
- Contingent liabilities
- Contingent risk
- Corporate
- Credit Conversion Factor (CCF or CF)
- Credit rating
- Guarantee
- HM Treasury
- Obligor
- Off balance sheet risk
- Performance guarantee
- Pillar 1
- Pillar 2
- Pillar 3
- Prudential Regulation Authority (PRA)
- Retention bond
- Risk Weighted Assets (RWAs)
- Standard & Poor's (S&P)
