Mr Evans was with us to talk about the PRA’ plans for implementing Basel 3.1 in the UK.

A week earlier, the PRA released its proposals in CP16/22.  Since then I along with many others had been excitedly exploring its almost 1400 pages. For the most part I like what I see. The PRA has responded to some of the concerns we had previously articulated on behalf of members but importantly has stuck closely to the Basel framework. Now that the UK is outside the EU it can design its own approach to implementation but like the PRA, I recognise the importance of aligning with the international standards that were that was finalised almost five years ago and of which the PRA was a leading architect.

Our internationally active members want the certainty and consistency that this brings, to avoid then having to implement multiple different interpretations of what is essentially the same requirements from one jurisdiction to another. I agree too with the view that alignment with international best practice in banking regulation also enhances the UK’s attractiveness as a global financial centre.

However, the PRA has also tailored the package to UK market conditions. The Basel framework is designed for large internationally active banks and UK Finance has long been advocating for a more proportionate approach for less systemically important firms. So we were delighted to see that the simpler firms ‘ceiling’ has been increased to £20 billion of total assets, although it would be good if the MREL threshold was correspondingly increased too.

The PRA has also come up with a workable solution to more appropriately risk weight corporate lending in the absence of an associated external credit rating and a possible work-round to the Basel expectation that a lending bank should always use the value of the house at the beginning of the mortgage for loan to value assessment purposes.

Both these are welcome, and in my view framework compliant clarifications of the Basel requirements.  And the slightly more technical approach to counterparty credit risk, which was in my view too conservatively calibrated when the Basel 3.1 framework was finalised has been modified too through a sensible reduction in the α factor for some types of exposures.

So on balance I think the PRA’s proposals are a well-balanced package that adhere to the international standards whilst introducing justifiable evidence-based adjustments to tailor the package to the UK market.

UK Finance will of course work with members to respond to CP16/22 by the end March deadline.