Global: BoE Postpones Trading Rule to 2028, Eases Capital Rules for Mid-Sized Banks

The Bank of England (BoE) has announced a one-year delay in implementing a key component of the global Basel 3.1 banking reforms, extending the timeline for introducing new trading activity rules until January 2028. This move is intended to align with developments in other major jurisdictions, particularly the United States.

While the broader Basel 3.1 reforms will still come into force in January 2027, the BoE confirmed that the internal models approach under the Fundamental Review of the Trading Book (FRTB)—which governs how banks calculate trading risks—will be delayed by an additional year.

BoE Deputy Governor Sam Woods said the update would provide regulatory clarity and flexibility for financial institutions:

“Today’s announcements will give certainty to firms of all sizes about the future capital framework… and allow an extra year for part of the implementation of new investment banking rules.”

The FRTB forms a critical part of post-financial crisis reforms, dictating how banks calculate and report risk on trading assets. The delay reflects the BoE’s desire to give firms adequate time to prepare and to observe international developments, particularly as the EU has also deferred its FRTB implementation to 2027, and uncertainty persists around the U.S. regulatory stance.

Relief for Mid-Sized Banks

In a separate decision, the BoE also announced more lenient capital requirements for mid-sized banks by raising the minimum asset threshold for issuing Minimum Requirements for Own Funds and Eligible Liabilities (MREL) — a form of loss-absorbing debt meant to ensure banks can be bailed in during financial distress.

Under the revised framework, banks with assets between £25 billion and £40 billion (up from the previous £15–£25 billion threshold) will be subject to lighter MREL obligations, with full “bail-in” expectations reserved for those above £40 billion in assets. These changes come after industry consultation and are slightly more generous than the £20–£30 billion range initially proposed in 2023.

Institutions such as OneSavings Bank and Metro Bank, which have long argued that post-crisis regulations disproportionately burden smaller lenders, are among those likely to benefit.

Nigel Terrington, CEO of Paragon Banking Group, praised the move:

“This is a strong step in harnessing the full potential of this sector.”

The regulatory adjustments align with broader calls from the new Labour government, urging financial regulators to support sectoral growth and move away from overly risk-averse approaches. As global financial centres cautiously weigh reforms, the BoE’s decisions aim to maintain competitiveness while preserving financial stability.