In policy statement (PS)9/24 - Implementation of the Basel 3.1 standards near-final part 2, the Prudential Regulation Authority (PRA) confirmed that it will conduct an off-cycle review of firm-specific Pillar 2 capital requirements. Particularly, the PRA confirmed its intention to:
- adjust firms’ Pillar 2 capital requirements to address any potential double counting identified; and/or
- rebase firms’ variable Pillar 2A requirements and PRA buffer so that the changes to Pillar 1 risk-weighted assets (RWAs) do not result in unwarranted higher (or lower) Pillar 2 requirements where the relevant risk level has not changed.
The PRA highlighted in PS9/24 that, as part of this off-cycle review, it also plans to apply firm-specific structural adjustments to Pillar 2A (the ‘SME lending adjustment’ and ‘infrastructure lending adjustment’) to ensure that overall capital requirements for SME and infrastructure lending do not increase as a result of the removal of the Pillar 1 support factors.
The PRA noted in PS17/23 and PS9/24 that it will conduct a firm data collection exercise to inform the above adjustments. This page, and the accompanying data templates and instructions, initiate and provide further information on that exercise. The data collected via this exercise will be used to inform the PRA’s off-cycle review of firm-specific Pillar 2 capital requirements, so that requirements are updated at the same time as the Basel 3.1 standards are implemented.
As stated in PS9/24, the PRA has moved the implementation date of the Basel 3.1 standards to 1 January 2026. The deadline for firms to submit the data for the collection exercise is 31 March 2025. Firms that take up the modification to enter the Interim Capital Regime (ICR) ahead of this date will not be subject to the off-cycle review and data collection exercise (refer to section ‘Interaction with the Interim Capital Regime (ICR)’ for further guidance).
Data collection exercise
All firms taking part in the off-cycle review are expected to submit the:
- Total Basel 3.1 RWAs template (Submission 1) – including a breakdown of credit risk, counterparty credit risk, credit valuation adjustment (CVA), market risk and operational risk RWAs (to be calculated on the basis of the rules in PS17/23 and PS9/24).
Firms that wish to qualify for the SME lending adjustment and/or infrastructure lending adjustment are also expected to submit the template described below. Firms do not need to submit these data if they do not wish to qualify for the SME lending adjustment or infrastructure lending adjustment.
- SME lending adjustment and infrastructure lending adjustment template (Submission 2) – including a breakdown of eligible credit risk exposures, by sub-exposure class and applicable risk weight (to be calculated on the basis of PS9/24).
The PRA recognises that there are firms that prior to the Basel 3.1 standards implementation date will apply for B3.1 related permissions for the use of internal models or methods which require prior PRA approval (including permission to stop using internal models where this is required). The accompanying data template instructions linked to this page provide guidance to firms for completing the data template where they anticipate the use of these models and methods to calculate RWAs as at the Basel 3.1 standards implementation date. The PRA asks that such firms indicate in the template which permissions they are planning to apply for (or have applied for) and the timing of the applications (including permissions in relation to the standardised credit valuation adjustment method (SA-CVA) and the advanced standardised approach method for market risk (ASA)). For other existing or BAU applications firms should not use unapproved models in their submissions, in line with our standard guidance. Firms should refer to the Basel 3.1 Permissions page for information on new and existing permissions impacted by the Basel 3.1 standards policy package, including details on how and when to apply for certain permissions.
For a small number of firms, the PRA will separately request market risk data to address any potential double counting or undercapitalisation in Pillar 2 market risk requirements. The timeline for submitting this additional data request is aligned to the overall data collection exercise, ie with a deadline of 31 March 2025. The PRA will request relevant firms to submit the FSA080 template detailing illiquid and concentrated trading positions under both the CRR and the Basel 3.1 standards. Supervisors will shortly reach out directly to relevant firms to provide details on the scope of this additional data request.
Submission templates, instructions, dates and process
The PRA expects firms to submit the data template(s) by 31 March 2025; earlier submission is encouraged where possible. In completing the data template(s) firms should use a reference date of 31 December 2024. The PRA recognises that firms will be in the process of implementing Basel 3.1, and therefore, these data submissions are expected to be on a best-efforts basis – however, firms should seek to ensure that the data is as accurate as possible, given the PRA intends to use the data for capital setting purposes.
Firms should submit the requested data using the available templates and referring to respective instructions:
- Total Basel 3.1 RWAs template (XLS)
- Total Basel 3.1 RWAs template instructions (PDF)
- SME lending adjustment and infrastructure lending adjustment template (XLS)
- SME lending adjustment and infrastructure lending adjustment template instructions (PDF) (Updated November 2024)
Firms should submit the data template(s) to B3.1P2DataRequest@bankofengland.co.uk, copying in their line Supervisor.
Firms should note that these templates are for the purpose of this data collection exercise only, and are distinct from the final Basel 3.1 standards reporting templates that will be implemented on 1 January 2026.
Interaction with the Interim Capital Regime (ICR)
In PS17/23 and PS9/24, the PRA set out its near-final policy on the ICR, including that ICR firms and ICR consolidation entities would not be subject to the off-cycle Pillar 2 review.
The PRA will consider firms to be exempt from the off-cycle review and accompanying data collection exercise provided they have consented to the modifications required to join the ICR ahead of the data submission deadline (ie 31 March 2025). The PRA expects any potential ICR eligible firms which by this point have not opted-in to the ICR, to submit the requested data in line with the submission date outlined above.
Firms potentially eligible for the ICR should be considering whether they intend to enter the ICR. Firms should engage with their supervisors regarding their plans, given the potential impact of this decision on their capital planning.
Firms with a non-UK parent undertaking (member of a ‘foreign group’) which wish to become ICR firms would need to apply for a modification to the Small Domestic Deposit Takers (SDDTs) criteria, using a supplementary form available on our website (see Waivers and modifications of rules). Firms that fall within this scope should also promptly and proactively engage with their supervisors on their intentions to apply for this modification.