Bank of England plans to ease capital rules for banks’ trading activities

The Bank of England’s Prudential Regulation Authority is consulting on changes to capital rules for banks’ trading activities, in a move that would ease parts of the UK’s planned market-risk regime and bring it closer to how other major jurisdictions are implementing Basel 3.1.

The proposal is aimed at trading-book capital, the framework that determines how much capital banks must hold against potential losses in their trading portfolios. Reported estimates suggest the changes could reduce capital requirements by about £700 million.

The central bank has already delayed full implementation of the key market-risk rules until January 2028. This latest consultation suggests the PRA wants to adjust the UK approach before the regime takes effect, rather than simply imposing the strictest possible version on domestic banks.

What the PRA is changing

According to the research, one of the main changes would extend the monitoring period for some market-risk data used in capital calculations from one year to three years. That would make the rule less sensitive to short-term market swings and would give banks a longer data window for modelling trading risk.

The PRA also plans a more targeted approach to risks that cannot be modelled directly. Those non-modelable risks are important because they tend to affect illiquid or hard-to-value positions, where banks cannot rely on the same statistical techniques they use for more liquid trading books.

The Financial News report said the PRA is consulting on these changes as global regulators line up around Basel 3.1 implementation. The Financial Times separately reported that the UK move would include lower requirements for some trading positions, a longer implementation window and a capital reduction estimate of roughly £700 million.

Why the regulator is revisiting the rules

The changes sit inside the Basel 3.1 market-risk framework, also known as the Fundamental Review of the Trading Book. That framework is designed to make sure banks hold enough capital against trading losses, especially in complex or fast-moving markets.

The PRA said the revised approach is meant to support international alignment and reflect how similar rules are being implemented elsewhere. Sam Woods, the PRA’s chief executive, said the extra time is intended to take account of how the rules are being implemented in other jurisdictions while keeping UK trading activities appropriately capitalised.

That balance matters because the UK has been watching the US and EU closely before finalising its own version of the rules. The FT reported that the EU has already softened the impact of its approach for three years after its 2027 start date, while the UK and US have also been adjusting their Basel 3.1 and market-risk timetables.

Who is affected

The changes are most relevant to the banks with the largest trading books. According to the FT, 11 banks account for 95% of the UK capital-markets activity affected by the rules.

More than two-thirds of that activity is carried out by UK subsidiaries of foreign-based banks, which means the consultation is especially important for international banking groups with major trading operations in London.

That concentration helps explain why the PRA is focusing on the practical burden of the regime as well as the headline capital requirement. A rule that is too rigid could increase compliance costs and make UK markets less competitive, while one that is too loose could weaken the amount of capital banks hold against trading losses.

What happened on June 19

Financial News reported the consultation at 06:33 UTC on June 19, 2026. The Financial Times followed later the same morning, at 08:32:47 UTC, with additional detail on the scale of the proposed easing and its estimated capital impact.

The storyline is therefore not a retrospective change to a finished rule, but an active consultation that still needs to run to completion. The PRA has not yet published final rule text, and the exact implementation timetable remains tied to how the overseas Basel 3.1 process develops.

What comes next

Banks and other market participants are likely to respond to the consultation with views on the capital impact, the operational burden and the treatment of hard-to-model trading positions. That feedback will matter because the final rule could still differ from the version described in the initial reports.

The main open questions are whether the PRA will keep the longer three-year monitoring period, how precisely it will define non-modelable risks, and how far the final package will depart from the current framework once consultation responses are collected.

For now, the direction is clear: the Bank of England is moving to ease part of the trading-book capital regime for investment banks, while trying to stay aligned with the broader Basel 3.1 changes unfolding in the US and Europe.