The Bank of England announced on Friday that it would postpone implementing stricter bank capital regulations until January 2027, seeking clarity on actions from the United States government under President Donald Trump. The European Union has also indicated it will reassess its approach.
These global banking standards, formulated by the Basel Committee, represent a critical step in fortifying the banking sector post the 2008 financial crisis and are to be enforced by member nations.
The European Union, looking to adopt the reforms a year earlier in January 2026, emphasized the importance of full and timely implementation for everyone's benefit despite deliberations about potential impacts of other jurisdictions like the US and UK.
"In light of developments in other jurisdictions, including the US and the UK, (the EU) is evaluating next steps," stated a spokesperson from the European Commission.
Notably, US banks have strongly opposed these reforms, suggesting they could be altered or removed with a change in administration following comments from top banking regulator Michael Barr.
Reflecting on the domestic front, the British Labour government is urging regulatory bodies to support economic growth, a sentiment reiterated by the finance minister highlighting the watchdogs' significant role.
Following the Bank of England's announcement, shares in British banks saw slight increases, with Barclays rising by 1.9%, Lloyds by 0.7%, and HSBC by 0.7%, compared to the FTSE 100 index's 1.2% gain.
While analyst Gary Greenwood from Shore Capital anticipated a subdued market response to the reforms, the Prudential Regulation Authority (PRA) emphasized the need for clarity on the US implementation plans before proceeding with Basel 3.1.
UK Finance, a bank lobby group, welcomed the extended timeline, emphasizing the importance of international coordination in banking regulations, as noted by Simon Hills, director of prudential policy.
Bank of England's Deputy Governor voiced the importance of not compromising on financial regulations to ensure a robust financial system. The regulator has committed to tailor regulations to support domestic banking needs, including capital requirements for small business lending.