In a recent development, the Bank of England announced it would postpone the enforcement of stricter bank capital regulations until January 2027. This decision aims to gain clarity on the actions the United States will take under its new administration. The delay has prompted the European Union to reevaluate its timeline for adopting these global Basel Committee standards, originally set for January 2026, with the EU signaling a need to assess its next steps.
The EU emphasized the importance of adhering to the reforms in a timely and comprehensive manner, stating that it is in "everyone's interest" to do so. An official from the European Commission mentioned that the EU is currently reviewing its approach in light of developments in the US and UK.
While the delay by the Bank of England was met with surprise and disappointment by some EU officials, concerns were raised regarding maintaining a level playing field among jurisdictions. Observers, like financial industry analyst John Cronin, noted the likelihood of the EU aligning with the approaches of the US and UK regarding these reforms, considering the competitive position of the EU banking sector.
The reforms have encountered opposition from US banks, leading to speculation about potential adjustments or cancellations under the new US administration. Notably, Britain's Labour government has been urging regulators to support economic growth, emphasizing their significant role in shaping financial policies.
Following the announcement, shares of British banks experienced modest gains, with Barclays up 1.8%, Lloyds up 1.5%, and HSBC up 0.7%, compared to the 1.3% rise in the wider FTSE 100 index. Analysts, like Gary Greenwood from Shore Capital, anticipate subdued reactions in bank shares as the Bank of England downplayed the reforms' impact on capital requirements.
The Bank of England's decision, made in consultation with the Treasury, was influenced by considerations of competitiveness and growth. The Prudential Regulation Authority (PRA) released the statement, mentioning the extension of the implementation deadline for the reforms in Britain to January 2026.
UK Finance, a bank lobby group, welcomed the delay, emphasizing the importance of international coordination on capital rules for the banking sector. Notably, a Bank of England Deputy Governor cautioned against engaging in a "race to the bottom" on financial regulations, stressing the need for prudent regulatory practices.