Basel III Prudential Roadmap: 2024 H2
Basel III Prudential Roadmap: 2024 H2Executive summary
The Basel Committee has revised the international standard for prudential supervision of internationally active banks, the Basel Framework, through its package of reforms referred to as Basel III.
All Jersey incorporated banks (JIBs) are part of large international banking groups that are subject to consolidated supervision that is increasingly moving towards Basel III. Basel III builds on the current prudential requirements, delivering a framework for capital allocation that better reflects the risks.
We are monitoring international developments, and the current expectation is that the UK and EU are targeting implementation as follows:
- UK targeting implementation on 1 January 2026
- EU targeting 1 January 2025 for most elements, but the trading book reforms are delayed until 1 January 2026.
The United States’ position is unclear, with changes expected and the election of a new president a further potential complication. We will monitor further announcements including from the incoming administration about its plans.
In March and April 2024, we issued Basel III consultation papers on the Prudential Roadmap and proposals for immediate implementation.
Our proposed Basel III prudential roadmap consultation included a timeline for detailed consultations, ahead of implementation in H2 2027 (with flexibility for banks to transition from H2 2026). It set out that our approach would:
- be based on the UK’s implementation
- be proportionate, flexible and simple
- address competitive disadvantages.
We published our Basel III feedback on these consultations and subsequently undertook bilateral dialogue with JIBs, which has been extremely useful in developing our proposals.
This consultation paper seeks feedback on proposals to implement three areas of the Basel Framework, being:
- the Standardised Approach to Credit Risk (SACR) (Section 4)
- the Standardised Approach to Operational Risk (SAOR) (Section 5)
- Large Exposures regulations (Section 6)
Section 3 addresses general matters regarding how we will implement changes to prudential regulation.
What are the key proposals and why?
For the SACR and SAOR, we intend to closely follow the PRA’s near-final rulebook, see Appendix A-1, published in September 2024 as part of the PRA’s policy statement PS9/24 Implementation of the Basel 3.1 standards near-final part 2 (PRA PS9/24).
This is in line with the Roadmap consultation, reflecting the positive feedback on this received during the consultation and bilateral dialogue. Feedback is sought on the proposed alignment with the detailed UK framework including on the impact on JIBs’ capital requirements. In light of the specific proposals recently finalised in the UK, please consider if the UK position remains appropriate for JIBs or indeed where simplifications can be made or modifications are needed to address competitive disadvantages. We will work with a JIB working group on the detailed wording.
For Large Exposures, the situation is complicated by the PRA consulting on its Large Exposures rules, which was not anticipated. This includes the recognition of indirect exposures, something that JIBs have, and a relaxation to policies regarding cross border exposures within groups, both of which are matters that JIBs have raised.
We will therefore finalise our proposals in H1 2025, drawing on the PRA’s final position but seek high level feedback from JIBs now on the key elements of the PRA’s current and proposed regimes.
This consultation only briefly touches on Pillar 2 and prudential reporting, which will both be consulted on in H2 2025. It provides a high-level plan for greater UK alignment, so that banks can provide early input on these topics.
We have not addressed securitisations at this time as the PRA’s CP13/24 Remainder of CRR: restatement of assimilated law, issued in October 2025 (PRA CP13/24) consults on (amongst other things) replacing the current UK legislation on securitisations with broadly similar PRA rules. We will consult once the PRA has finalised its position, expected to be in H1 2025.
Who would be affected?
The proposals in this consultation paper only directly impact JIBs. It has been circulated to them and the Jersey Bankers Association (JBA), including the relevant JBA sub-committee, the JBA Prudential and Banking Reform Technical Group (JBARTG).
The implementation of the Basel Framework will indirectly impact the customers of banks in Jersey, whether it be our implementation or implementation by home countries in respect of branches
Next steps
Following this consultation, we will publish feedback in Q2 2025, along with our near final draft documentation on the SACR and SAOR.
In line with the Basel III Roadmap, we will then:
- in H1 2025, consult on the remaining Codes changes required to implement the Basel III rules, including securitisations and Large Exposures
- in H2 2025, publish near-final Codes, to come into effect from 1 July 2027, with transitional provisions that enable earlier transitions from 1 July 2026
- in H2 2025 consult on changes to Pillar 2 (including Interest Rate Risk in the Banking Book) and Prudential Reporting
- in H1 2026, implement changes to Pillar 2 and Prudential Reporting so that JIBs can transition in H2 2026.
All aspects will be fully live for all JIBs in H2 2027.