Bank of England Delays New Rules Aimed at Preventing Banking Crash
Bank of England Delays New Rules Aimed at Preventing Banking Crash.
The Bank of England has postponed the enforcement of stricter global banking capital regulations by an additional year to avert a recurrence of a crisis akin to that of 2008. This second postponement has been attributed to uncertainties surrounding the rules' implementation in the United States.
The decision, made by the Bank's regulatory body following discussions with the Treasury, also considered factors related to competitiveness and economic growth.
Chancellor Rachel Reeves convened a meeting on Thursday with the chief executives of various regulatory bodies, including the Competition and Markets Authority, the water regulator Ofwat, and the Bank’s Prudential Regulation Authority (PRA), urging them to enhance their efforts in fostering growth.
The PRA, responsible for overseeing banks and insurance companies, announced that the implementation of Basel 3.1, the final phase of banking reforms aimed at preventing another global financial crisis, would be postponed until 1 January 2027. This follows a previous delay of six months announced last September, which moved the deadline to January 2026.
“Given the current uncertainty around the timing of implementation of the Basel 3.1 standards in the US, and taking into account competitiveness and growth considerations, the PRA, having consulted with HM Treasury, has decided to further delay implementation of the rules,” it said.
The PRA indicated that while it anticipates the implementation date to be set for 2027, it will persist in monitoring ongoing developments.
The standards have faced opposition from banks in the United States, particularly as Donald Trump is poised to regain power next week, with these institutions contending that the regulations would impose excessive burdens.
Reeves's meeting occurred shortly after the release of official data revealing that the UK economy experienced a modest growth of only 0.1% in November, which was below expectations but alleviated some pressure on the chancellor following a contraction in the previous month. Additionally, separate data published on Friday indicated a decline of 0.3% in retail sales volumes for December.
The Bank of England's delay in enforcing stricter banking regulations raises concerns about the long-term stability of the financial sector. While the postponement aims to address global uncertainties and support economic growth, it also signals a lack of urgency in addressing systemic risks that could lead to another crisis.
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With the US also facing opposition to the Basel 3.1 standards, the lack of coordinated global implementation may undermine efforts to safeguard the financial system. As the UK economy struggles with modest growth and declining retail sales, delaying these crucial reforms may exacerbate existing vulnerabilities and hinder future resilience.
