Applying the FSMA 2000 model of regulation to the Capital Requirements Regulation
Legislation to facilitate changes to the UK prudential banking framework, including implementation of Basel 3.1 and the Small Domestic Deposit Takers (SDDT) regime
Documents
Details
HM Treasury is progressing work to apply the UK’s established model of regulation for financial services, known as the FSMA model, to the law the UK inherited from the EU (known as assimilated law) on the capital framework for banks, building societies and investment firms. FSMA refers to the Financial Services and Markets Act 2000.
This policy update confirms the legislative approach for implementing the final post-crisis reforms to banks’ capital requirements, known as Basel 3.1. It explains how HM Treasury will revoke certain parts of the Capital Requirements Regulation (“the CRR”, which is the central piece of assimilated law on bank capital requirements), which the Prudential Regulation Authority (PRA) will then replace with rules implementing the new Basel standards.
The update also outlines the proposed legislative approach for revoking the remainder of the CRR and for revoking and restating with modifications the Capital Buffers Regulation. Completing the application of the FSMA model to this area of assimilated law will pave the way for a number of further reforms to the prudential regime proposed by the PRA, including a proportionate prudential regime for smaller banks and building societies.
HM Treasury has published three pieces of draft legislation alongside the policy update and would welcome technical comments on the proposed legislative approach within the next 6 weeks. The PRA has also published a number of corresponding policy documents that set out the final Basel 3.1 package and further reforms the PRA proposes to make to the prudential regime.
Update as of 17 January 2025: The Prudential Regulation Authority (PRA), in consultation with HM Treasury, has decided to delay the implementation of Basel 3.1 in the UK by one year until 1 January 2027. Read the press notice for more information.
Update as of 19 March 2025: The PRA has published a Consultation Paper (CP 3/25), proposing a set of conditions for identifying recognised exchanges or assets traded on these exchanges. HMT will implement the necessary legislative changes to support the PRA’s proposals outlined in the consultation paper.
Update as of 4 August 2025: On 15 July 2025, HM Treasury published a Policy Update inviting responses on the Overseas Recognition Regimes and Key CRR Definitions (outlined in Chapters 3 and 4 of the consultation document), as well as on the associated draft legislation. Responses were originally requested by 5 September 2025.
In response to feedback that additional time would be helpful, HM Treasury has extended the consultation period as follows:
-
Basel 3.1 transitional Statutory Instrument Basel 3.1 Market Risk Transitional Provision - Draft Regulations responses requested by 23:45 on 12 September 2025.
-
Chapters 3 and 4 (Overseas Recognition Regimes and Key UK CRR Definitions) of the Policy Update 2025, and the draft Key UK CRR Definitions Statutory Instrument Restatement of Capital Requirements Regulation Definitions – Draft Regulations responses requested by 23:45 on 30 September 2025.
Update as of 20 January 2026: The Prudential Regulation Authority (PRA) has published policy statements confirming its rules for implementing:
-
the Basel 3.1 standards (Basel 3.1 Rules). These will apply to firms from 1 January 2027, except for capital requirements for market risk under the internal models approach, which will apply from 1 January 2028
-
the relevant remaining provisions in the Capital Requirements Regulation (Restatement of CRR Requirements)
-
the simplified capital regime for Small Domestic Deposit Takers (SDDTs) (Small Domestic Deposit Takers Rules)
HM Treasury has made the necessary legislative changes to support the PRA’s rules and to enable their implementation. HM Treasury will publish a full response to its policy update, Applying the Financial Services and Markets Act 2000 model of regulation to the UK Capital Requirements Regulation: Policy Update 2025, in due course.
Updates to this page
-
Applying the Financial Services and Markets Act 2000 model of regulation to the UK Capital Requirements Regulation: Policy Update 2025 updated. The deadlines for responses to the Policy Update on Overseas Recognition Regimes, Key UK CRR Definitions, and associated draft legislation have been extended following feedback requesting additional time. Basel 3.1 transitional Statutory Instrument: new deadline 23:45, 12 September 2025. Chapters 3 and 4 (Overseas Recognition Regimes and Key UK CRR Definitions) of the Policy Update, and the draft Key UK CRR Definitions Statutory Instrument: new deadline 23:45, 30 September 2025
Update history
2026-01-20 07:00
On 20 January, the Prudential Regulation Authority (PRA) published its rules for Basel 3.1, the final post financial crisis reforms to bank regulation, and its “Strong and Simple” framework for smaller, domestic banks and building societies. These rules give banks the certainty they need to plan and invest in the UK while minimising complexity for international banks.
2025-08-04 15:24
Applying the Financial Services and Markets Act 2000 model of regulation to the UK Capital Requirements Regulation: Policy Update 2025 updated. The deadlines for responses to the Policy Update on Overseas Recognition Regimes, Key UK CRR Definitions, and associated draft legislation have been extended following feedback requesting additional time.Basel 3.1 transitional Statutory Instrument: new deadline 23:45, 12 September 2025. Chapters 3 and 4 (Overseas Recognition Regimes and Key UK CRR Definitions) of the Policy Update, and the draft Key UK CRR Definitions Statutory Instrument: new deadline 23:45, 30 September 2025
2025-07-15 07:00
Applying the Financial Services and Markets Act 2000 model of regulation to the UK Capital Requirements Regulation: Policy Update 2025, The Capital Requirements Regulation (Amendment) Regulations 2025 and The Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2025 added.
2025-03-19 10:50
Added an update note regarding the PRA’s planned changes to the Recognised Exchanges framework.
2025-01-17 09:00
Added update note regarding delay to implementation by one year to January 2027.
2024-09-12 07:00
First published.