On 15 July 2025, the Prudential Regulation Authority (PRA) published a consultation paper (CP17/25) on ‘Basel 3.1: adjustments to the market risk framework’. The purpose of this consultation is to finalise the implementation of the Basel 3.1 standards in the UK, focusing on market risk requirements under the Fundamental Review of the Trading Book (FRTB). The consultation outlines proposed adjustments to the near-final rules published in 2023 and 2024, including a one-year delay in implementing the Internal Model Approach (FRTB-IMA) to 1 January 2028. This delay is intended to align UK timelines with other major jurisdictions and reduce operational complexity for firms with cross-border trading activities. Other elements of the FRTB, such as the trading book boundary, Advanced Standardised Approach (ASA), and Simplified Standardised Approach (SSA), will proceed as planned on 1 January 2027.

Key proposals include operational simplifications for collective investment undertakings (CIUs) under the ASA, introducing a de minimis threshold to reduce volatility in CIU allocation and capitalisation. Additionally, a permissions regime is proposed for the Residual Risk Add-On (RRAO) under the ASA, allowing firms to propose alternative methodologies for capitalising complex risks where the RRAO may be disproportionate. Reporting and disclosure requirements will also be updated to reflect these changes, with existing templates retained for the interim period until the FRTB-IMA is implemented.

The PRA emphasises that these proposals aim to improve proportionality, reduce operational burdens, and ensure the framework is risk-sensitive. The adjustments are designed to support firms with varying business models, particularly those with limited market risk exposures, while maintaining alignment with international standards. The PRA also notes that the proposals should not materially affect firms' overall risk-weighted assets (RWAs) compared to the near-final rules, as market risk typically accounts for a small portion of RWAs.

The consultation closes on 5 September 2025. Implementation of the proposed changes is scheduled for 1 January 2027 (except for the FRTB-IMA, which will take effect on 1 January 2028). The PRA will consider responses and finalise the rules to ensure the UK remains competitive as a global financial centre while adhering to its statutory objectives.