Basel 3.1 from 2027: UK, EU and US · RiskAtoms Academy

By the end you will be able to

1Describe what the 2017 finalisation of Basel III changed, and where the EU, the UK and the US stood with it as at 3 November 2026.
2Apply the output floor's phase-in in each jurisdiction, year by year.
3Say what changes for RiskAtoms Bank plc when the UK rules start on 1 January 2027.
4Read a reference to the Basel Framework, the EU CRR or CRD, the PRA Rulebook or the US CFR, and find the text it points to.

Why it matters

The Basel Committee finished most of its post-crisis rules in December 2017, and the market risk rules in January 2019. Nine years later they still apply differently in each of the three largest Western banking systems. The EU started in January 2025, the UK starts on 1 January 2027, and the US agencies were still consulting in 2026. A bank that operates in all three, or a risk manager who moves between them, needs to know which version applies, from when, and where to read it. Every RiskAtoms Bank plc figure in this module is the UK's version, applied early.

Core explanation

One standard, three timetables

What the 2017 finalisation changed

L2.7.04: Basel III and its finalisation introduced Basel III and its finalisation. The UK calls the finalisation Basel 3.1. It changed how RWA are calculated, not the capital ratios themselves:

Area	What changed	Where in Module 4
Credit risk, standardised	More risk-sensitive weights: by LTV for mortgages, by rating or grade for banks and companies	M4.2
Credit risk, IRB	No advanced IRB for large companies and banks; floors on PD, LGD and CCF inputs	M4.2
Output floor	Modelled RWA at least 72.5% of standardised RWA	L4.2.09
Market risk (FRTB)	New standardised approach; expected-shortfall models, approved desk by desk (a separate standard: January 2016, revised January 2019)	M4.3
CVA risk	New basic and standardised approaches; the internal model route removed	M4.3
Operational risk	One standardised approach replacing all earlier ones, including models	M4.4
Leverage	A G-SIB leverage buffer of half the G-SIB buffer rate	L4.1.06

Basel set 1 January 2022 as the start. In March 2020, as Covid-19 hit, the Committee's oversight body deferred it by a year to 1 January 2023, with the output floor phased in to 2028 (BCBS press release, 27 March 2020). In the Basel Framework, the floor rises from 50% in 2023 to 72.5% from 1 January 2028 (RBC90.1).

The timeline

TimelineFrom the Basel standard to national rules

1 / 10

Dec 2017

Basel III finalised

The Basel Committee published the final reforms; start date 1 January 2022.

Side by side

As at 3 November 2026 as at 3 Nov 2026:

	EU	UK	US
Law	CRR3 and CRD6	PRA Rulebook (PS17/23, PS9/24, PS1/26)	Proposals of 19 March 2026
Start	1 January 2025	1 January 2027	Not final
Market risk (FRTB)	1 January 2027	1 January 2027; IMA from 1 January 2028	Proposed
Output floor	50% in 2025 to 72.5% in 2030	60% in 2027 to 72.5% in 2030	Today a dual stack (217.10(d)); proposed to be replaced for Category I and II
Full implementation	2030, with some transitionals to 2032	1 January 2030	Not final

Output floor factor by year (RBC90.1; CRR Article 465(1) and 92(3); PRA Rulebook Article 92(5))
Year	Basel	EU	UK
2023	50.0%	none	none
2024	55.0%	none	none
2025	60.0%	50.0%	none
2026	65.0%	55.0%	none
2027	70.0%	60.0%	60.0%
2028	72.5%	65.0%	65.0%
2029	72.5%	70.0%	70.0%
2030	72.5%	72.5%	72.5%

What changes for RiskAtoms Bank plc

Illustrative dataRiskAtoms Bank plc's capital book

The same made-up UK bank as Level 3: £67bn of assets and £4bn of equity at 31 December 2025, in £ millions. Module 4.1 adds its regulatory layer: own funds, deductions, risk-weighted assets by risk type, buffers, the leverage exposure and MREL, computed from the Level 3 credit, trading, derivatives and operational risk books. Every figure is illustrative, not any bank's data.

Pro forma. The book applies Basel 3.1, the 2017 finalisation of Basel III, to the 31 December 2025 balance sheet. On that date the bank still reported under the old UK CRR. The UK applies Basel 3.1 from 1 January 2027, and the internal model approach for market risk from 1 January 2028 (PRA PS1/26, paras 1.23 and 1.24). So the book shows the bank as it would look under the new rules.

The book already applies the new rules, so what changes on 1 January 2027 is the bank's reality, not the book. Qualitatively: its mortgages move to LTV-based standardised weights for the floor calculation; its corporate IRB models face input floors; its trading desks use the new standardised approach until any IMA approval from 2028; operational risk uses the single standardised approach; and the output floor phases in. The floor matters most: it binds once the factor passes 68.53%, which in the UK happens in 2029. Lesson by lesson, the credit risk changes are L4.2.11: Credit risk capital: what changes from 2027, the market risk and CVA changes L4.3.11: Market risk and CVA capital: what changes from 2027, and the floor itself L4.2.09: The output floor.

Reading the references

Each rule book has its own address system. The Basel Framework, consolidated online, uses a three-letter chapter code and a paragraph: CRE31.4 is credit risk, chapter 31, paragraph 4. The main codes are CAP (capital), RBC (risk-based capital requirements), CRE (credit risk), MAR (market risk), OPE (operational risk) and LEV (leverage). Each chapter has versions by effective date, so the same paragraph can read differently in 2023 and 2027. The EU uses CRR and CRD articles, as amended. The UK uses the PRA Rulebook, with the old CRR article numbers inside named parts, and explains its changes in policy statements. The US uses the Code of Federal Regulations: 12 CFR 217 is the Federal Reserve's capital rule.

Sort itWhose rule is it?

Which rule book does each reference point to?

MAR21.1
RBC90.1
Article 465(1) of Regulation (EU) No 575/2013
CRD Article 133
PS1/26
Required Level of Own Funds (CRR) Part, Article 92(5)
12 CFR 217.10

The formal version

RWA after the floor in year $t$ , with floor factor $f_t$ , modelled RWA $\text{RWA}_{\text{IM}}$ and standardised RWA $\text{RWA}_{\text{SA}}$ (RBC20.4; CRR Article 92(3); PRA Rulebook Article 92(5)):

\begin{aligned} \text{RWA}_t &= \max\big(\text{RWA}_{\text{IM}},\ f_t\,\text{RWA}_{\text{SA}}\big) \\ f^{\text{UK}}_t &= 60\%,\ 65\%,\ 70\%,\ 72.5\% \quad (t = 2027, 2028, 2029, 2030+) \\ f^{*} &= \frac{\text{RWA}_{\text{IM}}}{\text{RWA}_{\text{SA}}} = \frac{21{,}558.1}{31{,}459.0} = 68.53\% \end{aligned}

The floor binds in the first year with $f_t > f^{*}$ . The book holds the 31 December 2025 balance sheet fixed, so only $f_t$ moves. £ millions.

Try it

Pick the rules and a year. When does the floor first bind on the bank under each? How much CET1 ratio does it take away, and how much MDA headroom?

Try itThe output floor, year by year

Rules

Year2027

Modelled RWA (IRB as used)

£21,558m

Floor: 60.0% × standardised RWA

£18,875m

RWA used

£21,558m

Floor factor60.0%

Floor bindsno

Floor add-on£0m

CET1 ratio14.01%

Total capital ratio18.53%

MDA headroom£752m

UK (PRA): transitional, full 72.5% from 2030. The floor binds on this book once the factor passes 68.5%.

Floor factor by year, and whether it binds on the pro forma book
Year	Basel	EU	UK
2025	60.0%	50.0%	none
2026	65.0%	55.0%	none
2027	70.0% binds	60.0%	60.0%
2028	72.5% binds	65.0%	65.0%
2029	72.5% binds	70.0% binds	70.0% binds
2030	72.5% binds	72.5% binds	72.5% binds

Pro forma: the 31 December 2025 balance sheet and the Basel 3.1 calculations are held fixed, so only the floor factor changes. Standardised RWA £31,459m. Before its first year a jurisdiction applies its old rules, which the book does not compute. Illustrative data, £ millions.

Worked example

The UK floor on RiskAtoms Bank plc, 2027 to 2030

Modelled RWA £21,558.1m; standardised RWA £31,459.0m; CET1 £3,019.9m. £ millions.

Year by year

Step 1 of 4

1
2027
$\max\big(21{,}558.1,\ 60.0\% \times 31{,}459.0\big) = \max\big(21{,}558.1,\ 18{,}875.4\big) = 21{,}558.1$
The floor does not bind: the modelled RWA are £2,682.8m above it. CET1 ratio 14.01%, total capital ratio 18.53%, MDA headroom £752.1m.

From 2027 to 2030 the floor takes 0.77 percentage points off the CET1 ratio and £178.6m off the headroom, with nothing else changing.

Regulatory lens

Status as at 3 November 2026 as at 3 Nov 2026. Check each source for later changes.

In the UK

The PRA's rules apply from 1 January 2027 and the internal model approach for market risk from 1 January 2028 (PS1/26, paras 1.23 and 1.24). The floor rises 60%, 65%, 70%, then 72.5% from 2030 (PRA Rulebook, Article 92(5), PRA2026/1). The near-final rules added SME and infrastructure lending adjustments, so that removing the old support factors does not raise overall requirements on those loans (PS1/26, para 1.16). When it published the credit risk rules, the PRA estimated that Tier 1 requirements would rise by less than 1% by 2030, down from 3.2% at consultation (PS9/24).

In the EU

CRR3 has applied since 1 January 2025, and CRD6 since 11 January 2026, with its third-country branch rules from 11 January 2027. The floor rises from 50% in 2025 to 70% in 2029 and 72.5% after (Articles 465(1) and 92(3)), and transitionals for unrated companies and low-risk mortgages in the floor calculation run until 2032 (Article 465(3) and (5)). The FRTB own funds requirements were deferred twice, to 1 January 2026 and then 1 January 2027; a third delegated act, adopted on 4 June 2026, applies from 1 January 2027 with targeted relief until 31 December 2029.

In the US

On 19 March 2026 the agencies proposed a single expanded risk-based approach for Category I and II firms, replacing the dual stack of standardised and advanced approaches, with an expected-shortfall market risk approach, new CVA rules and an operational risk charge based on income and expenses. Standardised weights would fall, for example from 100% to 95% for corporates. The agencies estimated that CET1 requirements would fall: category I and II by 4.8%, category III and IV by 5.2%, other banks by 7.8%. Michael Barr, a Federal Reserve governor, dissented. Comments closed on 18 June 2026. As far as we could find, no final rule had been adopted by 3 November 2026.

Spark Atoms

Spark AtomThe floor that waits

Applied today at 72.5%, the floor costs RiskAtoms Bank plc 0.77 percentage points of CET1 ratio. Under the UK's phase-in it costs nothing in 2027 or 2028, and starts to bind in 2029. Pro forma figures flatter or punish depending on which year you assume.

Public dataThe EU's floor, by the EBA's count (9 October 2026)

33 EU institutions would be bound by the floor when fully loaded. The capital shortfall from the floor would be €2.2bn in 2030 and €18.5bn fully loaded, in 2033.

Key takeaways

The 2017 finalisation, with the market risk rules of 2019, changed how RWA are calculated: standardised credit risk, IRB limits, FRTB, CVA, operational risk and the 72.5% output floor.
The EU applied it from 1 January 2025 (CRR3), with FRTB from 1 January 2027 and some transitionals to 2032.
The UK applies it from 1 January 2027, the IMA from 1 January 2028, and the full 72.5% floor from 1 January 2030.
The US proposed its rules on 19 March 2026; as at 3 November 2026 there was no final rule.
On the pro forma book the UK floor binds from 2029, when the factor first passes 68.53%.
Basel references are chapter codes (CRE, MAR, RBC), EU references are CRR and CRD articles, UK references are PRA Rulebook parts and policy statements, US references are 12 CFR.

Reaction

Check what stuck

Question 1 · objective 2

What output floor factor applies to a UK bank in 2028, in %?

%

Question 2 · objective 2

A UK bank has modelled RWA of £30bn and standardised RWA of £50bn. What are its RWA in 2029, after the output floor, in £m?

£m

Question 3 · objective 1

Which part of the EU's CRR3 package did not apply from 1 January 2025?

AThe new market risk rules (FRTB) for own funds requirementsBThe output floorCThe revised standardised approach for credit riskDThe new operational risk approach

Question 4 · objective 3

On RiskAtoms Bank plc's pro forma book, what is the CET1 ratio in 2029, the first year the UK floor binds, in %?

%

Question 5 · objective 4

Where would you find the rule cited as “Article 92(5)” for a UK bank in 2027?

AIn the PRA Rulebook's Required Level of Own Funds (CRR) PartBIn the EU's CRR, as published in the Official JournalCIn the Basel Framework's RBC chapterDIn 12 CFR Part 217

Glossary

Basel 3.1: The UK's name for the Basel III reforms finalised in December 2017. The EU calls its version CRR3 and CRD6; US commentators call theirs the Basel III endgame.
Output floor: RWA cannot fall below a set share, 72.5% when fully phased in, of the RWA the bank would have under the standardised approaches (RBC20.4).
FRTB: The Fundamental Review of the Trading Book: the revised market risk standard (MAR), with a new standardised approach and an expected-shortfall internal model approach.
Internal model approach (IMA): Internal model approach for market risk: capital from the bank's own expected-shortfall model, with approval desk by desk.
Transitional: A rule that applies for a limited time while banks adjust, such as a lower floor factor or a temporary risk weight.
CRR: Capital Requirements Regulation: the EU regulation that sets the capital rules directly. CRR3 is Regulation (EU) 2024/1623, which amended it.
CRD: Capital Requirements Directive: the EU directive that member states put into national law, covering supervision, buffers and governance. CRD6 is Directive (EU) 2024/1619.
PRA Rulebook: The PRA's rules. Since the UK left the EU, the PRA has moved the UK CRR's articles into Rulebook parts, keeping the article numbers.
Dual stack: The US approach for the largest banks: ratios under both the standardised and the advanced approaches, and the lower of each applies (12 CFR 217.10(d)).
Policy statement: Policy statement: the PRA's final rules after a consultation paper (CP). Supervisory statements (SS) set out its expectations.

Deep Dives & Origins

Deep Dives

Prudential Regulation Authority, PS1/26, 20 January 2026: the final UK dates and the last changes before implementation. Intermediate.
European Banking Authority, press release on its CRR3/CRD6 dashboard, 9 October 2026: who in the EU is bound by the floor, and by how much. Advanced.

Origins

Basel Committee on Banking Supervision, RBC20 and RBC90 (transitional arrangements, para 90.1), bis.org.
Basel Committee on Banking Supervision, press release on the deferral of Basel III implementation, 27 March 2020.
Basel Committee on Banking Supervision, Minimum capital requirements for market risk, January 2016, revised January 2019.
Regulation (EU) 2024/1623 (CRR3), Official Journal, 19 June 2024; CRR Articles 92 and 465 as amended.
Directive (EU) 2024/1619 (CRD6), Article 2.
European Commission, questions and answers on the banking package, on the application dates.
Commission Delegated Regulations (EU) 2024/2795 and 2025/1496 on the FRTB application date, and 2026/1221 on temporary relief and multipliers for market risk.
European Banking Authority, press release on the CRR3/CRD6 dashboard, 9 October 2026.
Prudential Regulation Authority, PS9/24 (12 September 2024), which also summarises PS17/23 (12 December 2023), and PS1/26 (20 January 2026, paras 1.16, 1.23, 1.24 and 2.5).
Prudential Regulation Authority, announcement of the delay to 1 January 2027, 17 January 2025.
PRA2026/1 instrument, Required Level of Own Funds (CRR) Part, Article 92(5).
12 CFR 217.10; Board of Governors of the Federal Reserve System, FDIC and OCC, capital proposals of 19 March 2026, Federal Register documents 2026-05959 and 2026-05960, 27 March 2026.

Watch this lesson

Video version

Prefer to watch? The same lesson as a 12-minute video will sit here, made from this page's script.