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On 29 April 2026, the United Kingdom Treasury made the Capital Requirements Regulation (Market Risk Transitional Provision) Regulations 2026, which come into force on 30 December 2026. The regulations, made under the Financial Services and Markets Act 2023, introduce a transitional provision for capital requirements relating to market risk applicable to credit institutions and Part 4A investment firms. The regulations insert new Article 465A into Regulation (EU) No 575/2013 (the Capital Requirements Regulation), establishing a transitional period from 1 January 2027 to 31 December 2027. During this period, credit institutions and Part 4A investment firms are prohibited from applying specified provisions of the Prudential Regulation Authority (PRA) Rulebook relating to the Market Risk: Internal Model Approach, including rules on transitionals, permission to use internal models, material changes and extensions to permission, and related annexes. This transitional arrangement allows firms to continue using existing market risk models or adopt new standardised approaches in accordance with PRA rules during the transition. The transitional provision is necessary because remaining capital requirements provisions from the Capital Requirements Regulation are being revoked on 1 January 2027 under the Financial Services and Markets Act 2023. These will be replaced by rules made by the PRA through the PRA Rulebook: CRR Firms: (CRR) Instrument 2026 (PRA 2026/1), which comes into force on the same date. Article 465A itself comes into force on 30 December 2026, immediately before the relevant provisions of the Capital Requirements Regulation are revoked. The Treasury retains the power to extend the transitional period by statutory instrument, subject to parliamentary annulment.

On May 5, 2026, HM Treasury published a statutory instrument (SI) on the Capital Requirements Regulation (Market Risk Transitional Provision) Regulations 2026, which was made on 29 April, 2026. The UK remains committed to implementing the Basel 3.1 reforms , with responsibility delegated to the PRA under the Fi nancial Services and Markets Act 2023 . However, delays in implementation by other major jurisdictions, particularly the US and EU, have created uncertainty around the timing of key elements such as market risk rules. To avoid placing UK institutions at a competitive disadvantage, the PRA has decided to delay the introduction of new internal model requirements for market risk until January 1, 2028, while proceeding with the rest of the Basel 3.1 framework from January 1, 2027. This instrument introduces a transitional provision requiring credit institutions and designated investment firms not to apply the Prudential Regulation Authority's (PRA) market risk rules on updated internal model requirements between January 1, 2027 and December 31, 2027 (the transitional period). The PRA rules will allow institutions to continue to use their existing internal models under the current approach before moving to the PRA’s new internal model approach from January 1, 2028. All other elements of Basel 3.1, including the trading book boundary, the Advanced Standardised Approach and the Simplified Standardised Approach, will be implemented on January 1, 2027. The regulation comes into force on December 30, 2026.

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United Kingdom Treasury Introduces Market Risk Transitional Provision for Capital Requirements

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UK's HM Treasury Publishes Statutory Instrument on Market Risk Transitional Provision for Capital Requirements