Basel 3.1 permissions

General application information

In flight applications

The Prudential Regulation Authority (PRA) will continue to progress reviews of applications made under the near-final Basel 3.1 rules. Closer to implementation date, firms may be asked to confirm that the information submitted with these applications has not materially changed, or to refresh aspects of that information, ahead of an approval or rejection decision being taken. As set out in PS9/24, the PRA will not require that IRB models themselves are fully compliant with Basel 3.1 on 1 January 2027 provided that firms have an appropriate remediation plan in place and are applying a post model adjustment (PMA) if necessary.  The PRA does not expect, however, that firms should delay model submissions required as part of a remediation plan due to the delayed implementation of Basel 3.1.

Applications for permissions made under the near-final Basel 3.1 rules, or final rules, that are granted ahead of the Basel 3.1 implementation date will not have an effective date before 1 January 2027.

The PRA will continue to progress reviews of applications made under the Capital Requirements Regulation (CRR), and prior to 1 January 2027 will grant approval where the relevant CRR requirements have been met.

Nearer to implementation date the PRA will contact firms that have made applications for permissions under the CRR, that are affected by Basel 3.1 regarding their in-flight applications. 

You will be asked whether you would like to convert these CRR applications into an application under the near-final Basel 3.1 rules. For some types of applications, the PRA may need to request new or updated information when converting the applications.

Once contacted by the PRA about the firm’s in-flight application, in the first instance you should discuss with your Supervisory team whether to convert the application into an application under the near-final rules.

If you choose to convert the application and the PRA decides to grant the permission, the permission will not have an effective date before 1 January 2027. Applications made under the CRR that are decided before 1 January 2027 will have an effective date soon after the decision is taken. Applications made under the CRR that have not been decided by the PRA or converted to an application under the near-final rules before 1 January 2027 will cease to have effect. You should expect to discuss any applications that are at risk of this with your Supervisory team.

Making applications for CRR permissions in advance of the Basel 3.1 implementation date

If you make a new application for a permission affected by Basel 3.1 before the Basel 3.1 implementation date (i.e. an application you have not already submitted) you will need to decide whether to make that application under the CRR or under the near-final Basel 3.1 rules.

Generally, the PRA expects it will become more appropriate for new applications to be made under the near-final Basel 3.1 rules as the implementation date approaches. You should continue to consider what the most appropriate basis for the application would be and take into consideration when you want the permission to have effect and the potential time an assessment will take. You should discuss applications with your Supervisory team before applying.

Applications made under CRR that have not been decided by the PRA before 1 January 2027 will fall away unless they are converted to an application under the near-final rules (see in-flight applications above).

Applications made under the CRR for which permission is granted ahead of the Basel 3.1 implementation date but where no savings provision exists (see further detail on savings provisions below) will cease to have effect on implementation date and you may want to reapply for a permission on the Basel 3.1 basis where one exists.

Applications made under the CRR for which permission is granted ahead of the Basel 3.1 implementation date and where a savings provision exists will be converted to a Basel 3.1 permission on implementation date.

Applications for permissions made under the near final Basel 3.1 rules, or final rules, that are granted ahead of the Basel 3.1 implementation date will not have an effective date before 1 January 2027.

Credit risk

Internal Ratings Based (IRB) model permissions

As stated in consultation paper CP16/22 – Implementation of the Basel 3.1 standards, the PRA expects that HM Treasury (HMT) will save existing IRB permissions (known as savings provisions).

On or before the Basel 3.1 implementation date of 1 January 2027, the PRA intends to issue new written notices for saved IRB permissions.

These written notices will update existing permission documentation in the following ways:

• The PRA will update references to CRR articles to reflect the new PRA Rulebook articles and update legislative references where appropriate;
• The PRA will make updates to reflect variations to saved IRB permissions which the PRA expects to make using its power under section 144G of the Financial Services and Markets Act (FSMA) 2000 so that saved IRB permissions operate in line with the following changes (which will take effect immediately on 1 January 2027):
   - all restrictions on the scope of IRB models (e.g. restrictions on modelling exposure at default (EAD) and mandatory use of the standardised approach (SA), the slotting approach or foundation IRB approach (FIRB), subject to the transitional arrangements for equity exposures);
   - all changes to loss given default and EAD under the FIRB approach; and
   - all IRB input floors.

The PRA will also make updates to reflect its expected use of its section 144G FSMA powers to amend the saved IRB permissions for roll out and permanent partial use (PPU), so that the scope of the saved permissions is restricted to reflect the permissible scope of these provisions under the near-final Basel 3.1 rules. 

Firms may also want to make applications for permissions relating to the IRB approach under the near-final rules in advance of 1 January 2027. For example:

• applications to change roll out plans; 
• applications for PPU permissions to take advantage of additional flexibility in the near-final rules; and
• applications for permission to revert to the use of less sophisticated approaches.

If the PRA decides to grant such a permission ahead of 1 January 2027 it will aim to include it in the new written notice for the saved IRB permission where appropriate, including the date at which the change would come into force.

Applications can be made by completing the pro-forma for the notification of changes to IRB, IMM and IMA permissions under the near-final Basel 3.1 rules available on the permissions (CRR firms) webpage and sending it to CRRModelPermissions@bankofengland.co.uk. You should provide evidence to show the criteria for the permission you are applying for are met.

The PRA will aim to reach a decision on such applications ahead of the Basel 3.1 implementation date where practicable and if requested by the firm. Decision ahead of the Basel 3.1 implementation date is less likely for applications made after 1 January 2026.

Where possible the PRA will aim to share the new written notice, which will be updated as explained above and include any IRB model related new permissions the firm has applied for and that the PRA has decided to grant, with the firm ahead of Basel 3.1 implementation date. You would then have an opportunity to discuss the notice with your supervisory team before it becomes effective on 1 January 2027.

Standardised approach – risk sensitive approach for unrated corporates

Applicants for the permission in Article 122(6) of the near-final rules (SA risk sensitive approach) should complete the permissions (CRR firms) general application form and firms should provide evidence to support the requirements specified in Article 122(6) by completing the supplementary information form for permission under article 122(6). The application and supplementary form should be sent to CRRModelPermissions@bankofengland.co.uk.

The PRA will aim to reach a decision on such applications ahead of the Basel 3.1 implementation date where practicable and if requested by the firm. Decision ahead of the Basel 3.1 implementation date is less likely for applications made after 1 January 2026. Firms should discuss their intentions with their supervisors before applying.

Market risk

Internal Models Approach (IMA) permissions

Existing IMA permissions will not be saved. This means that firms with existing IMA permissions who want to continue to use an IMA model will need to apply for a new IMA permission under the near-final Basel 3.1 rules.

The PRA will aim to reach a decision on new IMA applications ahead of the Basel 3.1 implementation date where practicable and if requested by the firm. This is less likely for applications made after 1 January 2026. Any submissions after this date may require the firm to use the SA at least for an initial period, pending the completion of the PRA’s model review. Firms that submit by the requested date would be given priority during the PRA’s review. Firms should discuss their intentions with their supervisory team before applying.

To make an application for an IMA permission please complete the permissions (CRR firms) general application form, provide the information requested in the market risk internal model approach IMA application questionnaire, and complete the market risk internal model approach IMA data template. This application pack should be sent to CRRModelPermissions@bankofengland.co.uk.

Advanced standardised approach (ASA)

Firms which will be using the ASA for market risk may seek permission for several derogations. 

If you want to make an application for an ASA permission please complete the permissions (CRR firms) general application form, provide the information requested in the market risk advanced standardised approach ASA application questionnaire, and complete the market risk advanced standardised approach ASA data template. This application pack should be sent to CRRModelPermissions@bankofengland.co.uk.

The PRA will aim to reach a decision on such applications ahead of the Basel 3.1 implementation date where practicable and if requested by the firm. Decision ahead of the Basel 3.1 implementation date is less likely for applications made after 1 January 2026. Firms should discuss their intentions with their supervisory team before applying.

Standardised Approach-Credit Valuation Adjustment (SA-CVA) permission

Firms seeking permission to use the standardised approach (SA) for their own funds requirements for credit valuation adjustment (CVA) risk will need to apply for a SA-CVA permission.

To make an application for an SA-CVA permission please complete the permissions (CRR firms) general application form, provide the information requested in the standardised approach to credit valuation adjustment risk SACVA application questionnaire and complete the standardised approach to credit valuation adjustment risk SACVA data template. This application pack should be sent to CRRModelPermissions@bankofengland.co.uk. 

The PRA will aim to reach a decision on such applications ahead of implementation date where practicable and if requested by the firm. This is less likely for applications made after 1 January 2026, particularly where the applicant firm does not currently have permission to use the internal model method (IMM) for counterparty credit risk. Firms should discuss their intentions with their supervisory team before applying.

Other permission types

Output floor

Subsidiaries of overseas groups may apply for permission to be treated as international subsidiaries for the purposes of the output floor, if their home state jurisdiction has not yet implemented the Basel 3.1 standards. This permission may be granted where the PRA is satisfied that there is a specific and public proposal by the relevant authorities to implement an output floor. The full criteria for this permission are set out in Article 92 of the near-final required level of own funds part of the PRA Rulebook.

The end-point of the output floor transitional period remains 1 January 2030 as set out in the original proposals.

To make an application for an output floor permission please complete the permissions (CRR firms) general application form and provide evidence to support the requirements specified in Article 92 of the near final required level of own Funds Part of the PRA Rulebook. Applications should be sent to CRRModelPermissions@bankofengland.co.uk. 

The PRA will aim to reach a decision on such applications ahead of the Basel 3.1 implementation date where practicable and if requested by the firm. Decision ahead of the Basel 3.1 implementation date is less likely for applications made after 31 March 2026. Firms should discuss their intentions with their supervisory team before applying.

Operational risk

Existing operational risk AMA permissions are not saved under Basel 3.1 and there are no equivalent permissions to apply for. Firms that currently have an operational risk AMA permission will not be able to rely on them post the Basel 3.1 implementation date.