CRR vs Basel 3.1¶
UK firms transition from CRR to Basel 3.1 (PRA PS1/26) on 1 January 2027, with the output floor phasing in through 2030. This section brings together all framework comparison content in one place.
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This section compares two internal frameworks (CRR and Basel 3.1) run through the same engine on the same inputs. To compare this calculator's output against your legacy / incumbent engine during a migration, see Parallel-Run Reconciliation instead.
Why Basel 3.1?¶
Basel 3.1 addresses three core problems the BCBS and PRA identified with the post-crisis CRR framework:
Excessive risk-weight variability¶
BCBS studies found a "worrying degree of variability" in how banks calculated risk-weighted assets for identical portfolios. Under CRR, IRB banks had wide latitude in estimating PD, LGD, and EAD — different modelling choices produced materially different RWAs for the same risk, undermining confidence in reported capital ratios.
Inadequate capital requirements in certain areas¶
The financial crisis exposed that some risk weights were too low. The standardised approach lacked granularity (e.g., all unrated corporates received 100% regardless of actual risk), and internal models in some asset classes produced capital requirements that did not reflect true economic risk.
Excessive complexity and model risk in IRB approaches¶
The IRB framework had grown so complex that it was difficult for supervisors to validate and for firms to implement consistently. The complexity itself became a source of risk — models were opaque, hard to compare, and in some cases allowed firms to optimise their way to lower capital without reducing actual risk.
How Basel 3.1 responds¶
| Problem | Basel 3.1 Solution |
|---|---|
| RWA variability | Output floor — IRB RWAs cannot fall below 72.5% of SA-equivalent |
| SA too crude | More risk-sensitive standardised approaches — finer granularity by LTV, credit quality, etc. |
| IRB too permissive | Constraints on internal models — A-IRB removed for large corporates/banks/FIs; input floors on PD/LGD |
| Under-capitalisation | Recalibrated risk weights in areas the crisis showed were too low |
The PRA adopted Basel 3.1 with targeted UK adjustments: more risk-sensitive treatment of unrated corporates, SME and infrastructure lending adjustments to avoid capital cliff-edges when existing support factors are removed, and alignment with international standards to maintain credibility and competitiveness.
Sources
At a Glance¶
Details: See Key Differences for the comprehensive side-by-side comparison of all regulatory parameters.
The most impactful changes include removal of the 1.06 scaling factor and supporting factors, introduction of a 72.5% output floor, differentiated PD/LGD floors, and revised SA risk weights (particularly for real estate and retail).
In This Section¶
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Comprehensive side-by-side comparison of all regulatory parameters — risk weights, IRB floors, supporting factors, CCFs, slotting, and capital impact analysis.
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COREP template changes — column additions and removals, expanded risk weight bands, new real estate breakdowns, output floor columns, and post-model adjustments.
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Pillar III disclosure template changes — OV1 output floor rows, CR5 expanded risk weight columns, CR6 post-model adjustments, CR7-A slotting CRM, CR10 HVCRE split.
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Dual-framework comparison tooling, capital impact attribution waterfall, and transitional output floor schedule modelling.
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Developer-facing specification of parameter differences — PD/LGD floors, supervisory LGD, slotting weights, and configuration examples.