Basel 3.1 Specifications¶
Formal specifications for the Basel 3.1 (PRA PS1/26) credit risk framework, effective 1 January 2027.
These specifications document the changes from CRR introduced by PRA PS1/26 — the UK implementation of the Basel III final reforms. Where rules are unchanged from CRR, the corresponding CRR specification remains the authoritative reference.
Primary Regulatory Source: PRA PS1/26 Appendix 1 (Near-Final Rules)
Specification Index¶
| Specification | Description | Regulatory Reference | Test Group |
|---|---|---|---|
| SA Risk Weights | Revised SA risk weights: ECRA/SCRA, corporate sub-categories, RE loan-splitting, SA specialised lending | Art. 112–134 | B31-A |
| IRB Approach (entry conditions, scope and roll-out classes) | Art. 144 entry conditions (rating system coverage, validation, documentation, third-party vendors); Art. 143A–143E model-change notification regime; Art. 147 / 147A / 147B / 147C structure: eight roll-out classes, non-Retail AIRB Modelling category, exposure-class mapping | Art. 143A–143E, 144, 145, 147–148 | — |
| Foundation IRB | Reduced senior LGD (40%), higher PD floor (0.05%), covered bond LGD, 1.06 removal | Art. 153–163 | B31-B |
| Advanced IRB | LGD floors, post-model adjustments, CCF floor, double default removal | Art. 153–154, 161, 164, 166D | B31-C |
| Credit Risk Mitigation | Revised 5-band haircut tables, equity haircuts, IRB parameter substitution | Art. 191A–241 | B31-D, B31-D7 |
| Slotting Approach | Revised slotting weights, maturity split removal, no pre-op PF distinction | Art. 147(8), 153(5) | B31-E |
| Output Floor | PRA 4-year transitional floor, OF-ADJ capital adjustment | Art. 92(2A)–(2D), Rules 3.1–3.3 | B31-F |
| Provisions | EL with revised LGD, Art. 158(6A) monotonicity, shortfall/excess | Art. 158–159 | B31-G |
| Defaulted Exposures | Provision-coverage split (100%/150%), RESI RE exception, IRB defaulted | Art. 127, 153(1), 154(1) | B31-K |
| Equity Approach | New SA equity regime (250%/400%), IRB equity removal, transitional phase-in, CIU | Art. 133, 147A, Rules 4.1–4.8 | B31-L |
| Model Permissions | Art. 147A approach restrictions: FSE, large corporate, institution, equity routing | Art. 147A; PS1/26 Glossary (LFSE, CRR Art. 142(1)(4)) | B31-M |
| Counterparty Credit Risk (SA-CCR) | Inheritance from CRR — α-factor carve-out (Art. 274(2)) and output-floor S-TREA inclusion (Art. 92(2A)); no separate per-article specs | Art. 271–311 (inheritance), 274(2), 92(2A) | CCR-A |
Relationship to CRR Specifications¶
Each Basel 3.1 specification documents only the changes from the CRR framework. For unchanged rules, refer to the corresponding CRR specification.
Specifications that have no Basel 3.1 equivalent:
- Supporting Factors — SME (Art. 501) and infrastructure (Art. 501a) factors are removed under Basel 3.1. The SME corporate exposure class (85% RW, Art. 122(4)) replaces the supporting factor mechanism.
- Credit Conversion Factors — B31 CCF changes are documented within the CRR CCF specification as comparison tables, since the structure is unchanged and only values differ.
Test Coverage¶
| Group | Scenarios | Tests | Description |
|---|---|---|---|
| B31-A | A1–A10 | 14 | Standardised Approach |
| B31-B | B1–B7 | 16 | Foundation IRB |
| B31-C | C1–C3 | 13 | Advanced IRB |
| B31-D | D1–D6 | 15 | Credit Risk Mitigation |
| B31-D7 | D7, D7b–D7e | 5 | IRB Parameter Substitution |
| B31-E | E1–E4 | 13 | Slotting Approach |
| B31-F | F1–F3 | 6 | Output Floor |
| B31-G | G1–G3 | 24 | Provisions |
| B31-H | H1, H3 | 10 | Complex/Combined |
| B31-K | K1–K12 | 31 | Defaulted Exposures |
| B31-L | L1–L23 | 49 | Equity Approach |
| B31-M | M1–M12 | 16 | Model Permissions |
| Total | 90 | 212 |