BOE digest highlights Basel 3.1 changes, AI survey launch

The Prudential Regulation Authority (PRA) has issued Consultation Paper (CP9/26) outlining proposed adjustments to the Basel 3.1 internal model approach (IMA) for market risk.

This initiative is a critical step in the UK's implementation of the final Basel III standards, aiming to enhance the robustness and risk sensitivity of capital requirements for banks.

The adjustments are particularly pertinent for firms that currently hold IMA approval, as well as those contemplating applying for such approval under the forthcoming Basel 3.1 framework.

The consultation seeks to ensure that internal models accurately capture market risk exposures, thereby promoting sound risk management practices and maintaining financial stability within the banking sector.

These proposed changes reflect the PRA's commitment to aligning with international standards while tailoring them to the specificities of the UK financial landscape, ensuring a proportionate and effective regulatory environment for market risk capital.

The Bank of England and the Financial Conduct Authority (FCA) have jointly launched their 2026 AI Survey, a voluntary initiative to understand the development and use of artificial intelligence and machine learning (AI/ML) in UK financial services.

This includes foundation models, generative AI (GenAI), and agentic AI.

The survey, which builds on previous editions, aims to create a long-term picture of AI/ML adoption and its evolving impact across the sector.

Responses from firms are crucial for informing future regulatory strategies and ensuring responsible innovation.

The survey will remain open for submissions until July 31, 2026, providing a vital data source for policymakers navigating the rapid advancements in financial technology.