Brexit Frees UK Banks from Basel Rules, Says Bank of England
Governor Andrew Bailey has announced that the Bank of England plans to shield Britain's banks from international regulations following the UK's departure from the European Union (EU).
Bailey stated that the Bank will exclude some domestic lenders from upcoming Basel rules designed to increase reserve holdings during crises. The UK's departure from the EU allows it to exempt smaller banks from these stringent regulations, which were developed after the 2008 financial crisis.
"We have the flexibility to implement different capital regimes for banks," Bailey said. "The Basel regime applies to internationally active banks, but we can establish a distinct regime for smaller, non-internationally active banks."
Bailey's comments align with mounting pressure from Chancellor Rachel Reeves for regulators to ease restrictions that hinder economic growth. The Bank has also revised its 2025 growth forecast downward to 0.75%, citing the Chancellor's tax-raising Budget in October.
"We need to make thoughtful choices on regulation," Bailey said. "The Bank is eager to collaborate in shaping those choices."
The Bank's move mirrors expected deregulation efforts in the US under the Trump administration. Trump has expressed intentions to weaken or eliminate Basel rules to protect the American financial industry. However, Prudential Regulation Authority CEO Sam Woods believes the US is unlikely to abandon the rules entirely.
Despite America's concerns, Bailey emphasized that US banks have consistently advocated for Basel rule implementation. The Bank of England remains observant of US regulatory developments during this post-Brexit transition.