UK adjusts timetable to allow for Basel II delays

UK regulators said today they would implement their plans for uniform, risk-based rules for UK-based banks, insurance companies and securities firms in several stages, instead of one or two stages, following delays to the Basel II bank accord.

The Financial Services Authority (FSA), the UK’s chief financial market regulator, said it planned to start applying the rules to insurance companies in 2004. The final stage will now be in late 2006, when the Basel II and EU rules are planned to come into force for UK-based banks, building societies and investment firms.

The FSA gave the timetable today when it published a number of consultation papers and policy statements, including a consultation paper on operational risk, which will form the building blocks for the single regulatory regime.

The FSA said it originally planned to bring in the rules on January 1, 2004, having finalised them in the agency’s so-called Prudential Sourcebook by the end of this year.

That plan assumed the risk-based Basel II bank capital accord and parallel European Union (EU) capital rules would be implemented in 2004. But the Basel accord is now expected in late 2006.

Basel will determine how much of their assets large international banks will have to set aside as a cushion against losses from the risks of banking.

The European Commission wants to apply its third capital adequacy directive - or Cad 3 - to all banks and investment companies of the 15-nation EU, of which the UK is a member state, from the same 2006 date as Basel II is due to take effect.