8.34 The PRA proposed that the ICR would be based on existing CRR provisions. This would avoid firms having to apply the Basel 3.1 standards before implementing the SDDT capital rules at a later date. It would also avoid the PRA having to reset Pillar 2A add-ons for firms twice (first for Basel 3.1 standards and again for the SDDT capital regime).

8.35 Two respondents felt the ICR proposals would not sufficiently prepare firms for the SDDT capital regime. The respondents noted that they interpreted CP16/22 as proposing that the risk weights under the SDDT capital rules would ultimately be based on Basel 3.1 standards, which they believed would likely increase capital requirements relative to the existing UK CRR requirements. As a consequence, the respondents advocated for a 'glide path' approach for the ICR to aid ICR firms' transition to the SDDT capital rules, which would gradually transition firms from the CRR to the SDDT regime rules, to aid ICR firms' transition to the SDDT capital rules.

8.36 Having considered the responses, the PRA has decided not to incorporate a glide path into the draft ICR rules and policy. The PRA considers that the additional costs would not be commensurate to the benefits if the ICR was applied as a glide path. A glide path would likely introduce complexity for eligible firms, which would have to incur the costs involved in understanding and operationalising the glide path, for a regime that is ultimately temporary.