Unnecessary complexity, but the bark appears much worse than the bite… We have had a “first pass” at this morning’s weighty PRA consultation document: CP16/22 “Implementation of the Basel 3.1 standards”. Consultation closes on 31 March 2023. The timetable for implementation is (arguably) of equal importance to the precise calibration of risk-weights under Basel 3.1. It is noteworthy that (as we expected) the proposed implementation date is 1 January 2025, with provisions for new “output floors” to be phased in over a five-year period after that. Based on our initial read, we think that OSB, as a standardised bank, may see a small/manageable and transitory increase in RWAs prior to securing AIRB status. Encouragingly, the PRA appears minded to ease the process for transition, thereby potentially accelerating the path towards a more “level playing field” for standardised banks already on this journey. As per Appendix 11: “Draft amendments to SS10/13 – Credit risk: Standardised approach”, the existing “carve-out” for UK buy-to-let lending is to disappear. In its place, Article 124F of the draft PRA Rulebook (CRR) Instrument which accompanies CP16 /22 sets out an LTV-based approach to allocating risk-weights. LTV lending of <50% will attract a new lower (30%) risk-weight (down from 35%), though, prior to achieving AIRB status, lending at LTVs of 60-80% will be risk-weighted at 45%. OSB’s capital strength appears well in excess of requirements… Recall that, in the light of regulatory uncertainty ahead of today’s publication of CP16/22, OSB had chosen to build a very substantial capital surplus to enable it to comfortably absorb a wide variety of potential outcomes. At 30 June 2022, (after fully accounting for its maiden £100m share buyback), it reported a CET1 capital ratio of 18.9%, implying a “static” surplus of c.£470m over its new (ultra-conservative) target of 14%, with strong ongoing organic capital generation. Some of the detail today appears a little odd and/or poorly drafted, but we see nothing here which OSB cannot comfortably accommodate. As such, we continue to believe that it can and should double its buyback to £200m p.a. from 2023e. On 3.6x 2024e u/l EPS with an 11.0% prospective 2024e dividend yield, we reaffirm our Buy rec and (unchanged) 950p TP. Heading3 Video provides a powerful way to help you prove your point. When you click Online Video, you can paste in the embed code for the video you want to add. You can also type a keyword to search online for the video that best fits your document. To make your document look professionally produced, Word provides header, footer, cover page, and text box designs that complement each other.