Alter default value for field settings (allowed_formats)
Thanks to @Berdir and @4k4 who helped me out several times - I just followed their ideas, tested and wrote up the answers.

This first hook alters the field settings.  I've included a second example for image settings.

/**
 * Implements hook_ENTITY_TYPE_create() for 'field_config'.
 */
function MYMODULE_field_config_create(FieldConfigInterface $field) {
  if ($field-&gt;isSyncing()) return;

  switch ($field-&gt;getType()) {
    case 'image':
      $field-&gt;setSettings(['file_directory' =&gt; 'images', 'max_resolution' =&gt; '1080x1080']);
      break;

    case 'text_with_summary':
    case 'text_long':
      $field-&gt;setThirdPartySetting('allowed_formats', 'basic_html', 'basic_html');
      break;
  }
}


This second hook alters the form display settings.  The array_diff_key command is used to determine which fields are new.

/**
 * Implements hook_ENTITY_TYPE_presave().
 *
 * Override field form display defaults used when a field is added to a content type.
 */
function MYMODULE_entity_form_display_presave(EntityFormDisplay $display) {
  $fields = $display-&gt;getComponents();
  $origFields = (isset($display-&gt;original)) ? $display-&gt;original-&gt;getComponents() : [];
  foreach (array_diff_key($fields, $origFields) as $newField =&gt; $settings) {
    switch ($settings['type']) {
      case 'text_textarea_with_summary':
      case 'text_textarea':
        $settings['third_party_settings']['allowed_formats'] = ['hide_help' =&gt; '1', 'hide_guidelines' =&gt; '1'];
        $display-&gt;setComponent($newField, $settings);
        break;
    }
  }
}