February 16, 2018

PRA published the consultation paper CP6/18, which sets out the proposed changes to the supervisory statement SS17/13 on credit risk mitigation. The consultation closes on May 16, 2018 and aims to clarify expectations about the eligibility of guarantees as unfunded credit protection under Part Three, Title II, Chapter 4 (credit risk mitigation) of the Capital Requirements Regulation or CRR (Regulation 575/2013). CP6/18 is relevant to all firms that come under the CRR.

CRR Part Three, Title II, Chapter 4 (Credit risk mitigation) sets out the criteria that a guarantee must meet to be eligible for credit risk mitigation. CRR allows firms to recognize some forms of credit risk mitigation in the calculation of their capital requirements. Credit risk mitigation can be funded or unfunded. One of the ways unfunded credit protection can be achieved is through a guarantee. That can be achieved through the obligation of a third party to pay out in the event of non-payment or default of a credit obligor. To be eligible as a guarantee for credit risk mitigation under the CRR, strict eligibility criteria must be met. PRA has identified that some firms are unclear on what contracts or other documented obligations are eligible to be treated as guarantees for credit risk mitigation under the CRR. Thus, PRA believes that additional clarity is needed to ensure that capital relief from guarantees is obtained only where the risk has been effectively transferred to the guarantor. The proposals extend to any contract or other documented obligation that purports to be a guarantee for achieving unfunded credit protection under credit risk mitigation of CRR. Part Three, Title II, Chapter 4 (Credit risk mitigation) of CRR sets out the criteria that a guarantee must meet to be eligible for credit risk mitigation. CP6/18 proposes amendments to SS17/13 to provide guidance on the eligibility criteria for the recognition of guarantees.


Related Links

Comment Due Date: May 16, 2018

Keywords: Europe, United Kingdom, Banking, Credit Risk, Credit Risk Mitigation, CRR, CP6/18, SS17/13, PRA

Related Articles
News

EBA Report Assesses Regulatory Framework for Fintech Activities

EBA published the findings of its analysis on the regulatory framework applicable to fintech firms when accessing the market.

July 18, 2019 WebPage Regulatory News
News

OSFI Revises Capital Requirements for Operational Risk for Banks

OSFI is revising its capital requirements for operational risk, in line with the final Basel III revisions published by BCBS in December 2017.

July 18, 2019 WebPage Regulatory News
News

OSFI Consults on Revised Principles for Management of Liquidity Risk

OSFI proposed revisions to Guideline B-6 on the principles for the management of liquidity risk.

July 18, 2019 WebPage Regulatory News
News

ESMA Guidance on Disclosures for Credit Rating Sustainability Issues

ESMA published the technical advice on sustainability considerations in the credit rating market, along with the final guidelines on disclosure requirements applicable to credit ratings.

July 18, 2019 WebPage Regulatory News
News

FASB Issues Q&A on Estimation of Expected Credit Losses by Firms

FASB issued a second question-and-answer (Q&A) document that addresses more than a dozen frequently asked questions related to the Accounting Standards Update No. 2016-13 titled “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”

July 17, 2019 WebPage Regulatory News
News

US Agencies Delay Enforcing Volcker Rule Restrictions on Foreign Funds

US Agencies (FDIC, FED, and OCC) announced that they will not take action related to restrictions under the Volcker Rule for certain foreign funds for an additional two years.

July 17, 2019 WebPage Regulatory News
News

SRB Announces SRF Receives Cash Injection, Grows to EUR 33 billion

SRB announced that the Single Resolution Fund (SRF or the Fund) received a cash injection of EUR 7.8 billion from 3,186 institutions in 2019, bringing the total amount in the Fund to about EUR 33 billion.

July 17, 2019 WebPage Regulatory News
News

FASB to Propose to Delay CECL Compliance Deadline for Certain Entities

FASB published a summary of the tentative decisions taken at its Board meeting in July 2019.

July 17, 2019 WebPage Regulatory News
News

IMF Publishes Report on 2019 Article IV Consultation with Vietnam

IMF published its staff report in context of the 2019 Article IV consultation with Vietnam.

July 16, 2019 WebPage Regulatory News
News

European Parliament Elects Next President of European Commission

European Parliament elected Ursula von der Leyen from Germany as the first female President of the next European Commission for a five-year term from November 01, 2019.

July 16, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3476