General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
January 10, 2019

PRA published the consultation paper CP1/19 that is proposing changes to the supervisory statement (SS17/13) on credit risk mitigation. The proposed changes clarify expectations about the eligibility of financial collateral as funded credit protection under Part Three, Title II, Chapter 4 (Credit risk mitigation) of the Capital Requirements Regulation or CRR (575/2013). This consultation closes on April 10, 2019.

The criteria for recognizing collateral as eligible for credit risk mitigation (CRM) purposes are set out in CRR Part Three, Title II, Chapter 4 (Credit risk mitigation). Where the collateral is financial collateral, these criteria include that "the credit quality of the obligor and the value of the collateral shall not have a material positive correlation" (CRR Article 207(2)). In relation to non-recourse loans, in some cases a significant fall in the value of the financial collateral can bring about the default of the obligor. As such, the creditworthiness of the obligor can depend materially on the value of the financial collateral. The risk mitigation provided by such collateral may be compromised and Article 207(2) is relevant. In view of PRA, CRR is clear on this point. However, PRA has identified some variability in how firms interpret and apply the Article 207(2) requirement. PRA considers it necessary to clarify both how Article 207(2) applies in such circumstances and PRA’s expectations of how firms should treat collateral with a material positive correlation for credit risk mitigation purposes.

The consultation proposes adding a new chapter to SS17/13, set out in the Appendix. CP1/19 is relevant to UK banks, building societies, and PRA-designated UK investment firms that are subject to CRR. In February 2018, CP6/18 titled "Credit risk mitigation: Eligibility of guarantees as unfunded credit protection" had proposed adding a Chapter 7 to SS17/13; therefore, CP1/19 proposes to add Chapter 8, subject to the outcome of CP6/18.

 

Related Links

Comment Due Date: April 10, 2018

Keywords: Europe, UK, Banking, Credit Risk Mitigation, Credit Risk, CRR, CP1/19, SS17/13, PRA

Related Articles
News

BCBS Publishes Results of Survey on Proportionality in Bank Regulation

BCBS published a report presenting the results of a survey conducted on proportionality practices in bank regulation and supervision.

March 19, 2019 WebPage Regulatory News
News

US Agencies Adopt Interim Rule to Facilitate Transfers of Legacy Swaps

US Agencies (FCA, FDIC, FED, FHFA, and OCC) are adopting and inviting comments on an interim final rule.

March 19, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Third Update for March 2019

EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.

March 15, 2019 WebPage Regulatory News
News

OCC Updates Recovery Planning Booklet of the Comptroller's Handbook

OCC updated the Recovery Planning booklet of the Comptroller’s Handbook.

March 15, 2019 WebPage Regulatory News
News

EBA Publishes Report on Convergence of Supervisory Practices Across EU

EBA published annual report on the convergence of supervisory practices in EU.

March 14, 2019 WebPage Regulatory News
News

CPMI-IOSCO Publish Update to Level 1 Assessment of PFMI Implementation

CPMI and IOSCO jointly updated the Level 1 Assessment Online Tracker on monitoring of the implementation of the Principles for financial market infrastructures (PFMI).

March 14, 2019 WebPage Regulatory News
News

Agustín Carstens of BIS Speaks About New Role of Central Banks

While speaking at the 20th anniversary conference of the Financial Stability Institute (FSI), Agustín Carstens, the General Manager of BIS, highlighted the need for regulatory actions in light of the continued evolution of financial technology.

March 14, 2019 WebPage Regulatory News
News

ESMA Analyzes Impact of Regtech and Suptech for Markets and Regulators

ESMA published the results of its analysis of the regulatory and supervisory technologies—also known as regtech and suptech—being developed in response to various demand and supply drivers in the financial sector.

March 14, 2019 WebPage Regulatory News
News

PRA Publishes Policy Statement on Group Supervision Under Solvency II

PRA published a policy statement (PS9/19) that provides feedback on responses to the consultation paper CP15/18 and the final supervisory statement SS9/15 (Appendix) on group supervision under Solvency II.

March 14, 2019 WebPage Regulatory News
News

ECB Announces Start Date for Euro Short-Term Rate

ECB announced that it will start publishing the euro short-term rate (€STR) as of October 02, 2019, reflecting the trading activity of October 01, 2019.

March 14, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2759