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October 03, 2017

The PRA published the policy statement PS23/17, which provides feedback to responses to the consultation paper CP5/17 titled “Internal Ratings Based (IRB) approach: clarifying PRA expectations.” PS23/17 contains final amendments to the supervisory statement SS11/13 on internal ratings-based (IRB) approaches and is relevant to UK banks, building societies, and PRA-designated investment firms.

The proposals in CP5/17 sought to clarify the PRA expectations for firms applying for IRB model approval. CP5/17 also proposed to set two reference points for estimating Probability of Possession Given Default (PPGD) for residential mortgages for firms that lack significant possession data. The PS23/17 contains the PRA’s feedback to the responses received during the consultation. SS11/13 sets out the PRA expectations on firms’ use of IRB approaches. SS11/13 is aimed at firms to which the CRD IV applies and it covers topics such as corporate governance, permanent partial use and sequential implementation, overall requirements for estimation, definition of default, probability of default, loss given default, exposure at default, validation, income-producing real estate portfolios, and temporary adjustments to approved models.

 

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Keywords: Europe, UK, Banking, IRB Approach, PS23/17, SS11/13, CP5/17, PPGD, PRA

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