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

FSB Chair Reports to G20 on Implementation of Financial Reforms

FSB published the letter to G20 Leaders and the opening statement from an FSB briefing by the FSB Chair Randal K. Quarles.

June 25, 2019 WebPage Regulatory News
News

FSB Summarizes Progress in Implementation of G20 Regulatory Reforms

FSB published a summary progress report on implementation of the G20 financial regulatory reforms.

June 25, 2019 WebPage Regulatory News
News

EBA Issues 2020 Stress Test Methodology and Templates for Discussion

EBA published the 2020 EU-wide stress test draft methodology, templates, and template guidance, for discussion with the industry.

June 25, 2019 WebPage Regulatory News
News

SRB Updates MREL Policy to Reflect Changes in CRR 2

SRB updated its policy on minimum requirement for own funds and eligible liabilities (MREL) as a result of the revisions in the recent Banking Package.

June 25, 2019 WebPage Regulatory News
News

OSFI Updates Manual of Reporting Forms and Instructions for Insurers

OSFI issued its annual update for 2019 to the manual of financial reporting forms and instructions for property and casualty (P&C) insurance companies.

June 25, 2019 WebPage Regulatory News
News

PRA Consults on PRA110 Reporting Frequency Threshold

PRA proposed (CP14/19) to amend the reporting frequency of PRA110 reporting template (PRA110) when a firm is in stress.

June 25, 2019 WebPage Regulatory News
News

APRA Updates Guidance on Managing Information Security Risks

APRA released an updated Prudential Practice Guide CPG 234 on managing information security risks, including cyber-crime.

June 25, 2019 WebPage Regulatory News
News

IMF Releases Report on 2019 Article IV Consultation with United States

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

June 24, 2019 WebPage Regulatory News
News

FCA and US Agencies on Addressing Issues in Credit Derivatives Market

U.S. SEC Chairman Jay Clayton, U.S. CFTC Chairman J. Christopher Giancarlo, and UK FCA Chief Executive Andrew Bailey issued a joint statement announcing plans to address concerns regarding opportunistic strategies in the credit derivatives markets.

June 24, 2019 WebPage Regulatory News
News

BIS Report Discusses Regulatory Issues Related to Big Techs in Finance

BIS has pre-released a chapter of the BIS Annual Economic Report; this chapter focuses on the risks and opportunities presented by large technology firms in the financial services sector.

June 23, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3315