PRA Revises Approach to Reporting and Disclosures Amid COVID-19 Crisis

PRA has provided following clarifications on the application of credit risk approaches for firms:

• Clarification for firms using the standardized approach for exposures to the obligor. The portion of an exposure benefiting from the protection of a guarantee provided by the Secretary of State under the schemes is assigned the relevant sovereign risk-weight prescribed by the standardized approach. The residual part of the exposure—that is, the portion that does not benefit from the protection of a guarantee provided under these schemes—is assigned the standardized approach risk-weight that would apply if the exposure were not guaranteed.
• Clarification for firms using the internal ratings-based (IRB) approach for exposures to the obligor and the standardized approach for exposures to the guarantor (under permanent partial use or rollout). The portion of an exposure benefiting from the protection of a guarantee provided by the Secretary of State under the schemes is assigned the relevant sovereign risk weight prescribed by the standardized approach. The residual part of the exposure is risk-weighted according to the relevant approved IRB approach as if the exposure were not guaranteed.
• Clarification for firms using the IRB approach for exposures to the obligor and the IRB approach for exposures to the guarantor. Firms should adopt an approach to reflect the effect of the guarantee provided by the Secretary of State that is consistent with their approved IRB models and their IRB permissions.

Coming back to the statement on regulatory reporting, PRA, in April 2020, had issued a statement setting out that it would accept delayed submission of certain regulatory returns with deadlines on or before May 31, 2020. That statement noted that PRA would consider in due course the treatment of those returns with a deadline of June onward. Having considered that firms have now had time to adjust to new ways of working and the prudential benefits to supervisors of the timely submission of regulatory data, PRA has concluded that it would not be appropriate to continue to apply the reporting measures set out in the statement to future submissions. Firms experiencing difficulty with timely submission should contact their usual supervisor to discuss. 

Related Links

• Statement on Reporting and Disclosures
• Statement on Treatment of CBILS and CLBILS
• Overview of COVID-19 Measures

Keywords: Europe, UK, Banking, COVID-19, Reporting, Disclosures, Basel, Credit Risk, CBILS, CLBILS, Loan Guarantee, Standardized Approach, IRB Approach, PRA