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
March 06, 2019

PRA published a policy statement (PS7/19) that provides feedback to the responses to the consultation paper (CP17/18) on approach to implementing EBA’s recent regulatory products related to the definition of default in the Capital Requirements Regulation or CRR (575/2013). PS7/19 is relevant to UK banks, building societies, and PRA-designated investment firms.

PRA received ten responses to CP17/18. Respondents generally supported the PRA proposals. Some consultation responses outlined specific concerns and requests for clarification. The areas in which PRA has amended or clarified the proposals have been detailed in Chapter 2 of the policy statement. PS7/19 contains the final policy of PRA, including:

  • An amendment to the Credit Risk Part of the PRA Rulebook to set thresholds for determining whether a credit obligation is material for the purpose of CRR’s definition of default (Appendix 1). This instrument comes into force on December 31, 2020.
  • An update to the PRA’s expectations in supervisory statement (SS11/13) on internal ratings-based (IRB) approaches to implement EBA’s regulatory products that relate to the definition of default (Appendix 2). PRA rule and updates to SS11/13 apply from December 31, 2020, unless a firm attains supervisory approval to extend this application date. 

EBA has developed a roadmap of regulatory products to reduce unwarranted variability in the risk-weighted assets across banks for credit risk. Two of the products from the EBA roadmap relate to the definition of default: the regulatory technical standards for the materiality threshold for credit obligations past due and the guidelines on the application of the definition of default. PRA intends to publish a further consultation paper on PRA’s proposed implementation of the remaining aspects of EBA roadmap: the guidelines on probability of default (PD) estimation, loss given default (LGD) estimation, and the treatment of defaulted exposures; the regulatory technical standards that specify the nature, severity, and duration of an economic downturn; and the guidelines for the estimation of LGD appropriate for an economic downturn. The consultation paper will be published after EBA has finalized the relevant regulatory products.


Related Links

Effective Date: December 31, 2020

Keywords: Europe, UK, Banking, Credit Risk, Credit Obligations, Materiality Threshold, Definition of Default, PS7/19, CRR, IRB Approach, PRA

Related Articles

ECB Updates Validation Checks and List of Identifiers Under AnaCredit

ECB updated the AnaCredit validation checks (Version 1.4) and the list of national identifiers (version 2.4) for AnaCredit reporting.

March 21, 2019 WebPage Regulatory News

BCBS Publishes Results of the Basel III Monitoring Exercise

BCBS published results of the Basel III monitoring exercise based on data as of June 30, 2018.

March 20, 2019 WebPage Regulatory News

EBA, FCA, and PRA Agree on MoU Template for Supervisory Cooperation

EBA, FCA, and PRA announced that they have agreed on a template for the Memorandum of Understanding (MoU) that sets out the expectations for supervisory cooperation and information-sharing arrangements between UK and EU/European Economic Area national authorities.

March 20, 2019 WebPage Regulatory News

HKMA Publishes CoP on Loss-Absorbing Capacity Requirements of Banks

HKMA issued, in relation to the Financial Institutions Resolution (Loss-Absorbing Capacity Requirements—Banking Sector) Rules (LAC Rules) a chapter of a code of practice (LAC CoP) under section 196 of the Financial Institutions Resolution Ordinance (FIRO).

March 20, 2019 WebPage Regulatory News

EBA Publishes Reports Monitoring the Implementation of Basel III in EU

EBA published two reports measuring the impact of implementing the final Basel III reforms and monitoring the implementation of liquidity measures in EU.

March 20, 2019 WebPage Regulatory 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

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

HKMA Expects Banks to Manage Risks Related to Crypto-Asset Exposures

HKMA issued a statement announcing that it expects authorized institutions to take note of the BCBS statement on crypto-assets and its prudential expectations.

March 18, 2019 WebPage Regulatory News

SNB Issues Form on Solvency Risk of Counterparties in Interbank Sector

SNB released form (Version 5.00) and related documentation for reporting solvency risk of counterparties in the interbank sector.

March 18, 2019 WebPage Regulatory News

EIOPA Requests Data on LTG Measures from Insurers Under Solvency II

EIOPA has requested the European Economic Area insurance undertakings, which are subject to Solvency II, to provide information on the long-term guarantee (LTG) measures.

March 18, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2769