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
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
News

OCC Consults on Information Collection for Home Mortgage Disclosures

OCC is soliciting comment on the revision of the information collection titled “Regulation C—Home Mortgage Disclosure.” OCC also notes that it has sent the collection to OMB for review.

May 20, 2019 WebPage Regulatory News
News

EIOPA Updates Q&A on Regulations in May 2019

EIOPA published additional questions and answers (Q&A) on guidelines, directives, and regulations applicable to insurers in Europe.

May 17, 2019 WebPage Regulatory News
News

FSB Publishes Update on Meeting of RCG for Americas

FSB published a summary of the meeting of its Regional Consultative Group (RCG) in Americas.

May 17, 2019 WebPage Regulatory News
News

IASB Issues Work Plan and Meeting Updates for May 2019

IASB published an updated work plan, along with the update of its meeting in May 2019.

May 17, 2019 WebPage Regulatory News
News

FCA Publishes Its Business Plan for the Coming Year

FCA published its Business Plan, which sets out the main areas of focus and priorities for 2019/20.

May 17, 2019 WebPage Regulatory News
News

CFTC Proposes to Amend Derivatives Clearing Organization Regulations

CFTC proposed amendments to certain regulations applicable to registered derivatives clearing organizations (DCOs) under Part 30 of the CFTC regulations.

May 16, 2019 WebPage Regulatory News
News

APRA Licenses Societe Generale As Foreign Deposit-Taking Institution

APRA granted Societe Generale a license to operate as a foreign authorized deposit-taking institution under the Banking Act of 1959.

May 16, 2019 WebPage Regulatory News
News

EBA Provides Updates on Its Work on Basel III Impact Assessment in EU

EBA is working to finalize the impact assessment on implementation of Basel III standards, in response to the EC call for advice, which was received on May 04, 2018.

May 16, 2019 WebPage Regulatory News
News

ISDA Publishes Two Consultations on Benchmark Fallbacks

ISDA published two consultations on benchmark fallbacks, the comment periods for which expire on July 12, 2019.

May 16, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3097