Featured Product

    PRA Issues PS7/19 Related to Definition of Default Under Credit Risk

    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

    Featured Experts
    Related Articles
    News

    EIOPA Forms Consultative Expert Group on Digital Ethics in Insurance

    EIOPA established the Consultative Expert Group on Digital Ethics in Insurance to assist EIOPA in the development of digital responsibility principles in insurance.

    September 17, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 848 and 470

    FASB proposed taxonomy improvements for the proposed Accounting Standards Update on topic 848 on facilitation of effects of reference rate reform on financial reporting.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Statement on Recalculating Transitional Measures Under Solvency II

    BoE notified that it will be willing to accept applications from firms to recalculate transitional measure on technical provisions (TMTP) as at September 30, 2019.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Hosts Conference to Discuss Issues from Emergence of Stablecoins

    BIS hosted a conference in Basel to discuss policy and regulatory issues posed by the emergence of stablecoin initiatives backed by financial institutions and large technology companies.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Paper on Embedded Supervision of Blockchain-Based Financial Market

    BIS published a working paper that investigates ways to regulate and supervise blockchain-based financial markets.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Paper on Market-Implied Systemic Risk and Shadow Capital Adequacy

    BoE published a working paper that presents a forward-looking approach to measure systemic solvency risk.

    September 13, 2019 WebPage Regulatory News
    News

    HKMA Consults on Policy Module on Pillar 2 Supervisory Review Process

    HKMA is consulting on the revised Supervisory Policy Manual module CA-G-5 that sets out the HKMA approach to conducting the supervisory review process under Pillar 2.

    September 13, 2019 WebPage Regulatory News
    News

    PRA Publishes Waiver by Consent of Continuity of Access Rules

    PRA published a new waiver by consent to waive the Continuity of Access requirements contained in the Depositor Protection Part of the PRA Rulebook (DPP).

    September 13, 2019 WebPage Regulatory News
    News

    EBA Single Rulebook Q&A: Second Update for September 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to three questions.

    September 13, 2019 WebPage Regulatory News
    News

    BoE Publishes Update on Meeting of Working Group on Risk-Free Rates

    BoE published the minutes of the July meeting of working group on sterling risk-free reference rates.

    September 13, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3827