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

    BCBS Consults on Revised Disclosures for Market Risk Framework

    BCBS launched a consultation on the revised disclosure requirements for the market risk framework for banks.

    November 14, 2019 WebPage Regulatory News
    News

    FSB Examines Implementation of Resolution Regimes in Financial Sector

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions and sets out plans for further work.

    November 14, 2019 WebPage Regulatory News
    News

    PRA Publishes Final Policy on Maintenance of TMTP Under Solvency II

    PRA published the policy statement (PS25/19) that contains the final supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTPs) under Solvency II.

    November 14, 2019 WebPage Regulatory News
    News

    BCBS Consults on Disclosure Templates of Sovereign Exposures of Banks

    BCBS published a consultation on the voluntary disclosure templates related to sovereign exposures of banks.

    November 14, 2019 WebPage Regulatory News
    News

    IAIS Adopts ComFrame, ICS, and Holistic Framework for Systemic Risk

    IAIS adopted a comprehensive set of reforms—Common Framework (ComFrame), Insurance Capital Standard (ICS) Version 2.0, and Holistic Framework for Systemic Risk—that will enable effective cross-border supervision of insurance groups and contribute to global financial stability.

    November 14, 2019 WebPage Regulatory News
    News

    PRA Publishes Templates for Statistical Disclosures Under Solvency II

    PRA published templates for statistical disclosures, as required under Article 31(2) of the Solvency II Directive.

    November 14, 2019 WebPage Regulatory News
    News

    FASB Proposes Improvements to Derivatives and Hedging Standard

    FASB proposed an Accounting Standards Update, on codification improvements to hedge accounting under Topic 815, to clarify certain sections of the 2017 hedge accounting standard (Update 2017-12).

    November 13, 2019 WebPage Regulatory News
    News

    FASB Approves Guidance to Assist in Transition to New Reference Rates

    FASB approved an Accounting Standards Update (Topic 848) to provide temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the reference rate reform on financial reporting.

    November 13, 2019 WebPage Regulatory News
    News

    BIS and MAS Launch Innovation Hub in Singapore

    BIS and MAS launched the BIS Innovation Hub Center in Singapore.

    November 13, 2019 WebPage Regulatory News
    News

    MAS and Industry to Create Framework for Adoption of Responsible AIDA

    MAS announced that it is working with financial industry partners to create a framework for financial institutions to promote the responsible adoption of Artificial Intelligence and Data Analytics (AIDA).

    November 13, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4142