This policy statement (PS) publishes the feedback, final rules and supervisory statements to implement the proposals in the PRA’s consultation paper (CP) for CRDIV updates for credit risk mitigation, credit risk, governance and market risk (CP12/14).
This PS covers the proposals in CP12/14 subject to a one-month consultation period, which closed on 8 August 2014.
The following changes are made to PRA policy:
- the supervisory statement on credit risk mitigation (SS17/13) is updated with the expectation that a firm wishing to use its own estimates of volatility adjustments shall provide the PRA with confirmation that it meets the requirements set out in CRR Articles 225(2) and 225(3), together with the information set out in SS17/13;
- the supervisory statement on market risk (SS13/13) is updated with guidance for firms on how to report Risks not in VaR requirements in FSA005, and the European Banking Authority's common regulatory reporting framework (COREP);
- a new rule in Credit Risk 4 of the PRA Rulebook to introduce stricter criteria for the application of a 50% risk weight to certain commercial real estate exposures located in non-EEA countries; and
- guidance added to SYSC 4 of the PRA Handbook to clarify the PRA’s interpretation of how the CRD IV limits on directorships held by directors of significant firms apply to the individuals who manage the consolidated group.
CP12/14 also contained a proposal relating to an expectation that approval will no longer be granted for advanced internal ratings-based approach permissions for sovereign and financial sector entity exposures. The consultation period for this proposal closed on 30 September 2014. On 10 March 2015, the PRA announced that it is not taking forward the proposals at this time preferring instead to wait for further clarity on the direction of international developments. Once this clarity is attained, the PRA will consider its policy options. The full update is available on the webpage for CP12/14, see Related Links.