Date released: 15 December 2015
EU regulation 575/2013, the Capital Requirements Regulation (‘CRR’), sets out how banks are required to risk weight their assets (such as loans to businesses and mortgage loans) in the EU. The relevant risk weight depends on whether the bank uses the standardised approach or internal model based approaches. CRR Title II Chapter 2 (Articles 111 to 141) sets out the risk weight treatment for banks using internal model based approaches. Banks must have permission from their regulator (in the UK, the PRA) to use internal model based approaches.
On some issues the CRR gives discretion to the UK to determine the appropriate risk weight treatment. Where the UK has exercised these discretions, these are set out in Policy Statements and PRA Rules. PRA Supervisory Statements further clarify the PRA’s expectations of banks. The PRA and Financial Conduct Authority regulate banks in the UK to ensure compliance with EU and UK law.
For further information please see the links below:
|EU regulation 575/2013 Capital Requirements Regulation||Download PDF|
|PRA publications on implementation of capital standards||Supervisory statement
|Policy statement on strengthening capital standards (PS7/13)|| Download PDF
|Supervisory statement on the standardised approach (SS10/13)||Supervisory statement
|Supervisory statement on internal model based approaches (SS11/13)||Supervisory statement|