Credit risk: internal ratings based approaches

Consultation Paper 4/13
Published on 28 March 2013

Background

On 28 March 2013 the Prudential Regulation Authority (PRA) issued a consultation paper on the consolidation of legacy FSA material relating to internal ratings based (IRB) approaches into a Supervisory Statement. In addition to material previously communicated by the FSA the consultation proposed that firms should maintain a 10% exposure weighted average residential mortgage LGD floor.

Summary of the key issues covered by the consultation paper

The consultation paper consolidates extant FSA non-Handbook material communicated to firms on IRB approaches in respect of the following topics:

  • Definition of Default
  • Probability of Default (PD)
  • Loss Given Default (LGD)
  • Exposure at Default (EAD)
  • Income-Producing Real Estate Portfolios
  • Unrated Exposures
  • Notification and Approval of Changes to Approved Models

Responses

This consultation closed on 29 April 2013.  

PDFConsultation Paper 4/13

The Supervisory Statement relating to this Consultation Paper was issued on 2 August 2013.

Supervisory Statement 1/13

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