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
This consultation closed on 29 April 2013.
The Supervisory Statement relating to this Consultation Paper was issued on 2 August 2013.