Update 13 March 2019
This supervisory statement was updated following publication of PS8/19 ‘Credit risk mitigation: Eligibility of guarantees as unfunded credit protection’. This version comes into effect from Friday 13 September 2019, and is available under ‘Future version’ in the timeline below.
Update 28 April 2017
This supervisory statement was updated following publication of PS9/17 ‘Implementation of MiFID II: Part 2’, to update references in paragraph 2.26 from Markets in Financial Instruments Directive (MiFID) to MiFID II. The updates referring to MiFID II take effect from Wednesday 3 January 2018. See annex for details.
This supervisory statement sets out the Prudential Regulation Authority’s expectations in respect of the recognition of credit risk mitigation in the calculation of certain risk-weighted exposure amounts.
This supervisory statement covers elements of the following topics:
- eligibility of financial institutions as protection providers;
- recognised exchanges;
- conditions for applying a 0% volatility adjustment under the Financial Collateral Comprehensive Method (FCCM);
- permission to use 'own estimates of volatility adjustments' under the FCCM; and
- netting of liabilities that may be subject to bail-in.