Credit risk mitigation

Supervisory Statement 17/13

Update 23 July 2019

This supervisory statement was updated following publication of PS14/19 ‘Credit risk mitigation: Eligibility of financial collateral’.  This version comes into effect from 23 July 2019, and is available under ‘Current version’ in the table below. A version of SS17/13 has also been updated that incorporates the updates following PS8/19 ‘Credit risk mitigation: Eligibility of guarantees as unfunded credit protection’, and comes into effect from 13 September 2019, available under ‘Future version’ in the table below.

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.

Current version

Published: July 2019

This supervisory statement was updated following publication of PS14/19 ‘Credit risk mitigation: Eligibility of financial collateral’, and incorporates the updates following PS8/19 ‘Credit risk mitigation: Eligibility of guarantees as unfunded credit protection’.

Effective from: 13 September 2019

Past versions

Published: July 2019

This supervisory statement was updated following publication of PS14/19 ‘Credit risk mitigation: Eligibility of financial collateral’.

Effective from: 23 July 2019

Published: March 2019

This supervisory statement was updated following publication of PS8/19 ‘Credit risk mitigation: Eligibility of guarantees as unfunded credit protection’.

Effective from: 13 September 2019 (this version was superseded on 23 July 2019 by the July 2019 future version)

Published: 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'.

Effective from: 28 April 2017

Published: December 2013

Initial publication

Effective from: 19 December 2013

  • 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 above.

    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.

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